If you’ve been following the news lately, you’ve probably heard a lot of noise about the government’s proposed changes to superannuation tax—specifically, a new rule targeting balances over $3 million.
But what does it really mean for you, and is your nest egg at risk? Let’s break down the facts, the fears, and the fine print, so you can make informed decisions about your retirement savings.
From 1 July, the government plans to double the concessional tax rate on superannuation earnings for balances above $3 million. That means, instead of paying 15 per cent tax on earnings in the accumulation phase, those with super accounts over $3 million will pay 30 per cent on the portion above that threshold.
Treasurer Jim Chalmers has described the move as ‘modest’, emphasising that it will only affect a ‘tiny sliver’ of Australians—about 80,000 people, or 0.5 per cent of the population, according to Treasury estimates. The government says the change is necessary to make the budget more sustainable and to help fund priorities like strengthening Medicare and providing cost-of-living relief.
While the government insists the change is fair and targeted, critics argue it could have unintended consequences—not just for the wealthy, but for the broader superannuation system and even the economy.
One of the biggest sticking points is the way the new tax will be calculated. Unlike most taxes, which are based on realised gains—actual profits you’ve made by selling an asset, this one will also include ‘unrealised gains’—that is, increases in the value of your investments on paper, even if you haven’t sold them. This means you could be taxed on money you haven’t actually received, and if the value of your investments falls the following year, you won’t get a refund.
Industry groups like the SMSF Association have called this approach ‘flawed’, warning it could penalise self-managed super fund (SMSF) members for ‘paper profits that may never materialise’. Liberal senator Andrew Bragg has gone further, claiming it could ‘destroy innovation’ and even cause some Australians to go bankrupt.
‘It will destroy new ideas, it will destroy innovation because in one year you may have a paper gain, but in the next year you might have a paper loss. You’re going to pay the tax on the paper gain, but you don’t get any refund back on the loss,’ the Senator said.
The $3 million threshold is well above the average super balance, especially for those approaching retirement. But some experts warn that today’s 22-year-olds could easily retire with more than $3 million in super, thanks to inflation, wage growth, and the magic of compound interest.
So while the change is aimed at high-balance accounts today, it could capture more people in the future if the threshold isn’t indexed to inflation. That’s something to keep an eye on, especially if you’re still in the workforce and making regular contributions.
Beyond the immediate impact on high-balance super holders, there are concerns about the ripple effects on the economy. The SMSF Association points out that many small business owners, primary producers, and angel investors use their super as a way to invest in the Australian economy. If the new tax discourages them from doing so, it could have knock-on effects for innovation and growth.
‘No one disputes Treasury’s desire for a fair and equitable superannuation system, but to claim this tax only affects a minority and serves the national interest is shortsighted. It ignores the broader ripple effects,’ the association said.
There’s also the risk that some retirees may restructure their investments or even sell assets to avoid the higher tax, potentially destabilising the superannuation sector.
The government expects the new tax to raise $2.3 billion in its first full year (2027-28), and $40 billion over the next decade. That’s a significant sum, but in the context of the federal budget, it’s a relatively modest contribution.
While the super tax change has grabbed headlines, the government is also taking steps to support retirees and older Australians in other ways. Treasurer Chalmers recently highlighted Labor’s submission to the Fair Work Commission, advocating for a real wage increase for award workers. Since Labor came to office, the minimum wage has increased by $143 a week, and the median wage by $206 a week.
As debate continues over the proposed changes to superannuation tax and their potential impacts, many Australians are weighing the broader implications for retirement planning, investment behaviour, and economic sustainability.
What are your thoughts on the proposed $3 million super tax threshold? Do you believe the changes strike the right balance between fairness and fiscal responsibility? How might this affect your own retirement planning or financial outlook? Share your views in the comments below.
Also read: Markets are choppy. What should you do with your super if you are near retirement?
People voted them in with an increased majority.
How else will these voters get their freebies promised during the campaign?
When all the farms and businesses are sold to pay this tax, we can start importing all of our food until the next plague.
The one thing that this article does not highlight is that…. this wont affect or be applied to—you got it…, Politicians and Judges!!
Anyone with more than $3 million in their super fund, about 1%, do not need to receive tax concessions funded by the other 99% of taxpayers many of whom would be young people struggling with the cost of living.
Anyone claiming this change is unfair is a greedy entitled boomer or a political activist trying to score a point.
As to it not applying to judges and politicians, please provide proof of that because I think you are spreading a falsehood.
David, I can see that you are envious of others who have responsibly financially managed their money and abided by the tax laws at the time.
The cost of living crisis was created by Labor, which shows irresponsible financial mis-management and we shouldn’t be paying for their idiotic fiscal mismanagement.
A lot of trusts, farms and start-ups have Super investments, now the government is demanding tax be paid on a potential profit which will directly curtail investment in these start-ups. I have some of my super in a start-up hoping that it will become another Atlassian for Australia. Pulling my funding will kill this opportunity and force developers to overseas where the government is not as stupid and opposed building business opportunity.
The worse part is that Politicians and Public servants are exempt. How can this be fair and equatible?
these people are not taking public money by being in Super, look at it as merely donating less (but still a lot more that the other 90+ percent).
Re Judges and politicians: yep, it’s true.
To reverse your argument, just because you failed to google it properly doesn’t by any means make your version true
The proposed tax on superannuation accounts and unrealised capital gains will NOT apply to politicians, (including past politicians receiving defined benefits pensions) all judges and magistrates, head of departments in the civil service, senior members of the military, and police commissioners. Apparently this is is a constitutional requirement according to Chalmers.
You can confirm yourself easily by googling it, or checking Hansard.
Nothing I can find on Google. Making a statement and telling someone to do a search to verify that statement is not good enough so as you have offered no proof of what you post I stand by my original post and am calling your bluff.
This will be one of many tax increases that this lieing government will inflick on us and people were stupid enough to believe what that lieing scoundrel albo told us to get elected. He did not fool me i fid not vote for him. So those who did you are getting what you voted for so sit back and enjoy your suffering and enjoy what you have inflicked on other people that did not vote albo greens and the wealthy socialite teals
The thing that concerns me is that it will potentially be paid EVERY year whereas conventionally it would only be paid once, when the asset is sold.
Fair dinkum.
I too was not fooled by lies and innuendo spread by Labor and voted conservative and for a better life for my children and grandchildren .
I do not think social engineering by penalising those that have saved for old age in terms of Age care fees and super tax is not the Australian principle of a fair go for all that was ingrained in my 79 years to date.
Australians, the voting system has delivered a poor way forward because a good outcome is always a close Parliament not a one imbalanced by a rag tag of one issue parties and one strong Party who is able to avoid the scrutiny that a successful Parliament needs.
Thank goodness I live in Western Australia where my word is my bond still exists and we are subject to less Federal Government interference and manipulation.
Ps,the only way to fund the Aged is for the govt contribution is to be increased.
How would govt fund it?
Forgot the green energy grants to private companies.
Do not build any more wind turbines and super expensive power lines just destroying the landscape of the beautifull ranges of Eastern Australia.
Allow uranium to be mined.
Have proper cradle to grave studies of Solar/wind /critical coal/gas/nuclear solutions to power our new IT industries that are huge uses of Energy and need more than battery power.
We need to continue the R&D of batteries in hope of a commercial solution.
In WA gas is the answer except it still produces emissions so a nuclear plant will be needed for base load power. Combined cycle boiler based gas is base load but has disadvantages in increased labour.
Cheers.