June 30, 2026 represents a critical date for Australians with substantial superannuation balances. From July 1, 2026, a new taxation framework takes effect that will fundamentally change how earnings on large superannuation balances are taxed.
While this change affects fewer than 0.5% of Australians directly, many high-income professionals and business owners are approaching the threshold, and the rules create strategic considerations that require careful navigation.
What’s Changing: The Two-Tier System
The Australian Government’s revised superannuation tax proposal, which has passed cabinet approval and is proceeding to legislation, introduces a tiered taxation system for superannuation balances above $3 million.
The structure:
- Balances up to $3 million: Taxed at the existing 15% rate on earnings (no change)
- Balances between $3 million and $10 million: 30% tax on earnings from the portion above $3 million
- Balances above $10 million: 40% tax on earnings from the portion above $10 million
Critically, this revised framework represents a significant improvement over the original proposal announced in 2023. The Government has responded to industry feedback and made several important changes:
Only realised earnings are taxed: The controversial proposal to tax unrealised capital gains has been abandoned. Under the final framework, only realised earnings such as dividends, interest, rental income, and capital gains from sold assets will be subject to the higher tax rates.
Thresholds are now indexed: Unlike the original fixed $3 million threshold, both thresholds will be indexed to inflation, preventing bracket creep from eventually capturing middle-income retirees.
Cost base reset available: Individuals with balances above $3 million as at June 30, 2026 can elect to reset the cost base of their assets to that date, ensuring only future growth is assessed under the new rules.
This last point is crucial and time-sensitive.
The June 30, 2026 Cost Base Election
If someone has a total superannuation balance exceeding $3 million as at June 30, 2026, their superfund will need to make an election to reset the cost base of assets to their market value on that date.
Why this matters: Without making this election, any capital gains realised after July 1, 2026 will be calculated from the original purchase price of assets, potentially capturing years or decades of prior growth under the new higher tax rates.
With the election, only growth from July 1, 2026 onwards is assessed under the new framework.
Example scenario: Consider someone with $4 million in superannuation, including shares purchased 15 years ago for $500,000 that are now worth $2 million. If those shares are sold in 2027:
- Without cost base reset: Capital gain is $1.5 million ($2 million sale price minus $500,000 original cost). A portion of this gain would be taxed at 30%.
- With cost base reset: Capital gain is calculated from the $2 million value as at June 30, 2026. Only growth after that date is taxed at 30%.
Treasury guidance indicates that super funds will manage this election process, but individuals need to be aware of its importance and ensure their fund completes it where applicable.
First Financial’s James Wrigley warned in December 2025 that failing to make this election could have significant tax consequences: “If you don’t make that election, the prior growth will be caught up in all this as well.”
Who Does This Actually Affect?
Currently: Fewer than 0.5% of Australians have superannuation balances exceeding $3 million. Treasury estimates suggest approximately 90,000 Australians will be directly affected by the $3 million threshold, with significantly fewer affected by the $10 million threshold.
However, several cohorts should be paying close attention:
High-income professionals in accumulation phase: Doctors, senior executives, legal partners, and other professionals earning $300,000+ annually who have been maximising concessional contributions for years may be approaching or will exceed $3 million within the next decade.
Business owners who have sold or plan to sell: The small business CGT concessions allow business owners to contribute up to $1.65 million into superannuation (in addition to standard caps) when selling a business. A successful business sale can push superannuation balances well above $3 million instantly.
Those with defined benefit schemes: Some public sector workers and corporate executives have defined benefit superannuation that may be valued above $3 million when converted to an account balance equivalent.
Self-managed super fund (SMSF) members: SMSFs holding concentrated property or equity positions may have seen balances grow substantially, particularly if purchased decades ago.
Couples combining balances: While the threshold applies per individual, couples with combined balances approaching $6 million need to consider strategic allocation between partners.
Strategic Considerations Before July 1, 2026
For those approaching or exceeding the threshold, several strategic options exist, though their appropriateness depends entirely on individual circumstances:
1. Contribution Timing
For those under $3 million: Maximising concessional contributions before July 1, 2026 locks in assets at the 15% tax rate before the higher rates apply.
The concessional contribution cap for 2025-26 is $30,000. If unused cap amounts exist from previous years (the carry-forward provision allows unused caps from the past five years to be used if your total super balance was under $500,000 on June 30 of the previous year), larger contributions may be possible.
For business owners planning a sale: Timing of small business CGT concession contributions relative to the July 1, 2026 implementation date could affect long-term tax outcomes. However, business sale timing should be driven primarily by commercial considerations, not tax timing alone.
2. Pension Phase Strategy
Superannuation in pension phase (drawdown mode) generates tax-free earnings up to the transfer balance cap, currently $1.9 million per person.
For those with balances above $3 million, the portion in pension phase (up to $1.9 million) continues to generate tax-free earnings, while the portion in accumulation phase is subject to the tiered tax rates.
