Treasurer Jim Chalmers made a surprise announcement on Monday, 13 October, revealing significant revisions to his ‘signature’ superannuation legislation.

Three major changes have been introduced:

The proposed additional 15% tax on earnings from super balances over $3 million (increasing the rate to 30%) will now have its $3 million threshold indexed to inflation.
A second tier of tax—40%—will apply to earnings on super balances exceeding $10 million.
These higher tax rates will no longer apply to unrealised capital gains.

Will these changes affect you?
Let’s start with the origins of this legislation. First proposed over two years ago, the initial plan was to double the tax on super earnings (from 15% to 30%) for individuals with balances over $3 million. Though affecting only around 90,000 Australians (0.5% of the population), the proposal quickly grew more complex due to two controversial aspects:

Unrealised gains: The original plan taxed paper gains—such as the increase in value of a property held within a super fund—even if the asset wasn’t sold. This meant retirees could face a tax bill on money they hadn’t actually received.
Fixed threshold: The original $3 million cap was not indexed, raising concerns that inflation would pull more Australians into the higher tax bracket over time.

These two contentious features have now been scrapped.

The newly introduced 40% tax on earnings above $10 million will impact very few retirees, likely muting opposition. Still, the revised bill isn’t law yet. The Albanese Government will need support from both the Greens and the Opposition to pass the legislation through Parliament. The bill is expected to be introduced in early 2026, with a tight timeline for a planned start date of 1 July 2026.

What to expect from the new rules
Our current expectations:…

Legislation to commence on 1 July 2026, with the first assessments made on 30 June 2027.
Thresholds of $3 million and $10 million will apply to an individual’s Total Super Balance (TSB), including both accumulation and pension accounts.
These thresholds will be indexed—by $150,000 for the $3 million level, and by $500,000 for the $10 million.
An additional 15% tax (making it 30% total) will apply to earnings on the portion of TSB above $3 million.
An additional 25% tax (40% total) will apply to earnings on the portion of TSB above $10 million.
Tax can be paid from either super funds or personal assets.

A practical example: Bob’s situation
Bob has $3.1 million in his super—just over the $3 million threshold. He’s exploring strategies to manage the potential extra tax on the $100,000 excess. Options being considered include adjusting his investment mix, transferring funds to his spouse’s super, or simply withdrawing the excess.

Remember…
The proposed tax applies to earnings—not the balance itself. So while a 30% tax rate sounds steep, it will only apply to earnings generated on the portion of super that exceeds the $3 million threshold.

Rick Maggi CFP, Financial Advisor (Perth)