The Federal Government’s bill to increase taxes on superannuation balances above $3 million is expected to pass Parliament this week.
The Greens have confirmed they will support the bill in the Senate, meaning it will pass.
The bill also increases support for low-income workers through changes to a superannuation tax offset.
Here’s what you need to know.
Super
If you’re an adult working in Australia, your employer must contribute to your superannuation for your retirement.
You can also make voluntary payments into your account. In most cases, you can’t access super until you’re at least 60.
Super funds invest your contributions in areas such as shares and property. Your balance changes in value based on how those investments perform.
Taxing super
Super balances are taxed differently to income.
Currently, super investments are taxed up to 15% as they build up (while you are a working adult). This is known as the “accumulation” phase.
There are various tax concessions on super contributions and gains during the accumulation phase, which means not every dollar is taxed at 15%.
The main thing to note is that the super tax rate is never more than 15%, which is lower than all current income tax brackets.
Super reform
Labor proposed reforms in 2023 to increase taxes on super balances that exceed $3 million from 15 to 30%. It put a bill before Parliament before the last election, which did not proceed.
The Government says super balances of $3 million to $10 million are “well above” what most people need for retirement.
At this level, it argues, they are being used for wealth accumulation and estate planning, not retirement.
In February, Treasurer Jim Chalmers introduced a revised version of the bill.
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Changes
There are two main changes to the super system under the new bill.
From 1 July 2026, people with a total super balance above $3 million will pay up to 30% in tax on the portion of their balance above the $3 million threshold.
If a person has a balance of more than $10 million, they will pay up to 10% more tax on earnings above that threshold.
The $3 million and $10 million thresholds will be indexed to inflation each year.
This means the threshold won’t stay frozen at $3 million forever – it will rise gradually over time, keeping pace with the consumer price index (rate of inflation).
The Treasury estimates around 90,000 people (less than 0.5% of Australians with super) will be affected in the first year.
The second change will increase the number of people eligible for the Low Income Superannuation Tax Offset (LISTO).
This is a Government payment made directly into the super accounts of low-income workers. It’s intended to make sure they don’t end up paying more tax on their super contributions than they would if the money had been paid to them directly.
From 1 July 2027, the income threshold to receive LISTO rises from $37,000 to $45,000, and the maximum payment increases from $500 to $810. Around 60% of total beneficiaries when the new threshold kicks in will be women.
One aspect of the original bill which has been discarded was a tax on ‘unrealised gains’.
This is where you are taxed for the value of a long-term investment (e.g. a property) even if it isn’t a real-time earning (e.g. a salary).
Since superannuation can invest in property, people could be taxed for a hypothetical value increase, rather than a tangible sum of money.
The new version only taxes actual earnings.
Senate support
In the Senate, Labor holds 29 of 76 seats and needs 39 to pass legislation.
On Tuesday, the Greens announced they will back the bill unamended, allowing it to pass.
Senator Nick McKim called the bill “a downpayment on genuine, progressive tax reform,” and said the Greens want bigger changes in the upcoming Budget.
