Tax Alert - Further guidance on proposed additional 15% tax on earnings on super balances over $3 million from 1 July 2025

Lowe Lippmann Chartered Accountants

Further guidance on proposed additional 15% tax on earnings on super balances over $3 million from 1 July 2025


Last week, we released a Tax Alert (click here) after the Government announced proposed changes to impose an additional tax of 15% (the additional tax), increasing the original concessional tax rate from 15% to an effective new 30% rate, on earnings on total superannuation balances (TSB) over $3 million.


This measure is proposed to commence on 1 July 2025 and apply to the 2025-2026 financial year onwards.


This week, the Government released further guidance to help explain how the additional tax would be applied to earnings on TSB over $3 million.


The additional tax only applies to the proportion of earnings corresponding to balances above $3 million, and this means that earnings corresponding to funds below $3 million will continue to be taxed at the original concessional tax rate of 15% or less.

What are earnings?


Earnings are calculated with reference to the difference in TSB at the start and end of the financial year, adjusting for withdrawals (added) and contributions (subtracted).


The calculation of earnings includes all notional (unrealised) gains and losses, similar to the way superannuation funds currently calculate members’ interests. The proposed changes intend to treat defined benefit interests in a similar way, however no details are available at this time. We anticipate further details during the consultation process before these proposed changes become legislation.


Negative earnings can be carried forward and offset against any additional tax liabilities assessed in future years. However, it is important to note that any “negative earnings” can only be carried forward, and they can not be carried back to previous years to refund any additional tax liability paid in previous years.


We anticipate this limitation within relation to the “negative earnings” concept will also be debated during the consultation process.

What is your TSB?


An individual’s TSB includes all of their superannuation interests (across multiple superannuation fund accounts) and is not a separate figure for each interest, which means the $3 million threshold will be applied on a per-individual basis and not on a per-account or per-fund basis. TSB includes both pension and accumulation account balances.


The Australian Taxation Office (ATO) currently uses superannuation fund reporting to calculate the total amount that individuals have in the superannuation system, for example to determine whether individuals are eligible to make non-concessional contributions.

How is the additional 15% tax assessed and how is it paid?


These proposed changes are scheduled to commence on 1 July 2025 for the 2025-2026 income year.


The ATO will issue a notice of additional tax directly to individual members, notifying them of their additional tax liability to pay. Individuals will then have the choice of either paying the tax out-of-pocket or from their superannuation funds. Individuals who hold multiple superannuation funds can elect the fund from which the tax is paid.


This additional tax liability notice will be separate from an individual’s personal income tax, similar to the existing Division 293 tax. This means that any tax offsets or franking credits available to the individual on their notice of assessment (for income tax purposes) cannot be applied to reduce any additional tax liability imposed by the ATO.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Tax Alert - Chalmers backs down on Superannuation reform

October 13, 2025
In response to continuing criticism and significant industry feedback, Treasurer Jim Chalmers has announced substantial revisions to the proposed Division 296 tax. The government has decided not to apply the tax to unrealised capital gains on members superannuation balances above $3 million. The removal of the proposed unrealised capital gains tax is undoubtedly a welcome change. Division 296 was initially set to take effect from 1 July 2025. The revised proposal, effective from 1 July 2026, still imposes an additional tax but now only on realised investment earnings on the portion of a super balance above $3 million at a 30 percent tax rate To recover some of the lost tax revenue, the Treasurer announced a new 40 percent tax rate on earnings for balances exceeding $10 million. It is also anticipated that both tax thresholds will be indexed in line with the Transfer Balance Cap. We will provide more details and guidance on the new proposal as they become available.

Practice Update – October 2025

October 3, 2025
ATO interest charges are no longer tax deductible – What you can do As we explained in our Practice Update for September, general interest charge ( GIC ) and shortfall interest charge ( SIC ) imposed by the ATO is no longer tax-deductible from 1 July 2025. This applies regardless of whether the underlying tax debt relates to past or future income years. With GIC currently at 11.17%, this is now one of the most expensive forms of finance in the market — and unlike in the past, you won’t get a deduction to offset the cost. For many taxpayers, this makes relying on an ATO payment plan a costly strategy. Refinancing ATO debt Businesses can sometimes refinance tax debts with a bank or other lender. Unlike GIC and SIC amounts, interest on these loans might be deductible for tax purposes, provided the borrowing is connected to business activities. While tax debts will sometimes relate to income tax or CGT liabilities, remember that interest could also be deductible where money is borrowed to pay other tax debts relating to a business, such as: GST; PAYG instalments; PAYG withholding for employees; and FBT. However, before taking any action to refinance ATO debt it is important to carefully consider whether you will be able to deduct the interest expenses or not. Individuals If you are an individual with a tax debt, the treatment of interest expenses incurred on a loan used to pay that tax debt really depends on the extent to which the tax debt arose from a business activity: Sole traders: If you are genuinely carrying on a business, interest on borrowings used to pay tax debts from that business is generally deductible. Employees or investors: If your tax debt relates to salary, wages, rental income, dividends, or other investment income, the interest is not deductible. Refinancing may still reduce overall interest costs depending on the interest rate on the new loan, but it won’t generate a tax deduction.

Audit Lowe Down – Costs incurred in acquiring / forming a business

September 9, 2025
Costs incurred in acquiring / forming a business. Further to the recent blog about capitalisation of costs when acquiring an asset, we have received a number of questions in relation to costs incurred in setting up / purchasing a business. Formation costs on establishing a business: These costs would include: Incorporation fees ASIC registration fees Legal fees Business name registration Pre-operating costs Pre-opening costs. The relevant standard for these costs is AASB 138 Intangible Assets and paragraph 69a confirms that these start-up costs are expensed when incurred. There is no identifiable asset controlled by the entity when the costs are incurred as the entity does not exist. Business acquisition costs These costs would include: Legal and accounting fees Due diligence and valuation costs Stamp duty Advisory or brokerage fees Project management costs related to the acquisition Internal costs allocated to the transaction In contrast to the asset acquisition discussed previously, AASB 3 Business Combinations requires all acquisition costs to be expensed as incurred. This means that they are not included as part of the consideration paid and therefore do not affect calculated goodwill.  Entities purchasing businesses should be aware that these costs are not able to be capitalised as they can often be substantial, and purchasers often do not expect the costs to be taken directly to the income statement
More Posts