With proposed changes on the horizon, including an extra tax on large super balances (Division 296), many Australians are feeling the pressure to act fast. Some are even pulling money out of super to avoid future tax.
But is that the best move? In many cases, rushing could do more harm than good.
What’s Changing?
The government has proposed an additional 15% tax on a portion of earnings for individuals with over $3 million in super. This will apply regardless of whether you’re in pension or accumulation phase, and even to unrealised gains. The tax will be assessed at the member level, with the first calculations set for 30 June 2026.
It’s not law yet, but with bipartisan awareness and Treasury guidance already in circulation, it’s widely expected to proceed.
Why It Pays to Pause
If your balance is over (or approaching) the $3 million threshold, it’s natural to consider early withdrawals. However, here’s why we encourage caution:
- You may end up paying more personal tax. Outside super, investment income can be taxed at up to 47%, compared to 15% (or 0% in pension phase) within super.
- You could trigger capital gains tax (CGT). Selling assets to make a withdrawal may crystalise gains unnecessarily.
- You might disrupt other planning strategies. Super plays a major role in estate plans, income smoothing, and wealth transfers.
In short: trying to save tax today might create a larger, more permanent tax problem tomorrow.
Super Is Still a Strong Structure
Despite changes, super remains a highly efficient vehicle for long-term wealth.
Consider this:
- Most earnings inside super are concessionally taxed.
- For retirees, pension balances often generate tax-free income.
- For estate planning, super can protect and direct wealth more effectively than other ownership structures.
Yes, the rules may be tightening at the top, but that doesn’t mean the structure no longer works. It simply means you need to be more strategic about how and when you use it.
Timing Is Everything
With almost a full year before the rules are enacted, you have time to assess:
- What portion of your balance might be subject to the new tax?
- Is a gradual rebalancing strategy more appropriate than a lump sum withdrawal?
- Could reallocating between spouses, entities, or other super accounts create a better outcome?
We’re already seeing examples where pulling the trigger too early has led to unnecessary tax, lost flexibility, or future regret.
The Right Approach is Personal
Everyone’s situation is different. The size of your super balance is just one piece of a bigger picture that includes:
- Your age and timeline to retirement
- The tax treatment of assets inside vs. outside super
- Future income needs, beneficiaries, and estate planning structures
- Investment strategy and ownership of assets
The best outcomes come from tailored advice, not generalised assumptions.
Next Steps
This is a critical time to plan, but not to panic.
If your balance is approaching or over the $3 million mark, the smartest move isn’t necessarily to withdraw—it’s to seek clarity first.
We’re already helping clients:
- Run the numbers across different scenarios
- Balance tax efficiency with lifestyle goals
- Integrate super decisions into broader financial plans
Want to know what’s best for your situation?
Reach out to our team to explore your options, before committing to action that may not serve you in the long run. Contact us at team@tagfinancial.com.au.
Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686). Copyright 2025. Please do not reproduce without the expressed written consent of the author.