Australia’s Revised Superannuation Tax Landscape
In October 2025, the Australian Government announced significant changes to how superannuation earnings are taxed for account balances above AU$3 million. Key updates include: delayed commencement to 1 July 2026, a tiered tax rate structure (30% tax on earnings for balances between AU$3 million–AU$10 million; 40% for balances above AU$10 million), dropping of the taxation on unrealised gains, and indexing thresholds to inflation.(reuters.com)
These revisions are designed to make the system more equitable and reduce concerns about fairness, bracket creep, and wealthy tax-free accumulation.(reuters.com)
What This Means for Individuals with Large Super Balances
Here are practical implications:
| Scenario | Before Changes | After Changes |
|---|---|---|
| Bal- ance over AU$3M but under AU$10M | Full super tax concessions under current rates | Earnings taxed at 30% on realised income (interest, dividends now) from 1 July 2026 onward. |
| Balance above AU$10M | Same as above | Tiered rate rises to 40% on realised earnings above this tier from 1 July 2026. |
| Unrealised gains | Would have been considered under original proposal | Now not taxed; only realised gains will be subject. |
| Inflation protections | Fixed thresholds, risk of more taxpayers pushed into higher rates over time | Thresholds will index to inflation, preserving real value. |
How to Plan Around These Changes
- Assess your current super balance: If nearing tiers, expect higher ongoing tax rates on earnings.
- Maximise tax-efficient income sources: Focus on income streams generating realised returns—dividends or interest—since real earnings are taxed. Unrealised capital gains held in investments may be more advantageous under these rules.
- Timing of withdrawals or transition to retirement: If you’re planning to draw down funds, consider doing so before 1 July 2026 to potentially mitigate higher taxes, especially if your balance approaches or exceeds a threshold.
- Inflation indexation planning: Keep an eye on the indexed thresholds; stay aware how rising inflation could push balance segments into higher-tax bands.
Examples in Practice
- Example 1: Jane holds a super balance of AU$4 million. Under the new system, earnings over that AU$3 million threshold beginning mid-2026 taxed at 30%, but only realised returns matter.
- Example 2: Michael has AU$12 million in super. From 1 July 2026, income up to AU$10M over the base threshold taxed at 30%, only incomes above AU$10M tiered at 40% on realised earnings.
Takeaway Tips
- Review your investments in superannuation – assess the split between unrealised and realised returns.
- Work with your super fund or tax adviser to reallocate or realise gains thoughtfully.
- If planning to retire or access super soon, consider whether bringing forward actions could reduce exposure to these higher rates.
These changes may not affect most super holders, but for those with sizable balances, they represent a material shift. Thoughtful planning ahead of the July 2026 start date can help you manage your tax exposure smartly.