Understanding the New $3 Million Super Tax Changes and What They Mean for You

The Federal Government has confirmed changes to the proposed $3 million superannuation tax, addressing earlier concerns from Australians with higher super balances. Initially introduced in 2023, the original plan received significant criticism—particularly regarding taxing unrealised gains and the absence of indexation. With revised measures announced, it is important for high-balance members—especially SMSF trustees—to understand the implications for long-term retirement planning.

At the same time, many Australians approaching retirement are experiencing delays accessing financial support from their super funds. As more individuals enter the pension phase and adviser numbers decline, service standards are increasingly influencing fund choice.

Revised Super Tax – What’s Changing

Originally, the proposed tax applied to unrealised gains on balances above $3 million, meaning members could be taxed on increases in asset value even if those assets hadn’t been sold. The updated version introduces significant compliance-aligned improvements:

1. Tax Applies to Realised Gains Only

The tax will now apply only to actual income and realised gains. This change aligns with general taxation principles and removes concerns about taxing hypothetical or paper gains; an issue raised during the public consultation period.

2. Indexed $3 Million Threshold

The $3 million threshold will now be indexed in line with the general transfer balance cap. This is expected to reduce bracket creep over time and ensures the tax targets higher balances only.

3. Tax to Be Paid Personally

Similar to Division 293 tax, the liability will sit with the individual. Members may elect to pay from personal funds or request release from their super account. This offers flexibility but may have estate planning and cashflow implications.

4. Progressive Tax Rates

• $3M–$10M: Additional 15% tax on earnings (total 30%)

• Over $10M: Additional 10% tax on top of that (total 40%)

These changes are due to commence on 1 July 2026, providing time for strategic planning and professional advice.

Who Is Likely to Be Affected?

As of 2024, only a small percentage of members have balances exceeding $3 million. With the introduction of indexation, this proportion is expected to remain low.

However, if you hold significant assets within a Self-Managed Super Fund (SMSF)—such as property, equities, or unlisted assets—you may fall within scope. Key considerations include:

• Timing of Gains: It is not yet confirmed how accrued gains before 1 July 2026 will be treated.

• Payment Options: The ability to pay tax from personal funds may impact your broader wealth and estate strategies.

• Asset Allocation: Now is the time to assess your SMSF’s investment mix and revisit your fund’s investment strategy to ensure compliance with SIS Regulations.

You must not make structural or investment changes without considering the fund's Investment Strategy, Trust Deed, and member risk profiles. Any advice relating to these matters should be documented in accordance with the Best Interests Duty under s961B of the Corporations Act.

Delays in Super Fund Support

Beyond legislative change, an increasing number of members report long delays when contacting their super funds, particularly for pension guidance or Centrelink-related queries.

Real Examples:

• One retiree reported waiting over an hour on hold, followed by a five-week wait for an adviser appointment.

• Another was offered a two-week wait by a different fund—highlighting variation in service standards.

These issues stem largely from a shrinking adviser workforce. ASIC data shows adviser numbers have more than halved since 2018, creating capacity constraints at a time of rising demand.

Choosing a Fund – It’s Not Just About Fees

While low fees remain a valid consideration, retirees should look beyond pricing to factors such as:

• Investment performance over time

• Ease of withdrawals and pension payments

• Quality and timeliness of member support

• Access to intra-fund or external financial advice

Importantly, intra-fund advice—often free or low-cost—is limited in scope to your existing account within the fund. It does not extend to broader strategies such as downsizing, managing multiple accounts, or personal tax planning.

If your circumstances are complex—such as managing an SMSF, gearing, or estate planning—then engaging a qualified, licensed financial adviser may be more appropriate. While fees may be higher, so too is the strategic depth of service.

Final Thoughts

The updated $3 million super tax reflects a more balanced approach, avoiding the impracticality of taxing unrealised gains while introducing indexation and flexible payment options.

Although it affects a narrow group of individuals, SMSF trustees and high-balance members should act now to ensure investment strategies and documentation are aligned ahead of 1 July 2026.

Separately, the increasing wait times for member support serve as a reminder: choosing a fund (or platform) should factor in not just fees and performance, but also service capability, particularly in retirement.

Important Notice

This article provides general information only. It does not constitute financial or tax advice. Individual circumstances vary and the legislative landscape may change. If you’re uncertain how this may impact your retirement or superannuation strategy, you should seek advice from a licensed financial adviser.