Compliance
Preparing Legacy Super Funds for From-1 July 2025 Super Concessional Changes
From 1 July 2025 tax concessions on earnings above AUD 3 million super balances will be cut; here's how individuals and SMSFs should adapt to better targeted superannuation concessions and contributions rules.
By NomadicTax Research Team • 5-8 min read • November 16, 2025
## Overview of the Super Concession Changes
- Starting **1 July 2025**, superannuation balances above **AUD 3 million** will face a **more targeted concessional tax rate of 30%** on future earnings. This replaces more generous tax treatments previously available. ([ato.gov.au](https://www.ato.gov.au/about-ato/new-legislation/in-detail/superannuation/better-targeted-superannuation-concessions?utm_source=openai))
- These changes are part of the government’s plan to ensure high-balance super accounts pay a fairer share and to reduce tax advantages for extreme balances. They have not yet become law. ([ato.gov.au](https://www.ato.gov.au/about-ato/new-legislation/in-detail/superannuation/better-targeted-superannuation-concessions?utm_source=openai))
## Impact for Legacy Products & Contributions
1. **Legacy retirement products** (e.g. lifetime pensions, market-linked annuities) may be affected. Individuals exiting eligible legacy products may have new rules regarding reserves used in those products with implications for contributions caps. ([ato.gov.au](https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/self-managed-super-funds-smsf/smsf-newsroom/changes-to-legacy-retirement-products-impacting-smsfs?utm_source=openai))
2. Changes to reserve allocations: allocations from super reserves now generally count toward **non-concessional contributions caps** instead of concessional caps, for allocations from 7 December 2024 onward. ([ato.gov.au](https://www.ato.gov.au/tax-and-super-professionals/for-superannuation-professionals/apra-regulated-funds/fund-reporting-protocols/contributions-reporting-protocol/types-of-contributions-to-report/changes-to-reserve-allocations?utm_source=openai))
## What Should SMSF & High-Balance Super Members Do Now
- **Review your current super balance**: If close to or above AUD 3 million, forecast whether future earnings will push taxable earnings into the newly taxed band.
- **Consider strategies such as income streaming vs accumulation**: Evaluate splitting funds or structuring super income streams where possible to limit exposure.
- **Monitor reserve allocations and commutations**: If allocating funds from reserves or altering lifetime product arrangements, check whether these allocations will now count as non-concessional contributions to avoid excess contribution taxes.
- **Seek professional advice**: Especially important for members in legacy retirement products or unusual pension structures. SMSF trustees should check fund rules and whether exit is possible.
## Example
**Michael**, aged 60, has super balance **AUD 3.5 million**, with AUD 300,000 in earnings per year in accumulation phase. Under previous rules, much of that earning enjoyed concessional rates; from 1 July 2025, earnings above AUD 3 million will be taxed at 30%, increasing his tax by **AUD 30,000/year** versus prior rate (assuming 15% rate). Planning may involve splitting balances or transitioning part to income stream to reduce exposure.
## Practical Tips Before the Law Changes
- Evaluate whether shifting earnings into lower taxed segments (if allowed) or rebalancing investment mix to reduce earnings volatility could help.
- Consider whether legacy retirement products can be exited—if eligible—before 1 July 2025, or align allocations to ensure they receive favourable treatment.
- Ensure all contributions (concessional and non-concessional) are properly monitored, and excess contributions avoided, especially with reserve allocation rules changing.
## Legislative Status & Timeline
- **Effective from** 1 July 2025, once legislation is passed.
- **Status**: **Proposed/not yet law** as of mid-2025. Legislation required.
These super changes represent a major shift for high-balance superannuation holders and legacy products. To avoid unexpected tax bills and maximise concessional benefits, now is the time to review your super structure, align with reserve rules, and consult professionals.