$3 Million Super Cap Changes – How it Impacts You

The Government has announced that from 1 July 2025, an additional tax of 15% will apply to a new definition of ‘earnings’ for superannuation balances exceeding $3 million.

WHAT IS IT?

The increased tax will apply to individuals with a Total Superannuation Balance of $3 million or more on 30 June 2025.  This includes all superannuation, across both pension and accumulation accounts, across all superannuation funds.
 
WHEN DOES THIS BEGIN?

The new tax will commence for the 2026 financial year, and the initial tax assessments will be sent to members after 30 June 2026.

WHAT DO I DO?

Nothing at this stage – there are many significant questions and concerns that will be raised with Treasury as part of the consultation process before legislation is drafted.

In addition, the new system will not apply until the 2026 financial year, allowing people to consider their own situation prior to this and restructuring if necessary.
 
HOW IS IT CALCULATED?

Essentially, the ATO will use the below calculation to determine how much tax is payable:

Earnings = Total Superannuation Balance (on 30 June of the current year) – Total Superannuation Balance (on 30 June of the previous year) + withdrawals – net contributions.

The earnings will then be apportioned to only include the amount over $3 million.

Proportion = (Total Superannuation Balance (on 30 June of the current year) – $3 million) / Total Superannuation Balance (on 30 June of current year)
 
WHAT IF ASSET VALUES GO DOWN?

If the above calculation results in a loss, then the member will be entitled to a carry forward loss to offset increases in subsequent years – however, there is no tax refund applicable.

We will keep you updated as this matter develops.