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Everything you need to know about the proposed changes to superannuation balances

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Proposed superannuation changes from 1 July 2025

Recently, the Albanese Labor Government announced changes for superannuation balances in excess of $3 million, commencing 1 July 2025. While it is important to understand that this is just a proposal at this time, we understand that you may have some questions about whether this proposal could apply to you. Here’s what we know so far.

What are the changes to superannuation that have been proposed?

The proposed change will affect the tax concessions on certain superannuation accounts, where you have a total super balance that exceeds $3 million.

What is the proposed change, and how does it differ from what’s currently in place?

Currently, a superannuation fund’s earnings (interest payments, dividends, income distributions, rent, etc.) are derived from the assets it holds. In the accumulation phase, these earnings are generally subject to tax at a maximum tax rate of 15%. In the pension phase (the current pension cap is $1.7 million per individual), the tax rate is zero.

The federal government’s announcement will broadly see ‘earnings’ on ALL of an individual’s superannuation balance above $3 million subject to a new and additional 15% tax at the end of the financial year 2025/26. This 15% additional tax is separate and in addition to any other normal super fund tax currently payable at either 0% (pensions) or 15% (accumulation).

Does the $3 million figure apply per fund or per person?
This proposed change will apply per person, not per superannuation fund. That means a couple could still have nearly $6 million in super before being impacted, as long as it’s split evenly between them and neither goes over $3 million. The $3 million cap includes all of a member’s superannuation accounts, i.e. both their pension and accumulation accounts combined. It’s not restricted to just their accumulation accounts.

What else will the proposed new formula include?

The new formula will also include growth in superannuation assets over each financial year on top of the income earnings. To clarify, “earnings” for this new special tax will include everything that causes an individual’s total superannuation account balance to go up – and that will include increases in the value of the assets, even when nothing has been sold. Conversely, should the super balance fall over the financial year, a loss can be carried forward to offset future ‘earnings’ calculations (there is no actual tax refund planned).

Will the $3 million cap be CPI indexed?
No, the announcement stated that the $3 million cap won’t be CPI indexed – so it won’t increase with inflation each year. Clearly, in the years ahead, as Australians build their account balances by contributing to super and the compounding growth effect of investments, this will see a lot more people captured in the new tax assessment over time than on day one of this measure.

When will we know more?

The Australian Government has advised that the next stage in the process will be targeted consultation on the implementation of the proposed measure, and that this will take place between now and the May 2023 Federal Budget. However, it is difficult to meaningfully predict the details, restrictions and opportunities as this measure is not proposed to commence before 1 July 2025 – which happens to be after the next federal election!

It’s important to note that, even with these proposed changes, superannuation remains highly tax effective in comparison to alternative investment structures.  We will continue to update you on how this potential legislative change will affect you, and what strategies can be employed as more information is released.

Please contact your Crystal Wealth Partners financial adviser if you have any questions.


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