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.

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