$3 Million Super Tax Set to Hit More Aussies Than Expected, Warns CPA Australia

Small and medium-sized enterprises (SMEs) across Australia are being urged to pay close attention to looming changes in superannuation policy, as new warnings emerge that the federal government’s proposed tax on superannuation balances above $3 million will affect more Australians than many realise.

According to CPA Australia’s Superannuation Lead, Richard Webb, the lack of indexation on the $3 million cap will lead to “bracket creep,” gradually pulling more Australians into the higher tax bracket over time—many of whom are not among the so-called wealthy elite.

“Even an average earner will go on to have more than $3 million in superannuation by the time they retire,” Webb warned. “It’s simply inconceivable to think that a young Australian today will see a proportion of their retirement savings taxed at a rate of 30 per cent.”

Webb argues that the impact of inflation is being overlooked. “The cumulative effect of inflation means that a dollar today has the same purchasing power as approximately $0.34 in 1985,” he said. “This reduction highlights the necessity of preserving the spending power of superannuation savings over one’s working life.”

For SMEs, this could have profound implications—not only for business owners managing their own super balances, but also for attracting and retaining staff, many of whom expect superannuation to provide a secure retirement.

Webb also raised concerns over the proposal to tax unrealised gains, calling it “a fundamental breach of Australian tax principles.” He warned that taxing paper profits could force individuals and businesses to sell investments just to pay tax on hypothetical gains.

“If this precedent is set, where are the limits?” he asked. “Opening this Pandora’s Box could ultimately lead to the imposition of capital gains tax on other assets and investments, even if today’s policymakers insist otherwise.”

For SMEs, this uncertainty could dampen long-term investment decisions, with ripple effects across the broader economy.

What can SMEs do now?

• Stay informed: Monitor government announcements and policy updates around superannuation.
• Seek expert advice: Speak with an accountant or financial adviser to assess how your super strategy may be impacted.
• Review succession and retirement plans: Consider how these changes could affect your business exit strategy and retirement timeline.
• Plan for inflation: Factor in the long-term erosion of purchasing power when planning for retirement.

As the debate over superannuation reform continues, SMEs will need to navigate an increasingly complex landscape—one where the rules today may not hold for tomorrow’s retirees.

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