Australia’s superannuation landscape is set for a significant shift on 1 July 2025. With new rules targeting high-balance accounts, it’s crucial to separate fact from fiction and understand how these changes might affect your retirement planning.
What’s Changing on 1 July 2025?
The Big Picture
Contrary to some online rumours, there will be no special one-off payment for Age Pension recipients. However, a new tax is set to impact individuals with superannuation balances exceeding $3 million.
Who Will Be Affected?
Only a small percentage of superannuation account holders—about 80,000 people or less than 1%—will be affected by the new rules. The changes specifically target those whose Total Superannuation Balance (TSB) is above $3 million, which includes both accumulation and pension accounts1.
How the New Tax Works
Current Tax Rules
At present, all superannuation earnings in accumulation phase are taxed at a maximum rate of 15%, though franking credits often reduce the actual tax paid.
New Additional Tax
From 1 July 2025, an extra 15% tax will apply to the proportion of superannuation earnings attributable to balances above $3 million. Importantly, the first $3 million remains taxed at the existing rate.
Unrealised Gains and Losses
A controversial aspect is the inclusion of unrealised gains. If the value of your super rises above $3 million, the additional tax applies to the increase—even if you haven’t sold the assets. Unrealised losses can be carried forward to offset future gains.
Key Considerations for High-Balance Holders
Indexation and Thresholds
The $3 million threshold will not be indexed for inflation or wage growth. Over time, more people could be caught by this limit as its real value decreases.
Legislative Status
The law is not yet finalised. It will be reintroduced to Parliament after the new government is formed. The Albanese Government needs Senate support to pass the changes, so modifications to the cap or indexation may still occur.
Practical Implications
Who Should Act?
If your super balance is near or above $3 million, you may want to review your investment strategy. The new rules make superannuation more complex, especially for those with large, illiquid assets like property in self-managed super funds (SMSFs)1.
Seeking Advice
Given the complexity, consulting a financial adviser is recommended, especially for those with SMSFs or significant non-super investments.
Common Misconceptions
Not Everyone Is Affected
The new tax only applies to balances above $3 million. Most Australians will see no change to their superannuation tax arrangements1.
Tax on Proportion, Not Entire Excess
The tax is applied to the proportion of earnings above $3 million, not the entire excess amount. For example, if your balance grows from $3 million to $3.2 million, only the proportion of earnings above $3 million is taxed at the additional rate.
Potential Strategic Responses
Asset Allocation
Consider the mix of assets in your super and non-super investments. Some may benefit from reallocating capital outside super to optimise tax outcomes.
Liquidity Planning
For SMSFs with illiquid assets, planning for future tax obligations is crucial, as unrealised gains could trigger a tax liability without corresponding cash flow.
Wider Social and Policy Context
Purpose of Superannuation
Superannuation was designed to provide retirement income and reduce reliance on the Age Pension. The new rules aim to ensure the system is fair and sustainable for future generations.
Debate and Controversy
Some argue that the new tax unfairly targets business owners with property in their SMSFs, while others believe it is a necessary step to address wealth inequality and ensure super is used as intended.
FAQs
Q: Will the new tax affect everyone with super?
A: No, only those with a Total Superannuation Balance over $3 million will be affected.
Q: How is the tax on excess balances calculated?
A: The additional 15% tax applies only to the proportion of earnings attributable to the balance above $3 million1.
Q: What should I do if my balance is near $3 million?
A: Review your investment strategy and consider seeking professional financial advice.
Superannuation Changes 1 July 2025
| Feature | Current Rules | New Rules (from 1 July 2025) |
|---|---|---|
| Tax Rate (under $3M) | 15% on earnings | 15% on earnings |
| Tax Rate (over $3M) | 15% on earnings | 15% + 15% (total 30%) on proportion of earnings above $3M |
| Threshold Indexation | N/A | Not indexed |
| Unrealised Gains | Not taxed | Taxed if balance exceeds $3M |
| Who is Affected | All super members | Only those with TSB > $3M |
| Legislative Status | Law | Pending Senate approval |
The superannuation changes from 1 July 2025 are significant but will only impact a small minority of Australians. Understanding the new rules, separating fact from fiction, and planning accordingly will help you navigate these changes with confidence. Always consult a financial adviser for personalised advice tailored to your situation.
This article is for informational purposes only and does not constitute financial, legal, or tax advice. Consult a qualified professional before making any changes to your financial arrangements.