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It's one of the most common questions Australians approaching retirement are asking right now: what does the new $3 million super tax actually mean for me?

The starting point is perspective. Yes, the rules are changing - but superannuation remains one of the most tax-effective investment structures available in Australia. The conversation shouldn't be about abandoning super; it should be about making smarter, more informed decisions within it.

The new legislation, known as Division 296, introduces an additional 15% tax on earnings attributable to super balances above $3 million. Since the announcement, it has caused some concern among Australians with growing retirement balances - particularly those worried they may be penalised for building wealth inside the super system.

The reality, however, is more nuanced than the headlines suggest. For many people, especially couples, there are still significant opportunities to reduce exposure and structure their wealth more effectively. Under these new rules, good planning becomes more important than ever.

What is the $3 million super tax?

Division 296 applies an additional 15% tax to earnings linked to the portion of an individual's super balance above $3 million.

Critically, the tax applies per individual - not per household - which creates meaningful planning opportunities for couples.

To put it in context, here's how super is currently taxed:

• Earnings on super in accumulation phase are generally taxed at 15%

• Pension phase balances up to the transfer balance cap (currently $2 million per person) are typically tax-free for those over 60 and retired

• Under Division 296, earnings attributable to balances above $3 million attract an additional 15% tax

• For extremely high balances above $10 million, a further 10% may apply, bringing the total effective tax rate to around 40%

While these figures sound significant on paper, context is important. Even with Division 296 in play, super can still be substantially more tax-effective than investing personally or through many other structures.

Why many Australians are overestimating the impact

When the policy was first announced, many people immediately assumed they should pull money out of super. In most cases, that's not the right response. The phrase "new super tax" tends to create an assumption that the benefits of super disappear - but they don't.

Consider a common example: a couple with $6 million in combined super, split evenly between them.

Because Division 296 applies individually, neither person exceeds the $3 million threshold - meaning the additional tax may not apply at all.

At the same time:

• Each person may still hold up to $2 million in tax-free pension phase

• The remaining balances continue to benefit from concessional tax rates inside super

• The overall effective tax rate across the combined retirement savings can remain remarkably low

Structure matters enormously here. Two people with $3 million each can end up in a far stronger position than one person holding the entire balance.

The strategies becoming increasingly important

As the new rules take effect, the focus is shifting from accumulation alone to structuring wealth more intentionally.

Equalising super balances between spouses

One of the most effective strategies for many couples is balancing super between partners wherever possible.

A couple with balances of $5 million and $1 million will likely face a very different long-term outcome than a couple with $3 million each.

Depending on age, contribution history and eligibility, strategies may include:

• Spousal contributions

• Contribution splitting

• Recontribution strategies

• Pension withdrawals and re-contributions

For some couples, taking action years before balances approach the threshold can create substantially better outcomes later on. The earlier the planning starts, the more flexibility is usually available.

Recontribution strategies and intergenerational planning

Recontribution strategies are also attracting renewed attention - not only because of Division 296, but because of the long-term tax implications for adult children who may eventually inherit super balances.

These strategies involve withdrawing and recontributing super as non-concessional contributions, potentially reducing the taxable component of super over time.

For many families, this is about more than reducing tax today - it's also about reducing unnecessary tax for the next generation.

In some situations, moving funds toward the lower-balance spouse can deliver dual benefits:

• Reducing Division 296 exposure

• Improving the eventual tax position of beneficiaries

As always, eligibility rules, contribution caps and timing considerations are critical, which is why personalised advice is essential.

A practical example

Consider a couple where one partner had spent decades in a high-income industry and built a substantial super balance, while the other had taken significant time away from the workforce to raise children.

The result was a major imbalance between their super accounts - creating potential exposure to Division 296, alongside future tax implications for their adult children.

By implementing a combination of:

• Contribution splitting

• Spousal contributions

• A targeted recontribution strategy

…the couple were able to significantly improve their overall position. Beyond the tax savings, the real benefit was clarity. They felt more confident about their retirement, more comfortable about their family's future, and more in control of what came next.

What should Australians do now?

The key message is simple: don't wait until the threshold is already a problem.

If your super balance is already above $1.5 million - or trending in that direction - now is the time to start understanding your options.

Importantly, many effective strategies cannot be implemented overnight. Contribution caps, timing rules and age-based eligibility requirements mean proactive planning generally creates better outcomes than reactive decisions.

In many cases, the solutions are more straightforward than people expect. Sometimes relatively small adjustments to how contributions are structured today can make a significant long-term difference.

Ultimately, Division 296 reinforces something good financial advisers have always known: strategy matters.

This isn't just about a super balance. It's about understanding the full picture - your income, your retirement goals, your family, and what you want your wealth to achieve over time.

To explore what strategies may be available in your specific situation, speak with your financial adviser about how the changes could affect you and what proactive steps may be appropriate.

Book a call with Kate Borch here