Superannuation Tax Reform: A Shift You Can’t Ignore

The landscape of superannuation has just taken a major turn, and it’s time to act, not wait.

The government’s new approach will increase the tax rate for super balances above $3 million, lifting it from 15 per cent to 30 per cent, but with one critical difference: the threshold will now be indexed, so it rises with inflation rather than staying static. “The threshold will be indexed to inflation, meaning fewer Australians will be caught in the bracket in the future.”

Even more importantly, the highly controversial tax on unrealised capital gains has been scrapped. As Chris Balalovski from BDO explained: “Taxation of unrealised capital gains is pretty unusual… you would have to dig deep into taxation law to see something similar.”

For those with balances above $10 million, a new rate of 40 per cent will apply, also with threshold indexation.

Treasurer Jim Chalmers described the move as “meaningful and substantial tax reform which will make the superannuation system fairer from top to bottom.”

Who stands to gain?

Younger, aspiring Australians whose balances are growing: The indexing means you may never hit the $3 million threshold. “They may never get to $3 million or surpass the indexed figure.”

Those holding illiquid assets (property, farms) in SMSFs: Since the tax on unrealised gains has been removed, you’ll only face tax when you sell. “Primary producers and those who have properties in SMSFs in particular would say the changes are fantastic… now they know they’ll only pay when they liquidate the asset,” says Balalovski.

Low-income earners: The Low Income Super Tax Offset (LISTO) will increase from $500 to $810, and eligibility will climb from $37,000 to $45,000 from 1 July 2027. That could translate into up to $60,000 more in retirement savings for some.

What about the other side?

Yes, roughly 8,000 Australians with super balances exceeding $10 million will pay the new 40 per cent rate. The system will become more complex, and as Balalovski notes: “For high net worth or emerging high net worth it is an additional layer of complexity. It is a reason to engage with an adviser.”

Your strategic move now

• Review your current super balance and growth trajectory
• Consider asset structure and liquidity: Now more than ever, timing matters when you’re nearing thresholds
• Seek specialised advice: The rules are shifting, and being reactive won’t cut it; you must be proactive
• Act before the indexing erodes your buffer

In this reform, the winners will be those who seize the moment, not those who wait for certainty. You can shift from uncertainty to clarity, from complexity to advantage.