Strategic considerations include:
- Maximising the pension phase component to $1.9 million per person
- Understanding how pension drawdowns and recontributions affect total balance calculations
- Coordinating pension strategies between partners to optimise household outcomes
However, individuals must meet conditions of release (generally age 60+ and retired, or age 65+) to commence a pension.
3. Spousal Contribution Splitting
Contribution splitting allows members to split up to 85% of concessional contributions to a spouse’s superannuation account in the following financial year.
For couples where one partner has a significantly larger balance approaching $3 million while the other has substantially less, splitting contributions can help balance accounts and potentially defer or avoid triggering the higher tax rates.
This strategy requires forward planning as splits apply to contributions from the previous year, and both partners must be under age 65 or meet specific conditions.
4. Considering Alternative Wealth Structures
For business owners and high-net-worth individuals, superannuation is one wealth accumulation vehicle among many options:
Personal investment structures: While lacking superannuation’s tax advantages, investments held personally or in family trusts offer greater flexibility, no contribution caps, and full access to capital without age restrictions.
Life insurance bonds: For those who have maximised superannuation but want tax-effective growth, investment bonds offer 30% tax on earnings (potentially lower than marginal tax rates for high earners) with tax-free withdrawals after 10 years.
Business structures: Retaining wealth within operating businesses or investment holding companies provides flexibility and may offer tax planning opportunities, though tax rates differ from superannuation.
The decision to maximise superannuation contributions versus retaining wealth in alternative structures depends on:
- Time horizon until retirement
- Need for capital access before preservation age
- Risk of exceeding $3 million threshold
- Estate planning considerations
- Overall tax position and marginal tax rates
5. Withdrawal and Recontribution Strategies
For those aged 60+ who have met a condition of release, withdrawing excess amounts above $3 million to reduce total balance may be worth considering, particularly if those funds can be recontributed by a younger spouse or deployed in alternative tax-effective structures.
However, this strategy involves complexity:
- Withdrawn amounts lose the superannuation tax environment permanently
- Recontribution is subject to standard caps and age limits
- Capital gains tax may be triggered on withdrawals from accumulation phase
- Estate planning benefits of superannuation (death benefit nominations, binding nominations) are lost on withdrawn amounts
The LISTO Increase: Support for Lower Earners
While much attention focuses on the $3 million threshold, the reforms also include significant support for lower-income earners.
From July 1, 2027, the Low Income Superannuation Tax Offset (LISTO) increases:
- Maximum payment rises from $500 to $810 annually
- Income eligibility threshold increases from $37,000 to $45,000
- Approximately 3.1 million Australians become eligible, with 60% being women
LISTO effectively refunds the 15% contributions tax paid on superannuation for low-income earners, ensuring their super contributions aren’t taxed more heavily than their income.
This demonstrates the Government’s stated objective: to better target superannuation concessions by reducing benefits for the wealthiest while increasing support for those who need it most.
Industry Response and Ongoing Consultation
The revised framework has received mixed but generally more positive reception than the original proposal.
The Association of Superannuation Funds of Australia (ASFA) welcomed the changes, particularly the removal of unrealised gains taxation and the introduction of indexation. ASFA CEO Mary Delahunty noted the LISTO increase would benefit 1.3 million Australians, with 60% being women.
CPA Australia called the revised framework “common-sense” changes, arguing that taxing unrealised capital gains would have been unjust.
However, some concerns remain:
Consultation timing: The draft legislation was released in late December 2025 with consultation closing January 16, 2026, during the holiday period when most advisers are unavailable. Some practitioners view this timing as inadequate for such significant reforms.
Implementation complexity: Super funds must implement new systems to track earnings attributable to balances above thresholds, calculate tiered tax liabilities, and manage cost base elections. This administrative burden will ultimately be borne by members through higher fees.
Future threshold adjustments: While indexation prevents bracket creep, future governments could adjust thresholds or rates. Superannuation policy in Australia has proven fluid, with frequent changes creating uncertainty for long-term planning.
Integration with Payday Super
The $3 million super tax commences on July 1, 2026, the same date as payday super implementation.
For high-income individuals approaching the threshold, payday super creates more frequent contribution flows into superannuation, providing better real-time visibility of total balance positioning.
This increased frequency may assist with:
- Tracking progress toward the $3 million threshold
- Timing decisions about whether to continue maximising contributions
- Managing contribution caps more precisely
- Coordinating with financial advisers on strategic adjustments
For business owners affected by both changes, the cash flow implications of payday super and the strategic considerations around the $3 million threshold need to be assessed in combination.
What High Earners Should Consider Now
If your balance is currently under $2 million: The $3 million threshold likely remains years away. Continue maximising concessional contributions to take advantage of the 15% tax environment, monitor balance growth, and reassess strategy every 2-3 years.
If your balance is between $2 million and $3 million: You’re in the “watch zone.” Consider:
- Projecting when you might exceed $3 million based on contributions and investment returns
- Whether adjusting contribution strategies makes sense given timeframes
- How pension commencement will affect your positioning when you meet conditions of release
- Spousal balancing if appropriate
If your balance exceeds $3 million as at June 30, 2026: Ensure your super fund completes the cost base reset election. This is critical and should be confirmed with your fund directly.
