The federal government has confirmed it will press ahead with its controversial new superannuation tax on balances above $3 million. From 1 July 2025, earnings on super above that threshold will be taxed at 30%, up from the current 15%.
That alone is a big change. But it’s the fine print that has people worried.
The new tax includes unrealised gains. In other words, you could be taxed on the paper increase in the value of your super investments, even if you haven’t sold anything. Imagine getting a tax bill because your house went up in value last year, even though you never sold it. That’s what’s being proposed.
Who’s affected?
Treasurer Jim Chalmers says it will only impact 0.5% of Australians. But the $3 million threshold isn’t indexed to inflation. That means more people will cross the line over time thanks to wage growth, rising asset prices and compounding returns.
What starts as a “tax on the wealthy” could gradually hit middle-aged Australians who’ve saved and invested responsibly.
There’s also no clarity yet on how this tax will apply to defined-benefit pensions, like those received by many politicians. That raises legitimate questions about fairness.
The impact on SMSFs
The group most at risk are SMSF trustees with large holdings in property, private businesses or other unlisted assets. These don’t have a transparent market value. If trustees are forced to pay tax on a government-estimated value that may never be realised, they could face liquidity issues or even be forced to sell to pay the tax bill.
Former Prime Minister Paul Keating, the architect of Australia’s super system, has warned this move could undermine confidence in super. Independent MP Allegra Spender has echoed similar concerns, saying it could discourage investment in early-stage businesses often backed by SMSFs.
We agree. Taxing unrealised gains on illiquid assets makes no sense. Many SMSFs will be forced to respond by selling off harder-to-value assets simply to avoid being caught by future tax bills.
A shift to ETFs?
One possible outcome is a growing shift by SMSFs towards listed, liquid investments like ETFs. Unlike property or private businesses, ETFs are priced daily and easy to value. There’s no ambiguity, no guesswork, and no risk of being taxed on an inflated estimate.
At Stockspot, we’ve always believed in the benefits of ETF-based super portfolios. It’s part of the reason we launched Stockspot Super which exclusively uses ETFs. They offer lower fees, greater transparency and better diversification. Now they also offer more certainty when it comes to tax.
Over the past year, we’ve seen more SMSF clients simplify their portfolios and move into ETFs. We expect this trend to accelerate as the July deadline approaches.
What about large industry and retail super funds?
There are concerns here too. Members with balances above $3 million may try to get ahead of the tax by pulling money out early or shifting funds into structures like family trusts, investment bonds or ETFs outside of super.
That creates two big issues for those who stay.
First, it weakens the investment pool. Large withdrawals may force funds to sell assets, particularly illiquid ones, to meet redemptions. That increases operational risk and could affect short-term performance.
Second, remaining members could wear the indirect cost of the new tax. That’s because most super funds use a unit pricing system. When one member realises a capital gain, or the fund pays tax on that gain, it reduces the unit price for everyone — not just those above the threshold. And even if no assets are sold, members may still end up sharing the burden of the higher 30% tax on large balances, simply because it’s too complex for funds to calculate tax at an individual level.
Ironically, lower-balance members could be penalised by a tax that was only supposed to affect the wealthy.
In contrast, super products like ours that exclusively invest in ETFs in an individual account structure avoid many of these issues. Daily pricing makes valuations straightforward. Liquidity makes redemptions easier. And listed assets won’t trigger surprise tax bills. It’s one more reason we believe ETF-based super investing is the way forward.
What should super members do?
This is a good moment to ask what’s in your control.
If you have an SMSF, now is the time to review what’s in it. Illiquid property or business holdings may have made sense in the past. But they carry new risks under this policy. ETFs provide a transparent, diversified and more tax-friendly alternative.
Even if you don’t have an SMSF, the message is clear. The $3 million cap isn’t indexed. So if you’re in your 30s, 40s or 50s and expect to build a large super balance over time, it may make sense to invest more outside of super where you have access to your money and more control over how it’s taxed.
If you’re in a big industry or retail fund with lots of members holding over $3 million, watch out. A higher tax bill could flow through to you via a lower unit price when large balance members sell out. You might be better off in a super product where tax is calculated at the individual level, so you’re not left covering the cost when large members take their money out.
Opinions from this article were featured in Why Labor’s new super tax will hit millions of younger workers with low superannuation balances
