The proposed $3 million super tax (Division 296) is a new 15% tax on investment earnings for individuals with total superannuation balances (TSB) exceeding $3 million, effective from 1 July 2026, based on 30 June 2027 balances. It acts as an additional tax, raising the total tax rate on earnings from 15% to 30% for balances over $3 million, with a further tier for balances over $10 million.
In a nutshell, the main changes are: a move to creating two tiers (earnings on balances greater than $3m and $10m); indexation of each of the tiers; an additional tax rate of 15% and 10% on the respective two tiers; and taxation on 'realised earnings' only.
Minimise valuation movements
Under the plan, super assets would be valued as of 30 June each year to determine their tax liabilities. Avoiding the tax means keeping your balance below $3 million on that date. Doing so could involve: Reducing holdings of volatile assets: to minimise the chances of sudden upward swings.
What's changing? On 1 July 2025, the Super Guarantee rate will increase from 11.5% to 12% of your before-tax earnings.
Capital gains in super currently receive a discounted tax rate of 10 per cent, versus the planned higher discounted capital gains rates of between 20 per cent and 27 per cent for high-balance accounts under the new regime starting July 1, 2026.
That said, despite any proposed changes that may occur, superannuation remains a tax-effective retirement savings vehicle for the vast majority of Australians. Even at up to 30 per cent tax above $3 million, it is usually better than investing personally.
On May 28, 2021, the White House and Treasury released the Fiscal Year 2022 Federal Budget and the Treasury Green Book, or "Green Book", which includes new details regarding the Biden administration's proposed 2021 tax reform -- including a retroactive proposed capital gains tax increase to 37% to the extent household ...
If you're aged 60 or over and withdraw a lump sum: You don't pay any tax when you withdraw from a taxed super fund.
In the organisation's super balance update, it found 2.5 per cent of the population have a super account of more than $1 million, as of June 2021. This represents 417,567 individuals, ASFA said, and is a 29 per cent increase from the 322,200 individuals who held over $1 million in June 2019.
Retiring at 60 with $500,000 in super is possible but challenging, depending heavily on your spending, lifestyle, and if you qualify for the Australian Age Pension. You might cover modest expenses using strategies like drawing down around $20,000 annually (using the 4% rule as a guide) plus other income, but it requires careful budgeting, potentially part-time work, and reducing living costs. A financial advisor can help tailor a plan, as $500k alone usually supports a basic to moderate retirement, not a lavish one.
On a $100,000 capital gain, you'll likely pay 15% for long-term gains, resulting in about $15,000 in federal tax (plus potential state tax), but it could be 0% or 20% depending on your total taxable income and filing status, while short-term gains are taxed as ordinary income (potentially 22-24%).
At a broader household level, only 1.4% of households have super balances above $3 million. Around 90% of households have super balances of less than $1 million and almost 20% have no super at all. And the average household super balance is $387,000 while the median balance is just $143,000.
Research shows that less than 1% of households have $3 million or more in retirement savings. While this amount is uncommon, those who consistently invest, save diligently and manage their spending can build significant retirement assets over time.
Division 296 tax applies at the rate of 15% to the earnings attributed to the portion of your balance that is above $3 million.
You can keep your super in the accumulation phase for as long as you like. There's no legal requirement to move your super into pension phase once you meet a condition of release. But unless you have a strategic reason, leaving your super in an accumulation account may not be in your best interests.
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If you inherit property or assets, as opposed to cash, you generally don't owe taxes until you sell those assets. These capital gains taxes are then calculated using what's known as a stepped-up cost basis. This means that you pay taxes only on appreciation that occurs after you inherit the property.