If your balance significantly exceeds $3 million: Consider comprehensive advice covering:
- Pension/accumulation split optimisation
- Contribution strategy going forward (continue maximising or redirect to alternative structures?)
- Estate planning implications
- Potential withdrawal and restructuring strategies if you meet conditions of release
- Tax-effective investment strategies within super to minimise realised gains
The Broader Context: Superannuation Policy Evolution
Australia’s superannuation system holds $3.5 trillion in assets, making it the fourth-largest pension pool globally. The system was designed to support retirement incomes, not unlimited wealth accumulation in a tax-preferred environment.
The $3 million threshold represents the Government’s attempt to better target tax concessions. Treasury modelling suggests the wealthiest 0.5% of Australians receive a disproportionate share of superannuation tax concessions, and this reform aims to rebalance that.
However, the threshold remains relatively high. A retiree with $3 million in superannuation generating 6% annual returns has $180,000 in investment income, plus Age Pension entitlements (if applicable), providing very comfortable retirement funding.
The question isn’t whether the threshold is fair in isolation, but whether it will remain stable over time. Superannuation policy in Australia has changed frequently:
- Contribution caps have fluctuated significantly over the past 20 years
- The transfer balance cap was introduced in 2017, then indexed upward
- Taxation of earnings for those over 60 has changed multiple times
- Work test requirements have been adjusted
- Bring-forward provisions have been modified
This policy instability creates planning challenges. Decisions made today assuming current rules may be undermined by future legislative changes.
Risk Factors and Uncertainties
Several considerations should temper planning assumptions:
Legislative risk: The current framework has cabinet approval but isn’t yet law. While passage appears likely, amendments could occur during the legislative process.
Future threshold changes: Even with indexation, future governments could lower thresholds, increase tax rates, or change the framework entirely.
Investment performance: Projections about when balances might exceed $3 million depend on investment return assumptions that may not materialise.
Longevity risk: Aggressive strategies to minimise balances above $3 million (such as withdrawals) need to be balanced against the risk of outliving retirement savings.
Complexity risk: Sophisticated strategies often involve costs, ongoing management, and potential for implementation errors that could outweigh benefits.
The Strategic Mindset
For ambitious professionals and business owners building substantial wealth, the $3 million super tax creates a planning consideration, not a crisis.
Superannuation remains highly tax-effective even with the new rates:
- 30% tax on earnings from $3-10m is still better than 47% marginal tax rates for high earners
- 40% tax on earnings above $10m, while significant, still provides tax deferral and estate planning benefits
- The 15% rate on contributions remains advantageous
- Tax-free pensions up to $1.9 million per person remain available
The question isn’t whether to abandon superannuation, but how to optimise its use within a broader wealth strategy.
Key principles include:
- Don’t let tax tail wag the strategic dog: Superannuation decisions should align with overall financial objectives, not be driven purely by tax minimisation.
- Understand your timeline: Those 10+ years from retirement have more flexibility and time to adjust strategies than those already in or approaching pension phase.
- Consider household positioning: Optimising at the individual level while ignoring household dynamics can lead to suboptimal outcomes.
- Maintain flexibility: Locking into rigid strategies based on current rules creates vulnerability to future legislative changes.
- Focus on fundamentals: Strong investment returns compound wealth regardless of tax rates. A 10% return taxed at 30% still outperforms a 6% return taxed at 15%.
Professional Guidance Considerations
The $3 million super tax involves complexity across multiple domains:
- Tax law and calculations
- Superannuation rules and regulations
- Investment strategy and asset allocation
- Estate planning and wealth transfer
- Cashflow modelling and projections
- Integration with business structures and other assets
For those approaching or exceeding the threshold, professional financial advice specific to individual circumstances is typically warranted. The Financial Services Council and Financial Planning Association emphasise that generic strategies rarely suit specific situations, and the cost of professional advice is usually modest relative to potential tax savings or avoided mistakes.
However, advice should come from appropriately qualified professionals operating under proper licensing. The superannuation and tax landscape is complex, and errors can be costly.
Need Strategic Guidance on the $3 Million Super Tax?
Whether you’re approaching the threshold, currently above it, or building wealth that will eventually exceed it, understanding how these changes affect your specific circumstances requires tailored analysis.
Book a clarity call with Obsidian Wealth Management to explore how the $3 million super tax integrates with your broader wealth-building strategy. We work with ambitious professionals and business owners who approach complex financial decisions strategically.
Key Sources:
- Treasury.gov.au – Better Targeted Superannuation Concessions
- Australian Taxation Office (ATO) – Superannuation Tax Changes
- Association of Superannuation Funds of Australia (ASFA)
- CPA Australia
- Financial Services Council
- Industry Super Australia
- Australian Financial Review
- Yahoo Finance Australia
