When it comes to superannuation, most of us are just hoping we’ll have enough to enjoy a comfortable retirement—maybe a few holidays, a nice meal out, and the ability to spoil the grandkids. But for a select few, the numbers are eye-watering, and the latest changes to super tax laws have sparked a heated debate that’s got the whole country talking.

Recently, a wealthy retiree—let’s call him 'Mr. $8 Million'—set the internet alight after asking a financial columnist how he could avoid paying extra tax on his enormous superannuation balance. With a self-managed super fund (SMSF) worth a staggering $8 million, shared with his wife, he wanted to know if there was a way to sidestep the Albanese government’s proposed super tax hike.

What’s the new super tax all about?

Outrage was sparked after a wealthy retiree with an $8 million super fund publicly asked how to avoid the proposed super tax targeting balances over $3 million. Credit: Nattakorn / iStock

Under Labour’s plan, Australians with more than $3 million in super will pay an additional 15 per cent tax on the portion of their earnings above that threshold. The government says this will only affect about 80,000 people—roughly 0.5 per cent of the population. For context, the average Aussie man has a super balance of $182,000, and the average woman has $146,000. So, for most of us, this is a world away from our reality.

But that hasn’t stopped the country’s wealthiest from seeking advice on how to protect their nest eggs. Mr. $8 Million, in his mid-to-late 80s, explained that he and his wife split their SMSF 58 per cent to him and 42 per cent to her. They plan to draw the minimum pension (9 per cent) in the 2025/26 financial year, which comes to about $333,000.

His burning question: If they sold enough assets to bring their balance below $6 million by June 30 next year, would they dodge the new tax? The answer, according to financial expert Noel Whittaker, is 'it depends.' The tax is calculated per member, so if one person’s account is still above $3 million, that account is liable for the extra tax.

To put it in perspective, if Mr. $8 Million reduced his personal super to $3 million and earned $400,000 in the next financial year, the extra tax would cost him just $7,056. Not exactly a drop in the ocean, but certainly not a life-ruining sum for someone with millions in the bank.

Public reaction: Sympathy in short supply

Unsurprisingly, the public response was less than sympathetic. Many readers pointed out that superannuation was never intended as a tax-free inheritance vehicle for the ultra-wealthy. Comments ranged from '$8 million and they’re whingeing about paying just a little extra tax' to 'Super is not an inheritance vehicle to ensure wealth is passed down the generations whilst paying the least amount of tax.'

It’s a sentiment that resonates with many everyday Australians, especially when you consider that 97 per cent of us will never see a $3 million super balance, let alone $8 million.

But is there more to the story?

While most agree that those with millions in super can afford to pay a bit more, there are some concerns about the details of the new tax. One key issue is that the $3 million threshold isn’t indexed to inflation. That means, over time, more and more Australians could find themselves caught by the tax, even if they’re not what we’d consider 'super rich' today.

Economists estimate that by 2040, $3 million could be worth just $2 million in today’s money. AMP economist Diana Mousina has warned that even average earners could eventually be affected if the threshold isn’t adjusted. She points out that a 22-year-old starting work today and earning average wages for life could eventually hit the $3 million mark.

What does this mean for you?

For now, the vast majority of Australians won’t be affected by the new tax. But it’s a reminder to keep an eye on changes to superannuation rules, especially as governments look for ways to balance the budget and fund essential services.

If you’re lucky enough to have a super balance approaching the $3 million mark (or you’re just curious about how the rules work), it’s worth speaking to a financial adviser. And if you’re like most of us, it’s still a good idea to review your super regularly, make sure your investments are working for you, and check that your fund’s fees aren’t eating away at your hard-earned savings.

The bigger picture: Superannuation and fairness

At its heart, the super tax debate is about fairness. Should those with the most pay a little more to help fund services for everyone? Or is it unfair to change the rules for people who’ve worked hard and saved diligently? There are no easy answers, but it’s a conversation worth having—especially as Australia’s population ages and the cost of healthcare and pensions continues to rise.

Key Takeaways

• A wealthy retiree with an $8 million self-managed super fund has sparked outrage after publicly asking how to avoid Labour’s proposed super tax hike, which only affects balances above $3 million.
• Labour’s plan would see Australians with more than $3 million in super paying an extra 15 per cent tax on earnings above that threshold, impacting just 0.5 per cent of the population — about 80,000 people.
• Public reaction to the retiree’s query has been overwhelmingly negative, with many social media users criticising the rich for complaining about paying a fairer share of tax.
• Some economists and the Greens have raised concerns that the $3 million cap isn’t indexed to inflation, meaning more Australians could be caught by the tax in the future as the real value of the threshold declines.

