Tax Planning
Tax Planning for High Balance Super Fund Members: Navigating the New $3 Million Rule
From 1 July 2025, individuals with total super balances over $3 million face reduced tax concessions on earnings above that threshold. Here's how to plan to protect your retirement savings and optimise your outcome.
By NomadicTax Research Team • 5-8 min read • November 23, 2025
## Understanding the Change
The Australian Government introduced a measure called **Better Targeted Superannuation Concessions**, effective **1 July 2025**, which reduces tax concessions on earnings for super balances exceeding **AU$3 million**. ([ato.gov.au](https://www.ato.gov.au/about-ato/new-legislation/in-detail/superannuation/better-targeted-superannuation-concessions?utm_source=openai)) Under the upcoming Division 296, earnings attributable to amounts over this balance will be taxed at **30%**, rather than benefiting from the usual lower concessional tax rates. ([ato.gov.au](https://www.ato.gov.au/about-ato/new-legislation/in-detail/superannuation/better-targeted-superannuation-concessions?utm_source=openai))
## Who’s Affected
Typically impacts individuals with:
- Large Self-Managed Super Funds (SMSFs)
- Long investment histories or high contributions
- Defined benefit interests with significant value
Only around **0.5% of super fund members** are expected to be affected. ([ato.gov.au](https://www.ato.gov.au/about-ato/new-legislation/in-detail/superannuation/better-targeted-superannuation-concessions?utm_source=openai))
## Actionable Strategies
To manage this effectively, consider the following:
### 1. Monitor Your Super Balance
Track your super balance at **30 June each year**, as that figure determines whether you cross the AU$3 million threshold. For defined benefit interests, ensure your fund applies the correct valuation method. ([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/stakeholder-relationship-groups-key-messages/superannuation-administration-group/superannuation-administration-group-key-messages-17-june-2025?utm_source=openai))
### 2. Shift or Time Earnings Realised
Since future earnings on amounts over AU$3 million are taxed more heavily, you may want to:
- Realise capital gains or dividends *before* crossing the threshold
- Shift or merge fund interests to distribute earnings between beneficiaries (if permissible)
- Defer contributions so that high earnings aren’t compounded once the higher rate applies
### 3. Explore Retirement Phase Options
In retirement, different rules may apply and income streams may allow more flexibility in the timing of earnings. Speak to financial advisers experienced in superannuation structuring.
### 4. Regular Reporting and Compliance Readiness
Funds will need to provide new reporting and valuations under Div 296. SMSFs, especially, should ensure their systems and financial statements are prepared, as additional labels will be added to annual returns. ([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/stakeholder-relationship-groups-key-messages/superannuation-administration-group/superannuation-administration-group-key-messages-17-june-2025?utm_source=openai))
## Practical Example
Sarah has a super balance of AU$2.8 million as of 30 June 2025. She realises AU$300,000 in investment earnings in 2025–26, pushing her balance over AU$3 million. Under the new rules, earnings on the **excess** (in this case, AU$100,000) will be taxed at **30%**, rather than concessional rates (e.g. 15–20%). Proactively, she could have:
- delayed some earnings to next financial year when maybe her balance is reset (if possible)
- moved some defined benefit interest earlier to avoid post-valuation jumps
- reviewed whether splitting earnings or restructuring balances is feasible legally
## Key Takeaways
- **Start reviewing your super now**, especially if you may breach the AU$3 million mark in coming years.
- Talk to your fund about how valuations will work and how they classify defined benefits.
- Stay up to date with ATO guidance: failure to comply with Div 296 obligations could lead to compliance risk or unexpected tax bills.
**Final word**: while this change only affects a small group, for those impacted it has material consequences. Effective planning, proactive tracking and having access to good advice can make the difference between an unexpected tax cost and strategic decision-making.