$3 million in superannuation limit…

Well, it isn’t exactly a limit, it is more essentially saying that balances in superannuation for an individual above $3 million will incur an additional tax of 15% on earnings above the $3 million you hold. Currently, the tax rate is 15% so this will effectively increase it to 30% on earnings for balances above $3 million.

This was announced firstly I believe back in February 2023 by Jim Chalmers (see article here).

It is planned to take effect from 1st of July 2025 but has not been legislated yet at the time of writing.

There are a few concerns about the proposal which include, it is set to tax also the portion of “unrealised gains” the superannuation fund has above $3 million. Whereas currently superannuation capital gains are taxed when the event happens, i.e. sale of shares or property. The proposed legislation is saying even if you don’t sell the shares, they will be applying a tax on the unrealised growth that you haven’t sold yet. This can be problematic for a few obvious reasons as funds might not have the money to pay the tax if they haven’t sold the asset!

There is also no proposed indexation on the $3 million dollars. Now that might seem fine, but the argument is for people my age or younger, having over $3 million dollars in superannuation by the time we are 65 + might not mean we are super rich but might just be a reasonable superannuation balance by the time you take into account inflation over the next 30 + years.

Me personally, I am not to worried that the figure isn’t indexed – although it could be a disadvantageous, I try not to get caught up on these things because they can easily just change the rules multiple times again over the next 30+ years. As a Financial Planner in the industry myself when I work with clients, I try to block out the noise and just work with within the rules at the time and develop the best strategy to suit.

For people that do hold $3 million plus in superannuation, it is good to start getting proper advice around your situation and considering what the impact will be and what your potential alternative options are, noting at the time of writing it still isn’t legislated.