Tax Alert - Further guidance on proposed additional 15% tax on earnings on super balances over $3 million from 1 July 2025

Lowe Lippmann Chartered Accountants

Further guidance on proposed additional 15% tax on earnings on super balances over $3 million from 1 July 2025


Last week, we released a Tax Alert (click here) after the Government announced proposed changes to impose an additional tax of 15% (the additional tax), increasing the original concessional tax rate from 15% to an effective new 30% rate, on earnings on total superannuation balances (TSB) over $3 million.


This measure is proposed to commence on 1 July 2025 and apply to the 2025-2026 financial year onwards.


This week, the Government released further guidance to help explain how the additional tax would be applied to earnings on TSB over $3 million.


The additional tax only applies to the proportion of earnings corresponding to balances above $3 million, and this means that earnings corresponding to funds below $3 million will continue to be taxed at the original concessional tax rate of 15% or less.

What are earnings?


Earnings are calculated with reference to the difference in TSB at the start and end of the financial year, adjusting for withdrawals (added) and contributions (subtracted).


The calculation of earnings includes all notional (unrealised) gains and losses, similar to the way superannuation funds currently calculate members’ interests. The proposed changes intend to treat defined benefit interests in a similar way, however no details are available at this time. We anticipate further details during the consultation process before these proposed changes become legislation.


Negative earnings can be carried forward and offset against any additional tax liabilities assessed in future years. However, it is important to note that any “negative earnings” can only be carried forward, and they can not be carried back to previous years to refund any additional tax liability paid in previous years.


We anticipate this limitation within relation to the “negative earnings” concept will also be debated during the consultation process.

What is your TSB?


An individual’s TSB includes all of their superannuation interests (across multiple superannuation fund accounts) and is not a separate figure for each interest, which means the $3 million threshold will be applied on a per-individual basis and not on a per-account or per-fund basis. TSB includes both pension and accumulation account balances.


The Australian Taxation Office (ATO) currently uses superannuation fund reporting to calculate the total amount that individuals have in the superannuation system, for example to determine whether individuals are eligible to make non-concessional contributions.

How is the additional 15% tax assessed and how is it paid?


These proposed changes are scheduled to commence on 1 July 2025 for the 2025-2026 income year.


The ATO will issue a notice of additional tax directly to individual members, notifying them of their additional tax liability to pay. Individuals will then have the choice of either paying the tax out-of-pocket or from their superannuation funds. Individuals who hold multiple superannuation funds can elect the fund from which the tax is paid.


This additional tax liability notice will be separate from an individual’s personal income tax, similar to the existing Division 293 tax. This means that any tax offsets or franking credits available to the individual on their notice of assessment (for income tax purposes) cannot be applied to reduce any additional tax liability imposed by the ATO.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Tax Alert - High Court decision and ATO statement on Bendel’s Case

July 7, 2026
High Court decision and ATO statement on Bendel’s Case The High Court recently handed down its decision in Bendel’s Case, confirming that an unpaid present entitlement (or UPE) between a discretionary trust and a beneficiary company does not fall within the extended definition of a “loan” for Division 7A purposes. The Australian Taxation Office released a Decision Impact Statement in response to the High Court findings, concluding the High Court's reasoning makes it clear that where a beneficiary company is entitled to a share of trust income that remains unpaid (a UPE) and the company takes no positive actions to call for payment of the entitlement, this will not fall within the expanded definition of a "loan" for Division 7A purposes. This is in contradiction to the ATO’s historical position that treated UPEs as "loans".

Practice Update – July 2026

July 5, 2026
Government's tax reform package The Government has recently legislated several of the tax reform measures announced in the 2026 Federal Budget (and in later media releases). These include, among other things: Replacing the CGT discount with cost base indexation and a 30% minimum tax on gains accruing from 1 July 2027 (including gains on pre-CGT assets); Increasing the small business turnover threshold for the 50% active asset reduction from $2 million to $10 million; Limiting negative gearing for residential property to new residential dwellings from 1 July 2027 (subject to transitional rules); and Introducing the Working Australians Tax Offset from 1 July 2027, and the $1,000 instant tax deduction for work-related expenses from 1 July 2026. After a round of consultation, the Government has also announced further proposed measures, broadly including (among others): A new targeted CGT discount for investors in innovative start-ups; Barring SMSFs from utilising future limited recourse borrowing arrangements ( LRBAs ) to acquire residential property; and  Exempting income of discretionary testamentary trusts from the minimum tax proposed for trusts. We recently released a Tax Alert considering the legislation restricting SMSFFs using residential property LRBAs – to read click here . For full details of each of the 2026 Federal Budget announcements, please see our Federal Budget Tax Alert – to read click here .

Tax Alert - Legislation restricting SMSFs using residential property LRBAs has now passed Parliament

June 28, 2026
Legislation restricting SMSFs using residential property LRBAs has now passed Parliament The Treasury Laws Amendment (Tax Reform No 1) Bill 2026 ( the Reform No 1 Bill ) was passed by Parliament on Thursday 25 June 2026. Schedule 5 of the Reform No 1 Bill amends section 67A of the Superannuation Industry (Supervision) Act 1993 to restrict future limited recourse borrowing arrangements ( LRBAs ) on real property to investments in “business real property” (as defined in section 66 of the SIS Act). Residential property of any kind is excluded from the definition of “business real property” in section 66 of the SIS Act. We note this also excludes newly constructed residential property, which is a distinction at odds with recent exemptions being given to new-builds with other Budget Night tax changes relating to negative gearing and restricting the CGT 50% discount. Super funds are not generally allowed to borrow for investments, but there has been a concession allowing a self-managed super fund ( SMSF ) to borrow money to buy single assets like property, if their loans were set up in line with particular requirements, known as LRBAs. This change means an SMSF will not be able to borrow to buy residential property after the start date of these changes.
More Posts