Overview of Better Targeted Superannuation Concessions
As part of the Superannuation reform package, the Australian Government introduced Better Targeted Superannuation Concessions:
- From 1 July 2025, individuals with total superannuation balances exceeding AUD 3 million (at the end of a financial year) will face a 15% tax on earnings exceeding that balance, in addition to earnings tax already paid inside accumulation phase funds. (ato.gov.au)
- Under current law, earnings on balances under this threshold are taxed at concessional rates. The new measure applies on earnings beyond $3 million. (ato.gov.au)
Implications for Entities, Trustees and High-Net-Worth Members
Who is affected:
- Individuals (members) of superannuation funds whose total balance exceeds AUD 3 million.
- Trustees/funds must identify which members exceed thresholds and apply the additional tax on their excess earnings.
Fund obligations:
- Funds will need to revise reporting and record-keeping to track members’ total super balances.
- Adjust contribution strategies for those approaching thresholds.
Entity structure implications:
- Self-managed super funds (SMSFs) with high-balance members must closely monitor balances across all super accounts, especially when there are multiple fund interests, vesting, or deferrals.
Examples of Strategies
Case A – SMSF Member with a balance of AUD 2.8 million approaching the threshold:
- Delay large non-concessional contributions until after 30 June if they would push total above AUD 3 million.
- Consider splitting balances across multiple super accounts (if legitimate under law) to reduce exposure.
Case B – Trustee of fund with many high-balance members:
- Proactively identify members near AUD 3 million and provide tailored communication.
- Use investment strategies with lower expected earnings on funds above threshold where additional tax applies.
Practical Tips for Entity Setup
Review contribution timing:
- Concessional contributions and non-concessional contributions might push a member above $3 million; timing matters to minimize excess earnings exposure after 1 July 2025.
Select investment mix carefully:
- For the portion of balance expected to exceed threshold, consider lower yielding but stable investments to reduce taxable earnings above $3 million.
Consider transaction costs and administrative burden:
- Tracking multiple accounts just to stay under thresholds may generate costs. Entity setup must balance tax savings against administrative complexity.
Legal & Compliance Considerations
- Legal capacity to split accounts depends on super law and fund rules; must be legitimate—not just for tax avoidance.
- The ATO will likely scrutinize “artificial” transfers or structures designed only to circumvent threshold rules.
- Ensure all fund members receive accurate statements and earnings attribution post threshold for compliance.
Conclusion
Entities and high-net-worth individuals must plan now to manage exposure under the Better Targeted Superannuation Concessions. Thoughtful structuring, investment strategy, and timing can lighten the impact and help ensure compliance for 2025–26 and beyond.