Following the recent election win by the Federal Labor Government, we’d like to update you on a proposed change to superannuation legislation that may affect larger self-managed super fund’s (SMSF’s) very soon.
The Federal Government is likely to implement legislation introducing a new tax, which proposes an additional 15% tax on superannuation growth where an individual’s total super balance exceeds $3 million.
What is the proposed growth Tax?
This proposed new tax targets growth associated with superannuation balances over $3 million. It is separate from the existing 15% tax on taxable earnings in accumulation phase and is intended to limit tax concessions on larger super balances.
The $3 million limit applies per member of a SMSF.
Key Features (Based on the previous legislation not enacted):
• Proposed Start date: 1 July 2025 (with first tax notices issued in the 2026–27 financial year)
• Threshold: May apply to individuals with a total superannuation balance exceeding $3 million as at 30 June of the relevant financial year
• Tax rate: Additional 15% on growth attributed to the portion of the balance over $3 million
• Earnings calculation: Based on the change in total member super balance year-on-year, adjusted for contributions and withdrawals
• Unrealised gains and losses are included in the calculation, meaning a tax liability could arise even without any asset sales
• Applies to individuals, not the fund directly — the tax is assessed personally, with the ability to elect to pay the tax for Superannuation or individually.
What This Means for You
If a member total super balance is close to or above $3 million, this change could result in additional tax obligations in the future — even in years where no assets are sold or no income is received.
What You Can Do Now
While the legislation is not yet implemented (and not much time before 30 June 2025), there are several strategies and planning steps you can consider now to be better prepared:
1. Review Your Current Superannuation Balance
• Understand how close you are to the $3 million threshold across all superannuation accounts (SMSF, retail super, industry super and defined benefits fund).
• Track projected growth to assess potential exposure from July 2025 onwards.
2. Review Investment Strategy & Asset Mix
• Consider whether your fund’s investments align with your risk and return goals — especially if you hold volatile assets with high unrealised gains.
• Review unrealised capital losses in the Superfund at present
• Evaluate the potential impact of market fluctuations on year-end valuations.
• Review Property holdings within Superannuation and consider whether any stamp duty concessions can be accessed in the transfer of property out of Superannuation.
3. Plan Contribution & Withdrawal Strategies
• Review planned contributions — especially non-concessional and downsizer contributions — which may push your balance above the threshold.
• Consider regular pension payments, strategic lump sum withdrawals and off market transfers before 30 June 2025 to reduce year-end balances, where appropriate.
4. Explore Wealth Diversification Outside Superannuation
• Assess whether part of your future wealth accumulation could occur in family trusts, companies, or other non-super vehicles to limit your super balance growth.
• Ensure investment platforms are setup in Trusts (or other structures).
5. Update Your Estate and Tax Planning
• Ensure your estate plan reflects this potential change in the tax treatment of super assets.
• Revisit your binding death benefit nominations, reversionary pensions, and succession plans.
• Consider whether Superannuation can be divested to children and or grandchildren earlier than via the will.
6. Prepare for Additional Reporting Requirements
• Get ahead by ensuring your SMSF’s valuation processes are correctly documented — especially for property or unlisted assets.
• You may need timely, accurate end-of-year balances from 30 June 2026 onward.
• Ensuring tax effect accounting is being implemented in your SMSF accounts
• Ensuring all superfund expenses are corrected accrued at 30 June 2025
7. Monitor Legislation Progress
• Stay informed. The final form of $3m growth tax may change during the legislative process.
We will keep you updated as the legislation progresses. In the meantime, if you’d like to discuss how this might affect your situation or begin planning, please don’t hesitate to get in touch.
