Is Your Super Safe? Australia Announces New Tax On Wealthy Retirees
As energy prices, inflation, and government spending continue to rise, the Australian government is moving forward with a new superannuation tax policy that will directly impact wealthy retirees and high-balance super holders.
Following Prime Minister Anthony Albanese’s election victory, the government plans to double the tax on earnings from superannuation accounts exceeding $3 million, applying it retrospectively and including unrealized capital gains.
This article breaks down exactly what’s changing, who will be affected, how much you could pay, and why many Australians are concerned about the future safety of their retirement funds.
What Is the New Super Tax?
The new Division 296 tax policy will apply an additional 15% tax on superannuation earnings above the $3 million threshold. Combined with the current 15% tax, this brings the total tax on high-balance earnings to 30%.
Notably, this includes unrealized gains—meaning increases in asset value that haven’t been sold or converted into actual income will still be taxed.
Key Facts About the 2025 Superannuation Tax
| Feature | Details |
|---|---|
| Tax Name | Division 296 |
| Effective Date | July 1, 2025 |
| Threshold | $3 million |
| Tax Rate | 30% on earnings over $3 million |
| Includes Unrealized Gains | Yes |
| Applies Retrospectively | Yes – balances assessed from previous financial year |
| Payment Options | Personally or from super account |
| Estimated Affected Australians | Around 80,000 people (0.5% of account holders) |
| Expected Government Revenue | $2.3 billion in first full year |
| Indexation of Cap | No – threshold not adjusted for inflation |
How Does the Tax Work?
Under the proposed system:
- At the end of each financial year, if your total super balance exceeds $3 million, a proportion of your earnings will be taxed at an additional 15% rate.
- The amount taxed is based on the increase in total balance, even if no assets are sold.
- You can choose to pay the tax from personal funds or have it deducted directly from your super fund.
This policy applies regardless of whether you are still working or have retired, as long as your super balance exceeds the limit.
Why It Matters to More Than Just the Wealthy
Although only 0.5% of super accounts are currently impacted, the lack of indexation means more people will fall under the scope of this tax in the future.
With compound growth, many Australians on modest-to-high incomes could reach the $3 million mark by retirement—especially younger professionals, public sector workers, and those with self-managed super funds.
This has led to growing concern that what is being labeled a “tax on the rich” today could become a mainstream issue in coming decades.
Major Concerns Around the New Tax
1. Unrealized Capital Gains Taxed
Taxing profits on assets that haven’t been sold is a major departure from traditional taxation models. This raises liquidity issues, especially for property or long-term asset holders.
2. No Indexation
Unlike income tax brackets or thresholds tied to CPI, the $3 million cap is fixed. Over time, due to inflation and growth in super balances, more middle-income Australians may be affected—even those not considered “wealthy” today.
3. Retrospective Application
The tax will apply from the previous financial year, even though the legislation is being introduced later. This could catch many off guard who haven’t had the chance to adjust their portfolios or plans.
What Can You Do About It?
If your super balance is nearing or above $3 million, consider:
- Reviewing your fund structure and seeking professional financial advice
- Evaluating diversification to manage unrealized gain exposure
- Strategically withdrawing or redistributing funds (if nearing retirement)
- Considering other investment vehicles for post-retirement income
Planning ahead will be key to minimizing tax impact and maintaining long-term growth.
Australia’s decision to introduce a new 30% tax on high super balances marks a major shift in retirement policy. While aimed at improving fairness in superannuation concessions, it raises legitimate questions around retrospective taxation, the fairness of taxing unrealized gains, and the absence of inflation protection.
With the legislation likely to pass in the coming months, it’s essential for retirees and future high-balance holders to reassess their retirement strategies.
This policy may not just target the ultra-wealthy—it could be a warning sign for all Australians looking to secure a financially independent future.
FAQs
Who is affected by the new super tax policy?
Australians with a total super balance over $3 million at the end of the financial year will be subject to the additional 15% tax on earnings above that threshold.
Does this tax apply to unrealized gains?
Yes, the tax will apply to both realized and unrealized gains, meaning you could owe tax on increases in value even if you haven’t sold the asset.
Will the $3 million threshold increase over time?
No. The cap is not indexed to inflation, meaning more people will likely be affected in the future as super balances grow.