Why the $3 Million Super Tax Isn’t Just for the Wealthy: What SMEs Need to Know

A controversial superannuation tax reform, aimed at Australians with balances over $3 million, is quietly sparking alarm across the business community — and not just among the ultra-wealthy.

According to CPA Australia, the federal government’s plan to apply an additional 15% tax on super balances above $3 million is likely to affect far more people than currently acknowledged, including average earners and business owners planning for a long-term retirement.

“Even an average earner will go on to have more than $3 million in superannuation by the time they retire,” says Richard Webb, CPA Australia’s Superannuation Lead. “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.”

Why SMEs Should Pay Attention

Many small and medium enterprise (SME) owners rely heavily on their superannuation as a retirement plan, often reinvesting in their businesses throughout their working lives. The current proposal not only targets wealthier Australians now but may eventually erode retirement security for many self-employed Australians who depend on compound growth.

Webb also warns that the lack of indexation on the $3 million cap is particularly problematic:

“The cumulative effect of inflation means that a dollar today has the same purchasing power as approximately $0.34 in 1985. Bracket creep is already having a silent eroding effect on personal finances.”

In essence, as inflation rises and super balances grow, more Australians will be captured by this threshold — even if they were never the intended target.

Taxing Unrealised Gains: A Troubling Precedent

CPA Australia also strongly opposes the taxation of unrealised capital gains, calling it a “fundamental breach” of core tax principles. In other words, the proposed approach means taxing investment profits before they’ve been sold or realised — a concept foreign to most business owners.

“Taxing people on the paper profits they haven’t yet accessed… is not only inequitable but also administratively burdensome,” Webb states. “If this precedent is set, where are the limits?”

The Bigger Picture: Eroding Trust in Retirement Planning

Webb argues this measure appears more like budget repair than sound retirement policy and risks undermining confidence in the super system — especially among younger Australians.

“Maintaining the trust and confidence of younger Australians will become harder as the benefits of today’s superannuation system are whittled away for future generations.”

What Comes Next?

While this legislation is framed as a tax on the wealthy, the long-term implications could ripple across Australia’s SME sector — particularly for those depending on a super-backed retirement. With trust in long-term financial planning already under pressure, small business owners are encouraged to seek expert advice and stay engaged in the policy debate.

The post Why the $3 Million Super Tax Isn’t Just for the Wealthy: What SMEs Need to Know appeared first on Small Business Connections.