Updated Changes To $3m Super Balance

Treasurer Jim Chalmers has announced welcoming changes to the previously announced Better Targeted Superannuation Concessions.

The taxing of unrealised capital gains has been removed from the calculations, indexation will now apply to the thresholds and the implementation will be delayed until 1 July 2026, meaning your Total Super Balance at 30 June 2027 is now the new figure to be aware of.  Assessments will commence being issued from the 2028 financial year.

One other major change that is less welcoming is the introduction of a two-tiered approach to the new tax, whereby balances between $3m and under $10m will have actual earnings taxed at 30% and balances above $10m will have actual earnings taxed at a further 40%.

The changes under the new announcements are as follows:

1. Reporting total super balance and the ATO

Once a Super Fund has submitted to the ATO their individual balances, the ATO will calculate the individual's Total Super Balance (TSB). The ATO will then contact the super fund for the proportion of the fund's applicable realised earnings for any individual with a TSB above the legislated threshold.

Once the share of earnings attributable to the applicable individual is calculated and provided to the ATO, the ATO will calculate the tax liability.

2. Calculation of superannuation earnings

Earnings will now be based on what the super fund actually earns, specifically it will not include unrealised earnings. This will be taxable income that is adjusted for such things as contributions and pension phase income.

Updated Calculation Method and Examples

While consultation on how the exact calculation of earnings and what will be included in the definition is still to be had, Treasury anticipate the following:

Step 1: ATO notifies the super fund that there is an in-scope member (i.e. a member with a total superannuation balance of $3 million or more)

Step 2: Fund calculates realised earnings attributable to that in-scope member and reports this to ATO

Note: the trustee of the super fund could attribute earnings to in-scope members using existing processes or on a fair and reasonable basis (as supported by ATO guidance).

Step 3: ATO calculates the proportion of the total super balance (TSB) exceeding the $3 million threshold

Step 4: ATO calculates the proportion of the TSB exceeding the $10 million threshold (if applicable)

Step 5: ATO calculates the total tax liability for all that member's interests

The above takes into account an extra 10% tax where the TSB is above $10m.   Remember, these calculations are also in addition to the 15% tax rate applied on income to superannuation earnings.

3. Indexation of large balances

The $3 million threshold will be indexed to the Consumer Price Index in increments of $150,000. The $10 million threshold will be indexed in $500,000 increments.

4. New two-tiered approach

A two-tiered approach will apply for TSBs at $3m and then at $10m.

• 30% tax rate on the proportion of earnings for TSBs between $3 million and $10 million; and
• 40% on the proportion of earnings for TSBs above $10 million.

The tax will still be levied on an individual level with the choice of paying the liability personally or from the superannuation fund.

With consultation on calculations and drafting of the measure still to come, introduction of the new legislation is set to happen in 2026.

We will be in contact with those clients affected by the new draft legislation to review and discuss your personal circumstances whilst we wait to see what comes of the draft legislation.

It is a relief to know that we now have something clearer to work towards.

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