5 Strategic Moves for Wealthy Individuals ahead of Australia’s New Super Concessions

What’s Changing in Superannuation Tax Concessions?

• From 1 July 2025, individuals with total super balances above AUD $3 million will face reduced tax concessions: earnings attributable to the amount above AUD $3 million will be taxed at 30%, not the standard rate.(ato.gov.au)
• These changes are part of the Better Targeted Superannuation Concessions measure announced in the 2023–24 Federal Budget.(ato.gov.au)

Who is Impacted?

• Individuals near or exceeding $3 million in super balance at 30 June 2025.
• Defined Benefit members and self-managed super fund (SMSF) holders who have not rebalanced risk exposures. More than 99.5% of super members are not affected.(ato.gov.au)

Strategic Planning Moves

1. Audit and Forecast Your Super Balance

   • Estimate whether your balance will exceed the threshold by 30 June 2025; this can inform contribution decisions before year-end.
   • Recall that concessional contributions (pre-tax) are limited each year; non-concessional contributions have different caps. Check these before acting up.(ato.gov.au)

2. Prioritize Tax-free Earnings or Tax-offset Investments

   • Position a portion of your portfolio in tax-free segments (e.g. investments that produce franked dividends) or personally-owned assets that may enjoy capital gains discounts.
   • Consider consolidating to reduce fees and maximise efficiency.

3. Marginalise Your Growth on Above-threshold Balance

   • Shift growth investments in the portion above $3 million into more stable or lower return assets to reduce tax exposure.
   • Delaying contributions on that portion may be a strategy if the marginal return does not outweigh the extra taxation.

4. Review Your Retirement Product Types

   • Check whether legacy retirement income streams or annuities you hold are “legacy” products; rules regarding exit options and reserves changed for those.(ato.gov.au)
   • These changes affect how reserve allocations count towards concessional or non-concessional caps—older products may require planning.(ato.gov.au)

5. Monitor Legislative Progress & Indexation

   • The $3 million threshold may not be indexed—watch Budget announcements for inflation adjustment. If you’re close, indexing could matter.(ato.gov.au)
   • Understand that some measures (like Payday Super) are upcoming and will affect employer obligations, cashflows, and system timing.(ato.gov.au)

Illustrative Example

Suppose Jane has $3.5M in super at 30 June 2025. Earnings are normally taxed at 15%, but under new rules, earnings on $500,000 above the threshold will attract a tax concession capped at 15%, meaning effective tax on those earnings becomes 30%. If Jane can shift $200,000 of that balance into lower growth or tax-favoured investments, she could save thousands in tax each year.

Actionable Advice Before 30 June 2025

• Evaluate contribution strategies now—may be better to pause contributions or reallocate assets to reduce above-threshold earnings.
• Liaise with your super fund or financial adviser to understand how reserves are treated in both legacy and current products.
• Stay alert for ATO guidance clarifying ambiguous areas like caps on reserve allocations and what constitutes assessable/income earnings for concession calculations.

Navigating these upcoming changes with intentional planning can protect more of your retirement nest egg while avoiding surprise tax liabilities.