Tax Planning
Planning Ahead: Navigating the Better Targeted Superannuation Concessions from July 2025
Australia’s tax concessions for long-term retirement savings will change conditionally for balances over $3 million—learn actionable strategies to optimise tax outcomes before the changes kick in on 1 July 2025.
By NomadicTax Research Team • 5-8 min read • November 17, 2025
## What’s Changing?
From **1 July 2025**, the Australian government is introducing the **Better Targeted Superannuation Concessions** (Division 296) regime. This will reduce tax concessions for earnings on superannuation balances **above $3 million**, applying a **15% tax** on the proportion of earnings tied to the excess balance. Individuals with balances below $3 million won’t be affected. ([ato.gov.au](https://www.ato.gov.au/about-ato/new-legislation/latest-news-on-tax-law-and-policy?anchor=Budget+2020-21&utm_source=openai))
Additionally, the **General Transfer Balance Cap (TBC)** has been indexed from **$1.9 million to $2 million**, impacting eligibility for pensions and contribution caps. The Defined Benefit Income Cap (DBIC) was also increased. ([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))
## Tax Planning Strategies
- **Review your super balance now**: If you are close to or exceeding $3 million, modelling your future earnings can help you understand the incremental tax impact.
- **Consider shifting asset allocation**: Since tax applies only to earnings on the excess portion, reducing exposure to high-yield or volatile assets might lower taxable earnings.
- **Timing of contributions**: Accelerate concessional contributions in years when your balance is below the threshold. Conversely, if over, consider non-concessional contributions or reduced contributions in high earning years.
- **Use legal withdrawal strategies**: If you have legacy products or annuities, consult advisers about options for commutation if permissible under your fund rules. Also, consider stream combining or separating defined benefit and accumulation components where applicable.
## Practical Example
Emily has a total super balance of $3.5 million entering 2025–26. Her earnings in a given year are $200,000, assuming 5.7% return. Earnings attributable to the $0.5 million above the $3 million cap (~28.6%) will be taxed at 15%. That’s ~$2,000 extra tax on her $200,000 earnings. Adjusting allocations so that some high return assets settle into investments held outside super or using lower-yield strategies can reduce this burden.
## Actionable Steps Before 1 July 2025
1. **Assess your fund**: Talk to your super fund and a financial adviser to determine exact balances and projections.
2. **Asset audit**: Identify high-yield investments in super. Consider moving some growth assets to other tax-efficient vehicles.
3. **Contribution planning**: Explore prepaying or delaying contributions to manage balance thresholds.
4. **Legacy product review**: If you hold eligible legacy annuities, check whether commutations or reserves releases are beneficial. Options may exist to restructure.
## Long-term Compliance Notes
- Funds and trustees will report required balances and earnings as part of standard obligations.
- Individuals must ensure all events that affect transfer balance cap (e.g. commencements or ceasing pensions) are timely reported.
- Keep clear records of super balances and earnings, including proportion of earnings attributable to the excess balance.
## Bottom Line
This policy rebalances tax concessions toward lower-balance retirees. For high balance super account holders, early strategic planning—adjusting contributions, reviewing investments, and understanding the indexation of caps—is essential to minimise tax liabilities and preserve retirement wealth.