The Australian Government has revised its Better Targeted Superannuation Concessions (BTSC) policy in response to stakeholder feedback. These changes aim to adjust superannuation tax concessions for individuals with high balances while maintaining the concessional nature of superannuation tax.
Key updates include:
– A tiered tax structure with thresholds at $3 million and $10 million.
– Indexation of both thresholds.
– A realised earnings approach to calculating tax liability.
– The start date has now been deferred to 1 July 2026.
While Treasury have provided a high-level overview of the proposed tax, in their Better Targeted Superannuation Concessions Fact Sheet, published on 13 October 2025, there are still specifics that are yet to be determined.
How does this compare to what was previously proposed?
Previous proposal | Featured | New proposal |
Additional 15% tax on earnings above $3 million threshold. | Two-tier structure | Additional 15% tax on earnings between $3 million and $10 million. Additional 25% tax on earnings above $10 million threshold. |
Fixed threshold at $3 million. | Indexation of thresholds | $3 million threshold to be indexed in $150,000 increments. $10 million threshold to be indexed in $500,000 increments. |
Calculated using changes in superannuation balances, including unrealised gains. | Realised earnings calculation | Calculated using superannuation fund’s realised earnings. Unrealised gains are excluded. |
Commencement from 1 July 2025 with first assessments issued in the 2026/27 financial year. | Start date shift | Commencement from 1 July 2026 with first assessments issued in the 2027/28 financial year. |
How is the tax intended to be calculated?
PART 1: Start by calculating the Total Superannuation Balance Proportion (TSB1 %) above the $3 million threshold.
((TSB at the end of the year – $3 million) / TSB at the end of the year) x 100.
PART 2: Next, calculate the Total Superannuation Balance Proportion (TSB2 %) above the $10 million threshold, if applicable.
((TSB at the end of the year – $10 million) / TSB at the end of the year) x 100.
PART 3: Now, using the TSB Proportions calculated in parts 1 and 2, calculate the value of the additional Tax Liability.
(15% x Total Earnings x TSB1 %) + (10% x Total Earnings x TSB2 %).
Noting that the method for calculating earnings is yet to be determined, let’s consider how this might apply in 2 different examples:
Formula | Nathan | Claudia |
((TSB at the end of the year – $3 million) / TSB at the end of the year) x 100 = TSB1 % | (($4,500,000 – $3,000,000) / $4,500,000) x 100 =33.33% | (($12,500,000 – $3,000,000) / $12,500,000) x 100 =76% |
((TSB at the end of the year – $10 million) / TSB at the end of the year) x 100 = TSB2 % | (($4,500,000 – $10,000,000) / $4,500,000) x 100 =0% | (($12,500,000 – $10,000,000) / $12,500,000) x 100 =20% |
(15% x Total Earnings x TSB1 %) + (10% x Total Earnings x TSB2 %) = Tax Liability | (15% x $315,000 x 33.33%) + (10% x $315,000 x 0%) = $15,748 | (15% x $875,000 x 76%) + (10% x $875,000 x 20%) = $117,250 |
What to look out for next
Further information is expected to be released publicly by early 2026, following a period of private consultation.
There is still some uncertainty as to whether the revised earnings calculation will capture or somehow exclude the increase in value of investments prior to the commencement date, when those investments are sold after the commencement date.
There will also be additional requirements for superannuation funds in calculating earnings attributable to members who are impacted by this new tax and reporting to the ATO.
We encourage you that the announcement this week does not require any urgent action, however we suggest staying in touch with your financial adviser for further updates.
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