The Australian Labor Government has announced changes to its proposed superannuation tax for high-balance accounts. After facing criticism over fairness and technical design, the revised version narrows the scope, softens some provisions, and introduces protections — making it more politically and practically viable.
Let’s break it down:
What’s Changing — And Why
Earlier proposals included:
- Doubling the earnings tax on super balances above $3 million (i.e. raising the “tax on returns” within super)
- Applying tax not only on realised gains (interest, dividends, property sales) but also on unrealised gains (market value increases)
- No indexation of the threshold, meaning more people over time would be caught under “bracket creep”
However, after industry and public pushback, Labor has backed off several elements. The revised plan now:
- Only taxes realised gains, removing the controversial “unrealised gains” component ABC
- Indexes the $3 million threshold, to guard against bracket creep over time ABC
- Delays implementation until 2026, allowing super funds time to adapt ABC
- Introduces a higher tax rate (40%) for super balances above $10 million (versus 30% for lower excesses) ABC
- Expands the Low Income Super Tax Offset (LISTO): now incomes up to $45,000 will be eligible, and the maximum offset increases (from $500 to $810) ABC
In short: the scope of who is impacted is smaller, the mechanics are simpler, and protections are stronger under the revised version.
Who Is Affected — And How Much
- The tax mostly targets very high super balances. The original version would have applied to ~90,000 accounts (0.5% of all super accounts).
- Now, with indexation and stricter design, fewer people will be affected, and over time the revenue raised will grow more slowly than under the original proposal.
- For the richest superannuation account holders (above $10 million), the effective tax on excess earnings could reach 40% under the new rules
- Meanwhile, lower-income earners stand to gain: by raising the list of eligible incomes for the super tax offset and increasing the offset amount, more people get a boost to their super via government contribution ABC
What It Means for Your Planning
- If your super balance is well below the thresholds, it’s unlikely you’ll be materially affected by this change — though it’s still wise to stay informed.
- If your super is large (multi-million dollars or above), this change could influence your investments, withdrawal timing, estate strategies, and whether to shift to other structures (such as pension phase, SMSF strategies).
- The removal of tax on unrealised gains is a win, as it avoids penalising non-liquid holdings.
- Implementation delay gives time for super funds to adjust and for advisers and members to plan ahead.
- You should discuss with your financial planner or tax adviser whether restructuring or timing changes (e.g., when you crystallise gains) might reduce your exposure under the new rules.
Final Thoughts
Labor’s revised super tax is more pragmatic and cautious than the original. While it still raises questions about fairness and complexity, the tweaks have made it more manageable and less threatening to many Australians’ retirement savings.
If you’re curious how this change might affect your own super balance or future income strategy (especially if you’re approaching those higher thresholds), Contact us here and we can go through your options with you.