From July 1, earnings on superannuation balances above $3 million will be taxed at 30%, up from the current 15%. This includes both realised and unrealised gains – a controversial feature of the reform that is raising red flags for property investors, especially those using self-managed super funds (SMSFs).
“Earnings on super balances over $3 million will be taxed at 30%, double the current 15% rate,” said Junge Ma (pictured), InvestorKit senior research analyst. “Starting July 2025, this significant change is coming to Australia’s superannuation landscape.”
The proposed tax, known as Division 296, is expected to pass the Senate and take effect as planned.
While this policy may appear to target only the wealthiest Australians, SMSF investors with growing property portfolios could cross the threshold unintentionally. Many hold appreciating residential or commercial property for long-term capital gains.
“This tax change could fundamentally reshape property investment strategies,” Ma said.
The key issue is that unrealised gains – paper profits not yet converted to cash – will be taxed. Investors may face tax bills without selling any property or generating actual income.
“Investors may owe tax just as their properties grow in value, without selling any of them and receiving any actual profit,” Ma said.
Critics argued that taxing unrealised gains is unfair and could lead to liquidity issues for SMSF holders with illiquid assets like property.
As the policy looms, many high-income investors and SMSF trustees are adjusting strategies. These shifts are becoming increasingly common among clients with property-heavy portfolios.
“Investors are starting, or may soon start, reallocating property out of super and into other structures, such as family trusts or company entities,” Ma said.
Other strategies include splitting SMSF balances across multi-member funds, or shifting to more liquid, low-volatility assets that are easier to manage under the new tax regime.
“This could lead to an uptick in strategic SMSF planning where super balances are split or carefully rebalanced to delay the onset of the higher tax tier,” Ma said.
The use of discretionary trusts and corporate vehicles is expected to grow as investors seek greater flexibility outside the super system.
“More investors are seeking advice from accountants and lawyers to assess how assets are held, transferred, or sold,” Ma said.
However, the broader housing market is unlikely to feel any immediate disruption. According to InvestorKit data, only a small percentage of property buyers use SMSFs – and among them, even fewer hold balances close to $3 million.
Mortgage brokers working with SMSF clients should encourage proactive strategy reviews.
While the tax only impacts a small group now, its long-term reach is broader due to compounding returns and the non-indexed $3 million cap.
Recommendations include:
“While the new tax affects a relatively small number of people today, its design reveals a larger shift in the government’s approach to wealth accumulation through superannuation,” Ma said.
This is not a time for panic selling, but rather for strategic realignment. Brokers should position themselves as key partners in helping clients navigate the evolving property-super landscape.
“For property investors, this is a moment to rethink, not retreat,” Ma said.
