Following on from our recent newsletter, Treasury have now released further guidance on the Government’s proposed Better Targeted Superannuation Concessions (BTSC) policy. It should be noted that the Government plan to enter a consultation phase so further changes may still occur and no doubt more details will emerge.

A recap on what is (now) proposed:

• Moving to a realised earnings approach that aligns to existing income tax concepts.
• Introducing a tiered approach so that:
  • Additional tax becomes payable (an additional 15%) on realised earnings where a taxpayer’s balance exceeds $3 million.
  • A further additional tax becomes payable (an additional 10%) on realised earnings where a taxpayer’s balance exceeds $10 million.
• Indexing balance thresholds of $3 million and $10 million.

Guidance has been released for calculating tax liabilities; however, this will be refined during the consultation period.  The guidance contains two examples which provide more insight into the proposed new rules illustrating a proportional approach once thresholds are exceeded.

The proposed proportions are determined by reference to the specified threshold and the total superannuation balance as follows:

Some examples of this this is anticipated to work in practice are as follows:

Example one – Sarah has a super balance of $12.9 million.

In the 2026/27 income year her fund had $840,000 of realised earnings.

The proportion of the fund in excess of $3 million is 76.74% (being (($12.9m – $3m)/ $12.9m).

Multiply the realised earnings [$840,000] by the proportion [76.7%] by the tax rate [15%] = $96,698.

Then, as the balance is more than $10 million repeat the process for the higher threshold…

The proportion of the fund in excess of $10 million is 22.48% (being (($12.9m – $10m)/ $12.9m)

Multiply the realised earnings [$840,000] by the proportion [22.48%] by the tax rate [10%] = $18,884.

Total additional tax payable by Sarah is = $115,581

Example two – Matt has a combined super balance (he has both a SMSF and an APRA-regulated fund) of $4.5 million.

In the 2026/27 income year he attributed $300,000 of realised earnings ($100k from the APRA fund and $200k from the SMSF).

The proportion of the fund in excess of $3 million is 33.33% (being (($4.5m – $3m)/ $4.5m).

Multiply the realised earnings [$300,000] by 15% = $15,698.

Total additional tax payable by Matt is = $15,698

As you can see from the above, the additional tax liability is not proposed to be based on the tax-free component of superannuation, rather it is simply targeting realised earnings with additional tax liabilities being imposed when balances exceed certain thresholds.  Preliminary analysis suggests that the effective tax rate on earnings will exceed the corporate rate when significant balances are within a members account.

Based on the current guidance there will be the option to pay this amount out of your fund or personally.

We recommend that individuals with substantial superannuation balances, who are potentially affected by the proposed changes consider conducting scenario modelling, particularly where superannuation benefits may be paid to non-dependants.

If you need assistance with this scenario modelling or have any questions, please don’t hesitate to reach out to your ESV Engagement Team.