Superannuation: Amendments to the Tax on high Super balances with improved targeted Super concessions

Following extensive lobbying from various stakeholders, including the financial planning industry, Treasury has announced a significant revision to its original proposal to apply an increased earnings tax of 15% on superannuation balances exceeding $3 million.

Many have welcomed the change, as the Government has confirmed that the proposed 30% tax will no longer apply to unrealised gains on balances over $3 million.

Additionally, the tax thresholds will now be indexed to the Consumer Price Index (CPI), allowing them to grow over time in line with superannuation balances.

A further adjustment introduces a new tier: super balances exceeding $10 million will attract a 40% tax rate, while balances between $3 million and $10 million will be taxed at 30%. This measure is intended to offset the revenue impact of removing the unrealised gains component.

There will now be two indexed thresholds, $3 million and $10 million, each increasing in line with CPI over time.

Summary of Proposed Div296 Tax Rates

• 15% increase in tax for balances between $3m and $10m
• 25% increase in tax for balances above $10m
• $3m threshold will be indexed in increments of $150,000
• $10m threshold will be indexed in increments of $500,000

PKF Wealth Summary

There will now be two indexed thresholds, $3 million and $10 million, each increasing in line with CPI over time. 

• The proposed Div 296 is expected to pass Senate, with a revised start date of 1 July 2026. Therefore, tax will first be payable in 2027-2028 financial year.
• Clarity has now been provided in relation to capital gains as there was the possibility that capital gains on assets would be backdated to when first acquired. The Government has confirmed capital gains will be measured from 1 July 2026. In addition, the Government has confirmed the existing one-third discount for capital gains tax will apply to Super accounts worth more than $3m.
• Individuals who have balances over $10m must consider whether to potentially withdraw some funds out of Super at the appropriate time (depending on individual circumstances).  Tax of 40% will now be due on a proportion of their earnings.

There will always be competition as to the pursuit of lower tax outcomes in the short term versus the objective of maximising wealth creation in the long term. Individual advice is essential and should be provided on a case-by-case basis using scenario analysis to understand the best outcome for those affected by the Government’s new Division 296 Tax.

If you require PKF’s assistance regarding superannuation, please get in touch with your local PKF contact.