The new $3 million super tax is here: who may be affected and what happens next?
Australia’s tax treatment of very large superannuation balances has changed from the 2026–27 income year. The change does not impose the same additional tax on every super fund member. It is directed at individuals whose combined total superannuation balance exceeds $3 million, with a further tier applying above $10 million.
The legislation passed both houses of Parliament on 10 March 2026 and received Royal Assent on 13 March 2026. It reduces the tax concessions applying to the relevant proportion of earnings associated with balances above the legislated thresholds.
For affected members, the most useful response is not to make a rushed withdrawal or restructure investments after reading a headline. It is to understand how the rules operate, confirm the value and composition of all superannuation interests, and obtain advice that considers the wider tax, retirement-income, estate-planning and social-security consequences.
It is your total balance that matters
The first important point is that the measure applies to an individual’s total superannuation balance, commonly called their TSB. It is not simply a tax on an individual account or on a particular self-managed super fund.
Someone may, for example, have an SMSF interest, an accumulation account with another fund and a separate superannuation interest associated with a pension. These interests may all be relevant when determining whether the person’s total balance exceeds a threshold.
Couples are also assessed individually. Superannuation owned by one spouse is not automatically divided equally between both spouses for this purpose. One member of a couple may be above $3 million while the other is below it.
This makes accurate information particularly important for people with more than one fund, unusual super interests or assets whose values are not readily observable.
How the additional tax works
The new regime imposes an additional 15 per cent tax on earnings based on the proportion of an individual’s total superannuation balance above $3 million. Where the person’s balance exceeds $10 million, a further 10 per cent tax applies to earnings based on the proportion above that higher threshold.
This does not mean that an affected member’s entire super balance is suddenly taxed at an additional 15 or 25 per cent. The calculation is proportionate.
Consider a simplified illustration. If an individual’s total super balance were $4 million, the amount above the first threshold would be $1 million. Broadly, one-quarter of the balance would be above $3 million. The additional tax calculation would therefore focus on the relevant proportion of earnings, rather than treating all earnings on the full $4 million as being above the threshold.
This illustration is intentionally simplified. Actual outcomes may be affected by the statutory calculation, contributions, withdrawals, benefit payments, valuation movements and other adjustments. It should not be used to calculate an individual liability.
A significant change from the earlier proposal
Some readers may remember controversy surrounding an earlier version of the policy. The 2023 bills proposed reducing concessions for balances over $3 million and generated concern about the treatment of changes in asset values. Those bills lapsed at the end of the 47th Parliament.
The legislation enacted in 2026 is different in several important respects. It introduced the additional tier for balances above $10 million, provided for both thresholds to be indexed to the Consumer Price Index and removed the earlier proposal to tax notional capital gains and losses.
The removal of the proposed tax on unrealised gains is important. Under the earlier proposal, an increase in an asset’s value could have contributed to the calculation even if the asset had not been sold. The enacted approach responds to that controversy, although affected members may still face complex calculations and cash-flow considerations.
Why SMSFs may require particular attention
The rules are not limited to SMSFs, but SMSF members may encounter additional practical issues because their funds often hold direct property, private companies, unlisted trusts, collectables or other assets without an easily observable daily market price.
Trustees are already required to prepare fund accounts and use supportable asset values. Under the new regime, valuation quality may become even more significant when a member is close to one of the thresholds.
A valuation that is out of date or insufficiently supported can create tax, audit and compliance risks. Trustees may need to consider whether their processes provide credible evidence of market value, particularly for property and unlisted investments.
Liquidity is a separate concern. A fund can be valuable on paper but hold relatively little cash. Property, private investments and other illiquid assets may generate insufficient cash to meet tax liabilities, pension payments and operating expenses at the same time. This does not necessarily mean the fund should sell an asset. It does mean that trustees should understand the timing and source of future cash requirements.
Record-keeping also matters. Contributions, withdrawals, pension payments and transfers between funds may all be relevant to calculations or reporting. A reliable record should explain not only what occurred, but when and why it occurred.
Recent regulatory activity has separately examined SMSF establishment advice and trustees’ safeguarding of retirement savings, reinforcing the importance of proper advice, governance and documentation.
Should affected members withdraw money?
There is no universal answer.
Withdrawing money from super may reduce a person’s future total super balance, but it can produce other consequences. Money outside super may generate personally taxable income. A withdrawal could alter investment arrangements, asset protection, estate planning and eligibility under government means tests. Once money has left super, contribution caps and eligibility requirements may prevent it from being returned later.
Similarly, moving assets, changing ownership structures or transferring value between spouses can involve tax, duty, contribution-cap, investment and legal considerations. Some options may be unavailable or unsuitable.
For this reason, a decision should not be based solely on comparing one headline tax rate with another. A useful analysis considers the person’s full position over time, including expected returns, cash-flow needs, family circumstances, investment risk, estate intentions and the tax treatment of alternative structures.
Questions to raise with an adviser or tax professional
People who may be affected could consider asking:
- What is my current total superannuation balance across all funds and interests?
- How close am I to either indexed threshold?
- Which transactions and adjustments may influence the calculation?
- Are the valuations supporting my SMSF accounts current and defensible?
- Does the fund have enough liquidity for tax, pension and operating commitments?
- How might any change affect my personal tax, estate plan or government entitlements?
- Are there contribution, withdrawal or transfer restrictions that need to be considered?
- What records should I retain, and who is responsible for each reporting obligation?
The tax rules have changed, but the purpose of retirement planning has not. A sound strategy still needs to support sustainable income, appropriate investment risk, flexibility and the member’s longer-term objectives. The new thresholds are one part of that picture, not the whole picture.
References
- Parliament of Australia, Treasury Laws Amendment (Building a Stronger and Fairer Super System) Bill 2026, legislative history and status. [
- Parliament of Australia, Superannuation (Building a Stronger and Fairer Super System) Imposition Bill 2026, summary of the tax rates and thresholds.
- Parliamentary Library, Bills Digest No. 48, 2025–26, explanation of the 2026 measure and comparison with the earlier proposal.
- Parliamentary Library, Bills Digest No. 49, 2023–24, background to the previous bills.
- Australian Securities and Investments Commission, Superannuation funds: regulatory resources and news.