3Mil Super Cap Update

Just a quick update on the proposed new superannuation tax targeting balances above $3 million, following recent announcements by Treasurer Jim Chalmers.

As originally proposed, the tax would have applied to unrealised gains, meaning that even increases in asset values on paper (such as property revaluations) would have triggered a tax liability. This feature has now been dropped. Under the revised model, the tax will apply only to realised earnings, gains that are actually crystallised, such as when an asset is sold.

Another welcome revision is that the $3 million threshold will now be indexed over time. This aims to ensure that the measure targets genuinely high-balance accounts and doesn’t gradually affect more Australians due to inflation.

In addition, a new tier has been introduced. A separate 40% tax rate will apply to earnings from super balances exceeding $10 million and this threshold will also be indexed.

The commencement date for the new tax has been pushed back to 1 July 2026. In theory, this gives individuals and advisers more time to assess structures, review strategies, and plan ahead. However, the actual mechanics of how the tax will be calculated are still not finalised, so the numbers remain uncertain for now.

A Political Note

The government’s initial proposal to tax unrealised gains created significant concern across the superannuation industry, particularly for SMSF trustees and their advisers. By walking that idea back and moving to a model that only taxes realised earnings, the announcement is being positioned as a softening. However, it's important to remember that a brand-new tax on super is still going ahead, just in a revised form.

If your total super balance is above, or approaching, $3 million, now is the time to consider your position and have a chat with your advisers ahead of the proposed 2026 start date, where appropriate.