By Peter Richards
By Jonathon Tainsh
Many Australians with large super balances have been watching the $3 million rule unfold with a mix of frustration and confusion. For anyone with most of their wealth tied up in property or private investments inside super, the question’s been simple: Will I be taxed on money I haven’t actually made?
That fear came from the original 2023 proposal — a design that would have doubled the tax rate on earnings above $3 million and applied it to unrealised gains. In other words, you could have owed tax on a paper profit from a property you hadn’t sold.
A revised plan was released last month. And it is still just a plan, it is not yet legislated and there is always a chance that things will change again and /or not be implemented, so whilst we are prepared for the changes it is best not to act on anything just yet.
A Softer, More Workable Version
The Treasurer’s revised plan, released last month, looks far more practical. The key changes:
- No tax on unrealised gains — only realised earnings will count. (Please note the actual cost-base to be used to calculate the size of the gain is not yet defined)
- Indexed thresholds — both the $3 million and new $10 million tiers will rise with inflation.
- Tiered tax rates — 30 % on realised earnings between $3 million and $10 million, and 40 % above $10 million.
- Start date pushed back to 1 July 2026 (pending legislation).
Overall, it’s still a tightening of concessions for very large balances — but one that now feels more measured and less punitive.
What This Means in Practice
For anyone approaching or above the $3 million mark, the tax rate on realised investment income inside super will effectively rise from 15 % to 30 % on the portion above that threshold. Those with balances above $10 million will see 40 % on that top slice.
Because the tax only applies to realised gains, members with property, private equity or other illiquid assets now have more control over when and how tax arises. The challenge shifts from avoiding tax on paper gains to managing the timing of actual realisations.
If your fund is heavy in illiquid assets, modelling your cash flow and timing of disposals remains essential. Even without taxing unrealised gains, you still need liquidity to cover tax when assets are sold. Further, the size of the gains may influence your actions over the period leading up to 30 June 2026
Defined-benefit members and those in large or hybrid funds will need further clarity once Treasury settles how those schemes will be treated.
Timing and Next Steps
A new bill is expected to be introduced next year, with consultation on the finer points — such as valuation rules and defined-benefit treatment — still underway. Assuming it passes, the rules would apply from 1 July 2026, although if your balance is under the threshold at 30 June 2027 the new taxes will not apply.
Our View
The revised package is a clear improvement: more equitable, less distortionary, and more likely to pass Parliament. It still represents a material change for high-balance members, particularly those in SMSFs with property or private assets.
Our advice at this stage is to stay informed, not alarmed. Once the legislation and calculation details are released, we’ll model the outcomes for affected clients and share practical planning options well ahead of the start date.
Disclaimer
People + Partners Wealth Management Pty Ltd ABN 67 127 250 613 is a Corporate Authorised Representative of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357 306. The content above is for general information only and does not constitute personal financial advice. It does not take into account your individual objectives, financial situation, or needs.
