If you’ve been following the headlines, you’ve likely heard about the proposed changes to superannuation for balances over $3 million. It’s called the Division 296 tax, and while the name might sound technical, the implications are real—especially if you’ve worked hard to build a strong retirement nest egg. Superannuation and the $3 million question are now front and centre in many retirement conversations.
What’s happening?
The Australian Government has proposed a new tax that would apply to individuals whose total superannuation balance exceeds $3 million. Starting from 1 July 2025, earnings that relate to the portion of your balance above that threshold would attract an additional 15% tax. This isn’t a tax on your entire super—just the earnings linked to the amount over $3 million.
An important caveat is that it’s calculated per person, not per fund. If you and your partner each hold $2 million in an SMSF, you’re not affected—even if it totals $4 million.
One of the more controversial aspects of this proposal is that it includes unrealised gains. That means if the value of your super investments increases—even if you haven’t sold anything—you could still be taxed on that paper gain. It’s a significant shift in how superannuation is treated and has sparked plenty of discussion among financial professionals and investors alike.
The proposed start date is 1 July 2025, with the first assessments due on 30 June 2026. If your balance tops $3 million but drops by year-end, you won’t be taxed for that year. Timing, as always, matters.
However, before any of this becomes law, the proposal must pass through Parliament. It’s still subject to negotiation, amendment, and political debate. The government needs Greens support in the Senate, and the final legislation may still change.
What should you do in the meantime?
First and foremost, avoid knee-jerk reactions. It’s tempting to make quick decisions in response to headlines, but acting too soon could lead to outcomes that don’t serve your long-term interests. Instead, stay informed. Keep in touch with your adviser and make sure you’re across updates as the legislation progresses.
While you wait for the final details, it’s wise to start preparing. Review your SMSF’s value, update records, and reassess any planned contributions or withdrawals. Preparation doesn’t mean action—it means being ready to act when the time is right.
Above all, remember that your strategy should reflect your values, goals, and long-term vision—not just the latest tax proposal.
