News & insights

Making sense of the proposed $3m super changes

6 Minute Read

In late February the government announced a proposal for an additional 15% tax on the earnings attributed to individual superannuation balances above $3m. This announcement was followed by further detail in early March and is proposed to start from 1 July 2025.

It is important to note that this is just a proposal, with consultation underway, and any proposal needs to be legislated before it becomes law.


Understanding the changes

Below is a simple summary that explains the current super tax rates a retiring member could expect from 1 July 2025, in comparison to the proposed tax rates.


Super balance: First $2 million (if moved to ‘Pension phase’)

  • Current scenario: 0% tax on earnings
  • Proposed scenario: No change


Super balance: Next $1 million

  • Current scenario: 15% tax on earnings (10-15% tax on realised capital gains)
  • Proposed scenario: No change


Super balance: Amounts over $3million

  • Current scenario: As per the above – 15% tax on earnings (10-15% tax on realised capital gains)
  • Proposed scenario: 15% tax on earnings (10-15% tax on realised capital gains), plus an additional 15% tax on earnings, based on total superannuation balance movement.


Pleasingly, the proposal included no requirement to withdraw balances above $3m, though this would be an individual consideration if there are other options to invest with a lower tax rate than 30%.


A practical example

To help make sense of what these changes practically mean, below is an example of how this tax would work on a balance exceeding $3 million.

On 30 June 2025, Warren is 52 with $4 million in superannuation. He makes no contributions or withdrawals. By 30 June 2026 his balance has grown to $4.5 million.

This means Warren’s calculated earnings are:

  • $4.5 million – $4 million = $500,000
  • His proportion of earnings corresponding to funds above $3 million is: ($4.5 million – $3 million) ÷ $4.5 million = 33%
  • Therefore, his tax liability for 2025-26 is: 15% × $500,000 × 33% = $24,750
  • This tax liability can be paid personally or from the superannuation fund


The concerns

Since the announcement there have been many concerns raised, including:

  • While the government has aimed to make the calculation of earnings as simple as possible, this has led to the number one concern being the proposal to tax unrealised capital gains. Traditionally, capital gains tax has only been paid when an asset has been sold so this proposal goes against previous tax principles. The concern has been that the valuation of assets often fluctuates year on year and that taxing unrealised gains could cause cash flow issues where members hold large illiquid assets. In addition, if assets go down in value temporarily, there is no cash refund of tax previously paid on increases.
  • Another issue raised is that this proposal would further increase the complexity of an already complex system.
  • Not surprisingly, many have raised the issue of the continued change in rules and that plans and investments implemented on historical rules are then impacted by changing rules, leading to a loss of faith in the system.
  • Lack of indexation of the $3m cap. The government is keen to point out that less than 0.5% of individuals with a superannuation account will be impacted. However, the current proposal is to not index the $3m cap so it is likely that over time more members are likely to be impacted.


Despite this, superannuation remains a very attractive structure to invest in

Despite all the above, whilst we acknowledge the issue of changing rules, from a tax rate perspective, superannuation remains the most attractive structure to invest in. The reason the rules keep changing is a testament to this and the government’s own analysis shows superannuation tax concessions amount to about $50 billion a year.

It should also be noted that while this proposal, if implemented, would be a net negative for superannuation concessions, it does follow 2022’s changes that were extremely positive, including the ability to make large after-tax (concessional) contributions to age 75 without meeting the usual work test.  In addition, the amount a member can transfer into a tax-free retirement pension is expected to index to $1.9m from 1 July 2023.

This all said, the proposed changes provide an added reason to carefully manage the ‘buckets’ that you are holding your money in. It is important to consider and balance what is or is projected to be in the ‘pension’ phase (best tax rate) and look at where it is best to hold other money – be it in super, personal names, or investments through other entities, like companies and trusts.


Timing and action

Over the years there have been many proposals announced or discussed, but far fewer legislated. The proposed changes are now in consultation period between now and the May 2023 budget, with formal legislation required thereafter for these rules to come into law. Our expectation is that these new rules will likely be legislated in some form, though perhaps with some adjustments to address some of the issues raised.

Therefore, while it usually pays to see what changes are legislated before making any strategy changes, there are ongoing strategies that can be actioned over time to protect against this and future changes.

Of course, the right course of action for you is entirely dependent on your personal situation and goals, and your trusted adviser will be able to make specific recommendations for you on these fronts.

If you want further clarification or do need any advice about how the proposal will impact you, please don’t hesitate to contact our team.


Oxlade Financial is one of the few truly Independent Financial Planning firms in Australia. We help our clients to get the most from their money and achieve their financial goals. We manage our clients’ finances like they are our own, and we limit the number of clients per adviser to provide a personalised and focused approach.

As an independent firm, we have no in-house products, no affiliations with large banks or institutions, and receive no commissions. We are therefore free to provide unbiased advice that is truly in the best interests of our clients.

If you have any questions about these article, or want to speak to a Senior Financial Adviser about your situation and whether we may be able to help, please call us on 07 3667 7260 or email info@oxlade.com.au to organise a cost/obligation free discussion.



Any information in this article is general in nature and does not consider any of your personal objectives, financial situation and needs. It is as intended, to be of a general nature only and NOT a recommendation to you. You should consider whether the information is appropriate to your needs, and where appropriate, seek personal advice from a registered financial adviser.

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