Large Superannuation Balances and Proposed Tax Changes from 1 July 2026

The Federal Government has released draft legislation proposing changes to the tax treatment of large superannuation balances. If enacted, these changes will affect individuals with total superannuation balances exceeding $3 million, from 1 July 2026.

While the legislation is still in draft form, it’s important for affected individuals to understand what’s proposed, how it may work, and what planning options may be available.

What’s Changing?

Currently, investment earnings in superannuation are generally taxed at 15% in accumulation phase.

Under the proposed changes:

• Earnings attributable to balances above $3 million would be subject to an additional 15% tax, bringing the total tax rate on that portion of earnings to up to 30%.
• Balances up to $3 million would continue to receive the existing concessional tax treatment.

These changes are proposed to apply from 1 July 2026, subject to legislation being passed.

How Will the New Tax Be Calculated?

If your total superannuation balance (TSB) exceeds $3 million, the Australian Taxation Office (ATO) would calculate an additional tax liability after the end of each financial year.

Key points to note:

• The calculation is based on the change in your total superannuation balance, adjusted for contributions and withdrawals.
• Importantly, this includes unrealised gains, meaning asset revaluations are taken into account, not just realised income.
• Only the proportion of earnings attributable to balances above $3 million is subject to the additional tax.

Once calculated:

• The ATO will issue a personal notice of assessment.
• You will have 84 days to pay the additional tax.
• You can choose to pay the tax personally or request a release from your superannuation fund to cover the liability.

How Does This Interact with Pensions and the Transfer Balance Cap?

Amounts above your transfer balance cap currently remain in accumulation phase and are taxed at 15%.

This framework will remain, however, if your total superannuation balance exceeds $3 million, the portion above that threshold will be subject to the higher effective tax rate of up to 30% on earnings.

What Can You Do Now?

As the legislation has not yet been enacted, there is time to review your position and plan appropriately. The right strategy will depend on your personal circumstances, investment mix, cash flow needs and broader estate planning considerations.

Possible options may include:

• Leaving funds in superannuation, accepting the higher tax rate on earnings above $3 million.
• Withdrawing lump sums (subject to conditions of release) and investing outside super in your personal name or a company.
• Reviewing asset holdings and timing of disposals prior to the commencement of the new rules.
• Reassessing succession and estate planning, including powers of attorney and beneficiary structures.

Any movement of funds from superannuation requires that a condition of release is met, and tax outcomes can vary significantly depending on the approach taken.

Need Advice?

These proposed changes are complex and may have long-term implications for wealth accumulation, retirement planning and estate outcomes.

If you would like to understand how the proposed rules may affect you, or to explore strategic options ahead of 1 July 2026, we recommend seeking tailored advice.

Important note: This article is general information only and does not take into account your objectives, financial situation or needs. It is not intended to be financial advice. Before taking any action, you should consider whether the information is appropriate to your circumstances and seek professional advice.