Exciting news for Australian workers and retirees — a major reform and overhaul of the superannuation system has been proposed, and it’s set to shake things up.
In 2024, the Actuaries Institute proposed a bold overhaul of the system, with changes that could save up to $1 billion in operational costs every year. Its plan centred on a flat 10 per cent tax rate for superannuation — a simpler model that would mean less tax while you’re working (down from the current 15 per cent), but a small 10 per cent tax in retirement, instead of the current tax-free setup.
The Institute also suggested new rules to close loopholes that let retirees withdraw large sums of super while still relying on the aged pension. Its plan would introduce withdrawal thresholds of $250,000 and $150,000 a year, alongside pension adjustments to support those affected — ensuring super is used for what it’s meant for: a comfortable, dignified retirement.
It also called for fairer rules around bequests, raising the tax-free threshold age from 60 to 67, and for scrapping the complex tangle of “concessional” and “non-concessional” contribution rules that confuse so many Australians.
But while those sweeping changes remain proposals, the federal government is now moving ahead with its own reworked super tax reform — a more targeted measure aimed at the nation’s wealthiest account holders.
Under Treasurer Jim Chalmers’ updated plan, super balances over $3 million will attract a 30 per cent tax rate on earnings (up from 15 per cent), and a new $10 million threshold will be introduced, with balances above that taxed at 40 per cent. Importantly, those thresholds will now be indexed to inflation, preventing more Australians from being pulled into higher tax brackets over time.
In a win for fairness, the government has also scrapped plans to tax unrealised capital gains — meaning you’ll only pay tax on profits you’ve actually made, not just on paper increases.
At the other end of the income scale, there’s good news for lower earners: the tax offset for low-income workers will rise from $310 to $810, benefiting those earning up to $45,000 a year. Over a lifetime, that could add around $15,000 extra to their super at retirement.
The government’s revised plan is expected to raise slightly less revenue than the original version but is designed to be fairer and more likely to pass through Parliament. It’s due to begin in July next year.
