by Luke Quinnell

There has been a significant announcement today (13th October 2025) from the government regarding the proposed superannuation tax reforms on balances over $3million.

The two most controversial aspects, being the taxing of unrealised gains and no indexation of the $3million threshold will both be removed. The original intent remains (i.e. to tax super balances that exceed $3million at a higher rate) but this will be done by taxing actual earnings rather than just the growth of an individual’s super balance.

These changes have come about in response to industry feedback and widespread public concern. From 1 July 2026, the higher superannuation tax will now apply only to realised earnings, not to unrealised gains that only occur on paper. This reduces the risk of taxpayers being forced to pay tax on increases in asset values that have not actually been sold. The revised plan also includes indexation of the $3 million threshold, ensuring that inflation and natural investment growth do not drag more superannuants into the higher tax bracket over time.

Additionally, a tiered tax rate structure has been introduced — balances between $3 million and $10 million will be taxed at 30 per cent, while those exceeding $10 million will attract a 40 per cent rate. This progressive system aims to better align tax outcomes with the size of an individual’s retirement savings, preserving fairness while still targeting the very largest balances.

No legislation has yet been drafted; this will be drafted with a plan to introduce it in 2026. Further consultation will be undertaken prior to the implementation.

Overall, these updates represent a considerable softening of the government’s earlier stance. By removing taxation on unrealised gains and introducing indexation, the reforms now appear more practical and sustainable. This is very welcome change.

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