Part 2 of our editorial series: "Your Pension, Your Future"
From 1 July 2025, a new rule will see Australians with superannuation balances over three million dollars paying 30 percent tax on earnings from the excess amount. If you're a self-funded retiree, this change may directly impact how your retirement savings are taxed.
At Downsizing.com.au, we understand that financial independence in retirement brings both freedom and complexity. This guide breaks down what the new tax means and the steps you can take to navigate it confidently.
What Is the New Super Tax?
The Australian Government is introducing a 15 percent additional tax on earnings that apply to the portion of your total super balance above three million dollars. This brings the total tax rate to 30 percent on that portion. The tax includes unrealised gains, which means even if you don’t sell assets, you could be taxed on their paper value.
Who Will Be Affected?
This change is expected to impact around 80,000 Australians, including many self-funded retirees who have diligently built up their super over time. You may be affected if:
- Your super balance exceeds three million dollars.
- You hold large assets inside super (e.g., property, unlisted investments).
- You recently made a large downsizer contribution.
Understanding Downsizer Contributions
Real-Life Scenario: Alan, The Self-Funded Planner
Alan, 72, is a retired business owner who sold his home and invested in a premium apartment within a retirement community. His self-managed super fund is valued at just over 3.2 million dollars.
From July 2025, Alan will face an additional 15 percent tax on earnings from the 200,000 dollars exceeding the cap. His accountant recommends:
- Reviewing the fund's asset mix to reduce unrealised gains.
- Considering strategic withdrawals.
- Reassessing future contributions from asset sales.
Strategies for Managing the Tax
- Diversify Outside Super: You might choose to hold more investments in your personal name or a family trust, particularly if you or your spouse have a lower marginal tax rate.
- Review SMSF Valuations: Get professional advice to ensure your assets are appropriately and defensibly valued to avoid overpaying the new tax.
- Revisit Estate Planning: Consider whether future contributions should be structured differently, especially if your balance will grow from future home sales or inheritances.
- Use the Cap Increase Wisely: With the Transfer Balance Cap increasing to 2 million dollars, there’s an opportunity to position more of your funds into tax-free pension phase before the new tax applies.
Retirement Properties For Sale
What to Do Now
- Get a super balance snapshot and estimate future earnings.
- Seek tailored advice to make the most of your contribution caps and estate plans.
- Evaluate your downsizing strategy to avoid unintended tax hits.
Caps, limits and tax on super contributions | Australian Taxation Office
Stay Informed with Downsizing.com.au
We’re here to help you make confident financial decisions, whether you’re managing your own super, planning a move, or supporting your family's future.
Disclaimer: This article provides general information only and does not take into account your personal financial situation or needs. You should consider obtaining independent financial advice from a licensed professional before making any decisions based on this content.
