The Federal Government has introduced a proposal that could significantly affect Australians with large superannuation balances. From 1 July 2025, individuals with total super balances above $3 million may face an additional tax of 15% on earnings, including unrealised capital gains. This is on top of the existing 15% tax that applies to superannuation earning in the accumulation phase.

How The Proposal Works

• The tax would apply only to the proportion of a member’s balance above $3 million
• “Earnings” would be calculated by the change in a member’s total super balance over the financial year, plus withdrawals and contributions
• Importantly, this means the measure captures unrealised gains, such as increases in property or share values that have not been sold

For example: If a super balance increases from $3.5 million to $3.8 million in a year (before contributions and withdrawals), the $300,000 increase would be treated as “earnings.” The additional 15% tax would apply to the portion relating to the balance above $3 million.

Points of Debate

Unrealised Gains: Taxing unrealised gains has been a central point of contention, with concerns about liquidity for SMSFs and the fairness of taxing “on paper” increases.

Threshold and Indexation: The $3 million threshold is not indexed, meaning more Australians may be affected over time as super balances grow.

Political Divide: The Coalition has stated it would repeal the measure if elected, while the Greens have argued for a lower cap of $2 million with indexation.

As at September 2025, the legislation is still before Parliament and has not yet been passed, with negotiations still ongoing.