Australia Superannuation Tax March 15: Greens Back Higher Rates

Australia’s superannuation tax is set to rise for very large balances after the Greens said they will support Labor’s plan. The deal clears the Senate path for near-term passage. Earnings on balances between A$3 million and A$10 million would face a 30% rate, while earnings above A$10 million would face 40%. High-balance SMSFs will likely pay more and may rethink asset mix, franking use, and cash flow. We explain who is affected, how the new tiers work, and the steps to prepare before the May budget.

What the Greens–Labor deal changes

Under the agreement, Labor’s higher superannuation tax applies to earnings, not the full balance. The 30% rate applies to earnings linked to balances from A$3 million up to A$10 million. The 40% rate applies to earnings linked to balances above A$10 million. With Greens support, the bill is set to clear the Senate soon, according to The Guardian.

For large SMSFs, effective rates will lift as more earnings fall into the 30% and 40% tiers. Franking credits become less valuable at higher tax rates. Trustees may reassess domestic shares, international equities, and fixed income to manage after-tax returns. Liquidity planning also matters so funds can meet higher tax payments without forced asset sales during weak markets.

Who is affected and how assessments work

Assessments will focus on earnings attributable to the portion of your balance above each threshold. In practice, the Australian Taxation Office is expected to use reported balances and apportion earnings. That means people with balances under A$3 million should see no change. Those with very large balances will see more earnings captured by the higher superannuation tax tiers.

Consider an SMSF with A$12 million that earns A$800,000. For illustration, assume earnings are proportional to balances. The A$3 to A$10 million slice is 7/12 of the fund, so 58.33% of earnings (A$466,667) faces 30%. The above A$10 million slice is 2/12, so 16.67% (A$133,333) faces 40%. The remaining 25% (A$200,000) is taxed at 15%.

Portfolio planning under higher rates

Higher superannuation tax rates reduce the net benefit of franking credits. Diversifying toward global equities, investment-grade bonds, and cash may smooth after-tax returns. Review asset location across family members where legal. For listed property and private assets, stress test income and valuations under stronger tax drag and higher rates. Keep costs low to protect net returns.

Trustees can review contribution timing within annual limits and consider rebalancing to keep future earnings below higher tiers. Pension planning and drawdowns should align with cash-flow needs and tax outcomes. Keep enough liquidity for quarterly PAYG instalments if required. Document decisions, minutes, and advice to support compliance and future audits.

What to watch in the May budget

The Greens have flagged interest in broader measures, including capital gains tax and negative gearing. No changes are confirmed. Investors should watch the May budget closely and model property, shares, and SMSF scenarios. For background on the recent super shift, see reporting by Bloomberg.

Once legislation passes, the ATO will release guidance on calculations, forms, and payment timing. SMSF trustees should keep accurate balance data, tax statements, and distribution records. Build a forecast of tax payable under the new tiers and set aside cash. Review trust deeds, investment strategies, and any related-party arrangements for compliance.

Final Thoughts

With Greens support, Labor’s higher superannuation tax on very large balances looks set to pass. The new tiers target earnings linked to A$3 million to A$10 million at 30% and earnings above A$10 million at 40%. For high-balance SMSFs, the priorities are clear: quantify your exposure by apportioning earnings across tiers, stress test portfolios for after-tax returns, and lock in enough liquidity to meet higher tax bills. Review franking reliance, consider global diversification, and keep fees tight. Finally, monitor the May budget for signals on capital gains and negative gearing, and be ready to adjust your strategy once ATO guidance and start dates are confirmed.

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The content shared by Meyka AI PTY LTD is solely for research and informational purposes.  Meyka is not a financial advisory service, and the information provided should not be considered investment or trading advice.