Proposed Amendments to Superannuation Tax Concessions

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Federal Treasurer Jim Chalmers recently announced plans to increase tax rates for individuals with superannuation account balances in excess of $3 million.

From 2025/26, future earnings for balances above $3 million will be taxed at a concessional rate of 30%. The current tax rate of up to 15% on earnings from superannuation in the accumulation phase will continue for all balances below the $3 million threshold. According to Chalmers, “The modest adjustment we announced today means 99.5 percent of Australians with superannuation accounts will continue to receive the same generous tax breaks, and the 0.5 percent of people with balances above $3 million will receive less generous tax breaks.”

It is estimated that around 80,000 people will be affected by this change and the policy is set to take effect after the next federal election. Fewer than 1% of superannuation accounts have balances of over $3 million, and the average balance of those accounts is close to $6 million. Mr. Chalmers emphasized that the average account balance of about $150,000 would be unaffected by the proposed changes. He also noted that some superannuation accounts had balances in excess of $100 million.

The proposed increase to 30% will only apply to accounts with balances of $3 million or more during the accumulation phase. Tax-free retirement phase earnings on funds with balances up to $1.7 million will remain unchanged. Balances above this cap will be treated as being in the accumulation phase and taxed at 15%.

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