The $3 million super tax proposal, SMSFs and the end of 2025

If your self-managed superannuation fund is carrying a balance near or above $3 million, there is one question worth settling before the new year: does the extra tax on large balances apply to you yet. As at mid-December 2025, it does not. It is not law, and there is no bill before Parliament. What exists is a revised proposal, announced on 13 October 2025, intended to start on 1 July 2026. The design has changed in the two ways people objected to most, and the mechanism is worth understanding before the headlines are.

Where the measure actually stood at the end of 2025

The first attempt was the Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023. The Parliament's own record for that bill shows it was introduced on 30 November 2023, agreed to by the House of Representatives on 9 October 2024, and introduced into the Senate on 10 October 2024. The Senate moved the second reading, and the measure never passed. The Parliament's bill homepage records the outcome in three words: lapsed at end of Parliament, on 21 July 2025.

That is what lapsing means in practice. The bill died with the Parliament considering it, and nothing carried across to the next one. Whatever the Government wanted to do afterwards had to begin again.

On 13 October 2025 it began again. The Treasurer announced a revised design and said the Government "will introduce legislation to implement these changes as soon as possible in 2026", according to the Treasurer's media release on the super reforms. At the time of writing that legislation had not been introduced.

So the position sits in three parts. The original bill is gone. The replacement has been announced but is not before Parliament. And the proposed start date is 1 July 2026, which is still on the far side of a financial year end.

What the October 2025 announcement proposed

The Treasurer's release describes the revised measure in these terms:

• The total concessional tax rate on earnings on balances between $3 million and $10 million will be 30 per cent. That is the total rate, not an amount added to something else.
• The total concessional tax rate on earnings on balances over $10 million will be 40 per cent. The $10 million tier is new; the lapsed design had a single threshold.
• Both thresholds will be indexed "to maintain relativity with the Transfer Balance Cap".
• The rates would apply only to future realised earnings.
• The start date moves back by one year, to allow consultation on final details and preparation of the legislation.

Treasury also said the measure would continue to affect "less than 0.5 per cent of all Australians in 2026-27".

What the announcement did not do is settle the detail. It said further consultation would follow to settle implementation. So at the end of 2025 several questions were genuinely open: how realised earnings would be measured inside a fund, how the tax would be assessed and paid, and what transitional rules would apply to balances built up before the start date.

Why unrealised gains were the part people argued about

To see why the change matters, you need the original mechanism, and it helps to be clear that this is the design that lapsed rather than the one now proposed.

Treasury's explanatory materials for the 2023 exposure draft set out how it would have worked. Earnings were the difference between a member's total super balance at the start and at the end of the income year, adjusted for contributions and withdrawals. Tax of 15 per cent applied to the percentage of those earnings equal to the percentage of the closing balance sitting above $3 million. The tax was levied directly on the individual, not on the fund.

Read that formula again and notice what is missing. It never asks whether anything was sold. A balance that rises because a property was revalued produces the same measured earnings as a balance that rises because shares were sold at a profit.

A worked example of the design that lapsed

Take a fund with one member. Their total super balance is $3.2 million on 30 June, and $3.6 million a year later. No contributions, no withdrawals.

• Earnings: $3.6 million less $3.2 million, or $400,000.
• Percentage above the threshold: ($3.6 million less $3 million) divided by $3.6 million, or 16.67 per cent.
• Taxable superannuation earnings: $66,680.
• Tax at 15 per cent: $10,002.

If that $400,000 was a revaluation of a commercial suite the fund still owns, the $10,002 was payable in cash all the same. That is the objection in a single number, and it is the objection the October 2025 announcement responds to by moving to realised earnings.

The second contested feature was quieter. The $3 million figure was a fixed number in the original design, so its real value would fall every year that prices rose. The October announcement adds indexation to a threshold that had been fixed.

Why SMSFs holding property were the focus of the concern

The concern was never really about the rate. It was about which funds would have to find the cash.

A large industry or retail fund holding listed assets can sell a slice of a portfolio in a morning. A self-managed fund whose main asset is a commercial suite in Robina or a development site on the Gold Coast cannot. Critics pointed to funds whose assets cannot readily be converted to cash, where a tax measured on a balance movement arrives without a matching movement in the bank account.

Funds holding property under a limited recourse borrowing arrangement carry that a step further, because loan repayments already have a first claim on rent. The same is true of funds with lumpy, infrequent income: unlisted trusts, private company shares, farmland.

Moving to realised earnings changes the shape of that problem rather than removing it. A realised gain still produces a liability in the year the asset is sold, and the timing of sales inside a fund is not always something the trustees control. Until the drafting is public, that is as far as the analysis honestly goes.

The SMSF year-end work has not changed

None of the above alters what a fund is actually assessed on now. If your fund's SMSF administration and compliance is in order, a change in the law is a question of numbers rather than a scramble.

Valuations at market value

The ATO's guide to valuing SMSF assets states that trustees are required to value all fund assets at market value when preparing the fund's financial accounts and statements. For that purpose you are not required to obtain a valuation from a qualified independent valuer, but you must keep evidence of how the valuation was determined and provide it to the auditor. The ATO recommends an independent valuer where the asset is complex or difficult to value, which is where a single tenanted property usually lands.

Market values at 30 June also drive each member's total super balance, which is the figure every large-balance proposal has been built around.

The annual audit

The ATO's guidance on appointing your SMSF auditor requires an approved auditor to be appointed each year, no later than 45 days before the SMSF annual return is due. The auditor must be registered with ASIC and independent of the fund. Before the audit starts you must give them a statement of financial position and an operating statement, and any further information they ask for within 14 days.

Minimum pension payments

Where a member draws an account-based pension, the ATO's income stream rules for SMSFs require a minimum amount to be paid each year. It is the member's pension account balance at 1 July multiplied by an age-based percentage factor: 4 per cent under 65, 5 per cent from 65 to 74, 6 per cent from 75 to 79, 7 per cent from 80 to 84, and 9 per cent from 85 to 89.

A member aged 68 with $1.6 million in a pension account at 1 July 2025 therefore has $80,000 to be paid by 30 June 2026. Meeting the minimum standards is what allows the fund to claim exempt current pension income on those assets, so the payment is worth checking well before June rather than in the last fortnight.

Records

Financial records must be kept for at least five years, and trustee records for at least ten. The ten-year set includes the fund's investment strategy and the record of reviewing it, changes of trustees and members, and signed trustee declarations. An investment strategy that has not been reviewed since the fund bought its property is the item auditors raise most often.

Where that leaves the coming year

Two things were true at once at the end of 2025. A measure that would change the tax on large balances had been announced but not legislated, with a start date more than six months away and its detail unsettled. And the ordinary obligations of running a fund, none of which depended on that measure, still had a 30 June deadline attached.

The gap between an announcement and an Act is where most of the noise lives. If you want the numbers for your own fund set out plainly, our taxation and compliance team works through them with SMSF trustees every year.