Treasury has released draft legislation to enact the Federal Government’s plan to increase the tax rate on earnings on superannuation balances over $3m from 15% to 30% from 1 July 2025.
This is the final step before the legislation is introduced into Parliament and a step closer to implementation. The draft legislation seems to be mostly unchanged from the Government’s original announcement.
The proposed calculation aims to capture growth in total super balance (TSB) over the financial year allowing for contributions (including insurance proceeds) and withdrawals. This method captures both realised and unrealised gains, enabling negative earnings to be carried forward and offset against future years.
The ATO will perform the calculation for the tax on earnings. TSBs in excess of $3 million will be tested for the first time on 30 June 2026 with the first notice of assessment expected to be issued to those impacted in the 2026-27 financial year.
From a planning perspective, for those with superannuation balances close to or above $3m, it will be important to explore the potential implications to your personal situation. What is best for you will depend on your circumstances, so it does pay to be informed or seek advice from a finance professional.
For more detail and examples of the legislation in practice, you can click this link to read an article from Tax Banter or contact your Arabon accountant to discuss the possible implications for your situation.
