Treasurer Jim Chalmers has announced amendments to the proposed superannuation tax changes outlined last year. The modifications, which address criticisms of the original blueprint, may drive some investors with superannuation balances over $10 million towards alternative investments.

The superannuation tax changes, which are designed to offer tax breaks to the very lowest income earners, will affect those with superannuation balances over $3 million (approximately 0.5% of the population) and, most directly, those with balances over $10 million (approximately 8,000 Australians).

If passed as legislation, the new taxes will take effect on 1 July 2026, a year later than originally planned, and they will be based on super balances as of 30 June 2027.

Current and future superannuation tax explained

Superannuation is taxed at a lower rate than regular earnings in a system designed to encourage you to save for your retirement. Only concessional (tax deductable) contributions into superannuation are currently taxed at 15% (contributions tax), while non-concessional (after-tax) contributions are not taxed when added to superannuation. Earnings within the fund, such as investment returns are taxed at up to 15% (earnings tax). There is no tax to withdraw superannuation balances after age 60.

The original proposal was to increase the tax on superannuation balances over $3 million to 30%. Under the revamped proposal, this will remain at 30% (Tier 1), with a second layer introduced for superannuation balances over $10 million, which will be 40% (Tier 2).

Both of these taxes apply to the proportion of earnings above the threshold figure, across each financial year.

What the new superannuation tax means for you

There are a couple of key changes to the original superannuation tax plan. Under the first proposal, the $3 million threshold would not be indexed to inflation, meaning with ‘bracket creep’, it would effectively amount to a $2 million threshold within 15 years, impacting many more households. The announcement this week confirmed that indexation will now be automatic.

Another key difference is the removal of the plan to tax ‘unrealised’ gains, such as increases in property value prior to sale. Now, the tax will apply only to ‘realised’ gains, such as interest, dividends or profits from the sale of physical assets.

The introduction of the Tier 2 tax may have the greatest impact on investment behaviour, potentially driving those with balances over $10 million away from superannuation and towards alternative investments. With the changes still to be legislated and no direct impact until at least the 2027–28 financial year, there is plenty of time to consider investment strategies and the best plan for you and your family.

A summary of the key changes

Here are the key changes and what to expect with the proposed superannuation tax:

• A 30% tax for individuals with superannuation balances between $3 million and $10 million (Tier 1).
• A 40% tax for individuals with superannuation balances over $10 million (Tier 2)
• A ‘realised’ earnings approach, which removes the tax for unrealised gains
• An indexed tax rate, in increments of $150,000 for the $3 million threshold, and $500,000 for the $10 million threshold

As part of the plan, the government will also:

• Adjust the earnings calculation so the tax rates apply to future realised earnings.
• Apply commensurate treatment to defined benefit interests to ensure equivalent impacts, with Treasury to consult on implementation details.
• Extend the existing exemption for some judges to improve consistency across jurisdictions (a small change to ensure more neutral treatment).

Superannuation and investment advice, with clarity

At Newealth, we can help guide you through the superannuation tax changes, offer advice on the best superannuation strategy for you and provide tailored advice on alternative investment strategies.

Newealth is a Sydney-based boutique financial advisory firm with 35 years of experience helping professionals, executives and families protect wealth and build lasting financial security across generations. Guided by clarity, discipline and integrity, we deliver
trusted advice for every stage of life.

We help provide financial clarity, so you can plan for tomorrow, with peace of mind. For a confidential discussion, please contact us.

General Advice Warning

The information in this blog is general in nature and does not take into account your personal objectives, financial situation or needs. You should consider whether the information is appropriate for you and seek professional advice before making any financial decisions.
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