Further 15% tax on super balance over $3 million

Posted 20 Apr '23

Treasury provides further details on additional 15% tax on superannuation balance of over $3 million.

In February 2023, the Government announced plans to impose a 15% additional tax on superannuation balances exceeding $3 million, effective from 1 July 2025. There is to be no limit imposed on the size of account balances in accumulation phase.

Treasury has subsequently released a factsheet to explain how the additional super tax will be calculated. The factsheet confirmed that individuals with a total superannuation balance (‘TSB’) of over $3 million at the end of an income year will be subject to a tax of 15% on superannuation earnings. This tax is in addition to any tax their superannuation funds pay on earnings in accumulation phase. This means that earnings attributable to balances above $3 million will generally attract a combined headline rate of 30%.

This measure will commence on 1 July 2025 and apply to the 2026 income year onwards. The tax only applies to the proportion of earnings corresponding to balances above $3 million (i.e., earnings corresponding to funds below $3 million will continue to be taxed at 15% or less).

Effectively, ‘earnings’ for the purposes of the additional super tax are calculated with reference to the difference in an individual’s TSB at the start and end of the income year, adjusting for withdrawals and contributions.

Individuals will have the choice of either paying the tax personally or from their superannuation funds (similar to Division 293 tax). Individuals who hold interests in multiple superannuation funds will be able to elect the fund from which the tax is paid.

The formula for calculating the additional super tax takes into account the difference between the member’s TSB for the current and previous income years and adjusts for net contributions (which excludes contributions tax paid by the fund on behalf of the member) and withdrawals, and is adjusted to ensure only superannuation balances in excess of $3 million are subject to the additional super tax.

If an individual makes an earnings loss in a financial year, this can be carried forward to reduce the tax liability in future years.

The Government intends to minimise the extent of new reporting requirements for superannuation funds with regard to the additional super tax, noting that TSBs are already collated by the ATO as part of superannuation fund reporting. TSBs in excess of $3 million will be tested for the first time on 30 June 2026, with the first notices of a tax liability expected to be issued to individuals (by the ATO) during the 2027 income year.

Example of calculating the additional super tax

Gina is 59 and has a $4 million TSB on 30 June 2025. She makes no withdrawals or contributions during the 2026 income year. By 30 June 2026, Gina’s TSB has grown to $4.5 million.

This means Gina’s calculated earnings for the 2026 income year is $500,000 (i.e., $4.5 million – $4 million). 

The earnings amount is then adjusted to calculate the proportion of earnings corresponding to funds above $3 million, which is calculated as follows:
($4.5 million – $3 million) ÷ $4.5 million = 33% (rounded)

In turn, Gina’s additional super tax for the 2026 income year is calculated as follows:
Tax Liability = 15% x $500,000 x 33% = $24,750

At Trinity Advisory, we specialise in tax accounting, advisory services, and business coaching for small businesses located in and around Cairns (116 Mulgrave Road, Parramatta Park QLD 4870) and the Sunshine Coast (2/8 Maroochydore Road, Maroochydore QLD 4558).

Should you need any taxation or accounting advice for your business, get in touch with Trinity Advisory today. Our team of expert Business Accountants, Advisors and Coaches are here to help!

Ref: Treasury website, 'Better targeted superannuation concessions' factsheet


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