Tax Planning
How Australia’s New Super Tax Thresholds Will Affect High-Balance Retirement Accounts
Australia introduces new superannuation tax rates starting July 2025 for balances over $3 million—understand the thresholds, examples, and what actions you can take now.
By NomadicTax Research Team • 5-8 min read • November 24, 2025
## Overview of the Policy Changes
Australia’s **Better Targeted Superannuation Concessions** policy, effective **1 July 2025**, introduces a **30% concessional tax rate** on future earnings for superannuation balances exceeding **$3 million**. ([ato.gov.au](https://www.ato.gov.au/about-ato/new-legislation/in-detail/superannuation/better-targeted-superannuation-concessions?utm_source=openai))
Simultaneously, the **transfer balance cap**—which limits how much you can move into a tax-free retirement phase—has been **indexed** from **$1.9 million to $2 million** as of 1 July 2025, with the defined benefit income cap similarly adjusted. ([ato.gov.au](https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/self-managed-super-funds-smsf/smsf-newsroom/general-transfer-balance-cap-indexation-on-1-july-2025?utm_source=openai))
## What This Means in Practice
These changes primarily impact individuals with large super balances, often in self-managed super funds (SMSFs) or high net worth portfolios. Here's how it plays out:
- If your super balance (total superannuation balance, TSB) is **below $3 million**, there’s **no change** in your concessional tax rate on earnings.
- Above $3 million, **earnings on the portion above that threshold** will be taxed at **30%**, rather than previous concession rates. This concessional change is separate from the tax your super fund already pays—you may also have a **division 296 tax liability** directly. ([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/stakeholder-relationship-groups-key-messages/smsf-auditors-professional-association-stakeholder-group/smsf-auditors-professional-association-stakeholder-group-key-messages-8-july-2025?utm_source=openai))
- With the **transfer balance cap rising to $2 million**, first-time pension commencers or those who have unused cap space benefit, since **tax-free benefits** are aligned with the new ceiling. ([ato.gov.au](https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/self-managed-super-funds-smsf/smsf-newsroom/general-transfer-balance-cap-indexation-on-1-july-2025?utm_source=openai))
## Examples to Illustrate Impact
- **Example A**: You’ve saved **$2.5 million** in super. Since this is below the $3 million threshold, your earnings remain fully concessional (i.e. taxed at the usual super fund rates).
- **Example B**: You hold **$4 million**. The first $3 million is treated under standard rules; earnings on the **$1 million excess** are taxed at **30%**, and you may receive a division 296 assessment to settle any personal liability. ([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/stakeholder-relationship-groups-key-messages/smsf-auditors-professional-association-stakeholder-group/smsf-auditors-professional-association-stakeholder-group-key-messages-8-july-2025?utm_source=openai))
## What You Can Do Now: Actionable Steps
1. **Check your total super balance (TSB)** as of 30 June 2025 to see if you’ll cross the $3 million threshold.
2. **Maximise concessional contributions** before 1 July 2025 if possible—this may shift more of your earnings into the presaved portion taxed at preferential rates.
3. **Explore restructuring retirement income timing**: Delaying pension commencement or arranging the use of unused transfer balance cap could provide relief under the increased $2 million cap.
4. **Consult financial advisers** especially if you have SMSF or defined benefit funds to understand division 296 applications and your potential liability.
5. **Ensure record-keeping is up to date**—unused cap space, high watermarch transfer balances, and pension commencement dates all matter for calculating your personal cap. ([ato.gov.au](https://www.ato.gov.au/tax-and-super-professionals/for-superannuation-professionals/super-funds-newsroom/changes-to-personal-transfer-balance-caps?utm_source=openai))
## Broader Considerations and Risks
- The policy could lead to **higher effective tax rates** on large balances, especially as accumulation of returns may now face steeper marginal taxation on a portion of super funds.
- Timing matters: if you start pension or make large deductions or contributions before the policy’s effective dates, you may avoid or delay higher rates.
- Remember, the legislation is **not yet fully in law** in some areas (e.g. division 296 processes may depend on further procedural rules), so keep up with ATO announcements. ([ato.gov.au](https://www.ato.gov.au/about-ato/new-legislation/in-detail/superannuation/better-targeted-superannuation-concessions?utm_source=openai))
## Conclusion
For those nearing or exceeding $3 million in superannuation savings, these changes mean **elevated scrutiny and potential tax increases** on earnings above that level, alongside opportunities tied to the new $2 million transfer balance cap. Understanding your current super situation, planning contributions and withdrawals smartly, and staying aware of the legislative rollout will be vital to managing these transitions with confidence.