There’s been a lot of talk about the new $3 million super tax (also known as the Division 296 tax) and what it means for high-balance members. But one of the lesser-known risks isn’t about tax rates or thresholds… it’s about how super funds account for unrealised capital gains and who ends up paying tax when those gains are eventually realised. This is where something called tax provisioning comes into play.
What is tax provisioning?
When a super fund invests your money, it usually does so through a unit trust structure. Your super balance is tied to a unit price, which reflects the underlying value of the fund’s assets: shares, bonds, property and so on.
If an investment rises in value but hasn’t been sold yet, that’s called an unrealised capital gain. When the fund eventually sells the asset, it will owe capital gains tax (CGT) on the profit. To keep things fair, most funds don’t wait until tax is paid. Instead, they provision for tax daily or weekly, adjusting the unit price to reflect the expected future tax bill. This stops new investors overpaying, or exiting investors walking away without covering their share of tax.
Do funds always provision the full tax?
Usually not. Most super funds use estimates based on member behaviour and tax rules. They don’t assume every capital gain will be taxed.
Let’s use an example.
Say a fund has a $1 million unrealised gain. After applying the CGT discount (only two-thirds is taxable in super), that leaves $666,667 taxable. If all of it were taxed at the 15% super rate, the fund would owe $100,000.
But funds often assume some members will move into pension phase, where tax is zero. Let’s say they expect 40% of members to enter pension phase, and only 60% to remain taxable. That drops the provisioned tax down to $60,000 (not $100,000). This smaller amount gets baked into the unit price. If their assumptions are off and more gains end up being taxed, remaining members wear the cost through lower future returns.
15 super funds most exposed to a capital gains sting
We’ve uncovered a group of 15 super funds whose members are most exposed to a hidden tax sting from the $3 million super tax changes.
Using APRA data, we’ve identified funds where older, wealthier member bases and large embedded capital gains could result in unit price write-downs over the next year as high-balance members exit.
Here’s why it matters: the CGT from those exits will be spread across all members in the fund. That means everyday Australians could end up footing the bill for unrealised gains they never received.
We looked at four key factors:
- Excluded defined benefit funds (which are exempt from the $3m tax)
- Total assets over $1 billion
- Net outflows above 80% (indicating an older member base)
- Average member balance above $100,000
These 15 funds control over $592 billion in assets, and sit across the retail, public sector, industry and corporate sectors.
Super funds most exposed to CGT risk
| Fund name | Type | Assets ($b) | Outflow ratio (%) | Avg. balance ($k) |
| Colonial First State FirstChoice Superannuation Trust | Retail | 96.8 | 111.0 | 156 |
| Russell Investments Master Trust | Retail | 11.4 | 80.0 | 131 |
| MLC Super Fund | Retail | 87.9 | 140.6 | 107 |
| Mercer Portfolio Service Superannuation Plan | Retail | 1.7 | 527.2 | 354 |
| ASGARD Independence Plan Division Two | Retail | 71.8 | 120.3 | 307 |
| Perpetual’s Select Superannuation Fund | Retail | 1.1 | 571.5 | 272 |
| Local Government Super | Public Sector | 15.1 | 134.7 | 167 |
| Aware Super | Public Sector | 183.1 | 84.7 | 144 |
| Local Government Super | Public Sector | 15.1 | 134.7 | 167 |
| Mine Superannuation Fund | Industry | 14.9 | 119.2 | 226 |
| equipsuper | Industry | 35.3 | 131.8 | 227 |
| legalsuper | Industry | 6.2 | 84.4 | 136 |
| NGS Super | Industry | 15.6 | 108.8 | 132 |
| Qantas Superannuation Plan | Corporate | 9.3 | 179.1 | 332 |
| Telstra Superannuation Scheme | Corporate | 27.2 | 144.5 | 271 |
The results raise serious questions around equity, transparency and the unintended consequences of the new tax. If these outflows occur and provisioning is light, it could lead to noticeable unit price drops for remaining members when gains are realised.
Why this doesn’t happen at Stockspot Super
Stockspot Super is built differently. We don’t use pooled unit trusts. Instead, each member owns their investments in their own super account.
That means:
- Tax is calculated on a member-by-member basis
- You only pay tax on your own gains
- You’ll never be impacted by someone else exiting or switching strategies
There’s no need for tax provisioning or guesswork. If you make a gain, we account for the tax. If you don’t, you won’t.
This avoids the risk of cross-subsidisation, which is now a growing concern in large pooled funds, especially in the face of policy changes like the $3 million tax.
Final thoughts
Tax provisioning is rarely talked about, but it can have a big impact on your returns. If your fund has misjudged how much tax it owes, you could be left covering the shortfall even if you weren’t around to benefit from the gains.
At Stockspot Super, we think there’s a fairer way to manage super. One that’s simple, transparent, and doesn’t make you responsible for someone else’s tax.
This article is a follow-on from our recent explainer on the $3 million super tax. If you missed it, you can read that here: The super tax targeting the wealthy- that might hit you too
