Super tax changes and SMSFs

For the most part, our advice to clients has been not to do anything, and certainly not to panic, especially while the legislation was still in draft.

Now, however, it has been finalised and will start in the 2026/27 financial year. It means that those with super balances over $3 million as at 30 June 2027 will have to pay an additional 15 per cent (effectively 30 per cent) on the portion of their balance that is between $3 million and $10 million, and a further 10 per cent (effectively 40 per cent) on the portion that is over $10 million.

In most cases, the additional tax will likely apply to individuals with SMSFs rather than public offer superannuation funds, as SMSFs are the most likely to be used by those with high super balances.

In its final format, we believe the legislation is much more palatable, and we have found most clients are generally accepting of it, and what it means for their SMSF.

Those impacted will pay an additional tax however, in most cases it should not be overly detrimental. For our clients, I still believe in most instances it is best to leave their money in super, as the tax rate is potentially still lower than they would pay outside super.

The only real consideration to withdraw monies of out of superannuation would be if clients have very little or no taxable income in their personal names, however thorough consideration needs to given in these instances as to whether or not this is a sensible Strategy.

Capital gains considerations

One particularly welcome change to the original proposal is that the tax will only be calculated on income, and not assets. Initially the government had planned to tax unrealised capital gains but this aspect of the proposal has fortunately not made it into the final legislation.

Instead, SMSFs can opt in to reset the cost base of all their assets to market value as at 30 June 2026, to avoid taxing pre-existing gains which is one of the underlying benefit of the new tax. It’s important to keep in mind that they either need to opt in for all assets to be reset, or none – they can’t select certain assets and leave others out. Generally speaking, SMSFs would need to be in a gain position for opting in to be most beneficial. If the SMSF is in a net loss position, then opting out is probably a better approach. This is one area that SMSF trustees will need to make an educated decision with their accountant or adviser fairly quickly once their 2026 financials are completed.

However, with the government under pressure to reduce the deficit, and a general trend of focussing on structures such as SMSFs and family trusts, it would be sensible to be prepared for further changes in this area.

Mitchell Markwick is a Partner at HLB Mann Judd Wollongong