If you’ve got a superannuation balance over $3 million, brace yourself—things are about to change. Treasurer Jim Chalmers has just unveiled a major shake-up to the country’s superannuation tax system, and while it’s a win for many, it also means higher taxes for Australia’s wealthiest super fund members. But what does this mean for you? Let’s break it down.
A Big Tax Hike for the Wealthy
Under the new changes, Australians with superannuation balances above $3 million will face a much higher tax rate—30% for every dollar above that threshold. This is a big leap from the previous 15% tax, and it’s all designed to ensure that the superannuation system is fairer for everyone, not just the wealthy. For those with over $10 million in super, the tax rate skyrockets to 40%, and, of course, this will be indexed to inflation, meaning it will rise with the cost of living.
Chalmers said the changes are aimed at making the superannuation system more equitable from top to bottom. “It’s meaningful and substantial tax reform which will make the superannuation system fairer,” he stated, reports NEWS. In other words, the higher earners are going to pay more, and lower-income earners will benefit.
Scrapping Unrealised Gains Tax
One of the most controversial aspects of the original proposal—taxing unrealised capital gains—has been scrapped. For those not familiar with the term, unrealised gains refer to the increase in value of an asset that hasn’t yet been sold. This move was widely criticized because, in the real world, you can’t tax something until it’s actually been realized (or sold). Chris Balalovski, a business services partner at BDO, noted that taxing unrealised capital gains was “pretty rare” and “unusual” in other countries, making this change a big win for super fund members who had illiquid assets in their funds.
Winners and Losers in the Superannuation System
So, who wins and who loses with these new rules? The biggest winners are young workers, those who are early in their careers and still building up their super, and low-income Australians. The changes to the low-income super tax offset (LISTO) will see a boost in both the amount of money low-income earners can get and the eligibility threshold, helping an additional 1.3 million Australians. The LISTO will increase by $310 to $810 and raise the eligibility limit from $37,000 to $45,000 starting in 2027. T
his is a crucial change, as it allows more people to benefit from superannuation concessions, which can have a huge impact on retirement savings over time. The biggest losers? High-net-worth individuals with super balances above $10 million. These people will now face an additional 10% tax on their superannuation funds, which could significantly affect their retirement planning.
What’s Next?
This shake-up, while significant, is only one piece of the puzzle. The system is becoming more complex, and while it likely won’t affect most Australians, it’s something to keep an eye on, especially for those with significant super balances. As for the young and lower-income earners, the changes offer a glimpse of a more equitable system where people can build their retirement savings with less of a tax burden, and the goal is to make superannuation work for everyone—not just those at the top.
These reforms are a step toward a fairer super system, but as with all major reforms, there’s always room for debate. Will this make Australia’s retirement savings system stronger for all, or are we just shifting the burden onto a different group? Time will tell.
