Understanding the Better Targeted Superannuation Concessions
In the Australian May 2024 Budget, the government introduced reforms called Better Targeted Superannuation Concessions. From 1 July 2025, individuals with a total super balance (TSB) exceeding AU$3 million at the end of the financial year will face reduced tax concessions on the portion of earnings above this threshold. (ato.gov.au)
Key Details
- Earnings on super balances up to $3 million continue under normal concession rules. Above that, future earnings will be subject to a higher tax rate. (ato.gov.au)
- These changes are pending legislation, meaning they are proposed but not yet fully law. (ato.gov.au)
Planning Strategies for High Super Balances
Here’s what individuals with large super balances can do:
| Strategy | How It Helps | Action Steps |
|---|---|---|
| Maintain balances just under $3 million | Avoids higher taxation on earnings above threshold | Regularly review and withdraw (where permitted) small excess amounts into other investment vehicles |
| Use diversified investment structures | Spread assets between super and non-super investments to manage tax exposure | Speak to an adviser about trusts, investment property, or portfolios outside super |
| Time contributions | Make concessional or non-concessional contributions in profitable years to maximise concessions within the threshold | Project earnings and use contribution caps effectively |
Example
Sarah has a TSB of $3.5 million. Under the new rules, earnings on the first $3 million are taxed as usual. Earnings on $500,000 above the threshold will face the new, less favourable rate. To reduce exposure, she might redirect some gains into a personal investment portfolio outside super or make withdrawals (if compliant) before the balance is assessed.
Compliance Considerations
- Legislation status: Keep an eye out — this measure is still pending legislation. (ato.gov.au)
- Assessment date: The TSB is measured at end of each financial year. So decisions just before 30 June could count.
- Investment structure risk: Changing structure may involve trust law, CGT implications, or other compliance costs.
Actionable Insights
- Review your super balance annually and forecast when you might cross the threshold.
- Explore alternative investments for returns expected above the $3 million threshold.
- Consult a tax professional specializing in superannuation and high-net-worth individuals to evaluate your entire tax position.
- Monitor legislative progress for the final rates and enforcement details.
This reform is Effective from 1 July 2025, with assessments first at the end of financial years thereafter.