What do you think about the new super tax? Is it fair for the wealthiest to pay more, or are you worried about the threshold not keeping up with inflation? Have you had to navigate changes to your own super, or do you have tips for making the most of your retirement savings? Share your thoughts in the comments below.

Read more: ‘It’s not cause for alarm’: Financial expert leaves advice ahead of superannuation changes

 

[darrellh]

You often find that the rich and big business find loopholes to avoid paying their fair share of tax through life so for those it is about time they paid. Everyday people don't have that advantage and I don't see why the rich should either. The tax department has been going after these people for years but not with much success I am given to understand. Creative accounting is not fair and equal and there should be a way to make sure this does not happen going forward.

 

[bikeboy]

This gentleman should be applauded for his stellar discipline in making a comfortable position for his and his wife's retirement. There are several ways to view this situation. For this person to accumulate $8 million, I can suggest that he was a high-income earner. Several years ago, before the Labor Party changed the rules, you could bring forward up to $500,000 over three years and top up your superannuation. If he was a high-income earner, he would have paid 30% tax, not 15% when it went into his superannuation account. He also would have paid double the Medicare Levy. Hardly fair in my opinion. Then, what about the pension he and his wife have saved the government paying them over the life of their retirement. We can assume he and his wife retired at 65, for this exercise. The current couple's full Age Pension is $1585/fortnight or $41,210. If this couple lives to 85, so 20 years of retirement, they will have saved the government $824,200.

It's their money, they have paid double the tax at the front end of their accumulation phase, and they aren't a burden on the government nor the community; they would receive little to no government benefits. AND, more significantly, look at what the government has saved in not having to pay them an Aged Pension. I'll point out this $ amount again, seeing as some people are getting bent out of shape on the value of the couple's superannuation balance, $824,200.

The government should stop means testing people to receive the Aged Pension; every person who paid income tax over their work life should get the Age Pension, they deserve it, irrespective of their accumulated wealth. Let's face it, half may go back to the government in tax when it's added to someone's income.

It would be a very interesting exercise to name and shame how much tax people pay and how much they take from the government in benefits.

 

[Giannidifirenze]

You often find that the rich and big business find loopholes to avoid paying their fair share of tax through life so for those it is about time they paid. Everyday people don't have that advantage and I don't see why the rich should either. The tax department has been going after these people for years but not with much success I am given to understand. Creative accounting is not fair and equal and there should be a way to make sure this does not happen going forward.

Somehow I don’t think the lower threshold of $3M is static. Once implemented that figure will eventually include all Super.
At the other end of the scale, once we become a ‘cashless’ society all transactions become transparent and taxable…’cash-in-hand’ payments for work will not exist. Another tax windfall for the government.

 

[novezar]

Hi Giannidifirenze,

Hi agree with you sentiments. i.e, especially that when drafted & in place, the tax on super accounts of $3M + will certainly filter down the line to affect may of us, the "Unfortunates" of the population. Especially to those trying for their betterment,&, for their offspring who could well be in need of financial assistance at the parents eventual demise.

This is certainly the case in my life.

As we all know, when the government changes the goal posts, its for the betterment for the government, &, nobody else.

 

[Bill MacL]

Why do the politicians ALWAYS exclude themselves from these revenue raising exercises, they are the worst people in the country at doing their job, but the best at screwing every possible cent they can out of the public purse for themselves. (lurks and perks) They give themselves pay increases every year in the quietest way possible yet scream as loud as possible when trying to take our money.

 

[darrellh]

Why do the politicians ALWAYS exclude themselves from these revenue raising exercises, they are the worst people in the country at doing their job, but the best at screwing every possible cent they can out of the public purse for themselves. (lurks and perks) They give themselves pay increases every year in the quietest way possible yet scream as loud as possible when trying to take our money.

They don't actually give themselves a pay rise, I believe it is an independent body but that is besides the point because those who already earn more certainly keep getting far more yet those same people don't think pensioners who have already paud all their taxes all their lives and did not have the benefit of the super guarantee levy from when they first started work cannot be in the same position they find themselves in. And of course they have the added lifetime perks and extra super etc that no one else is entitled to. You do have to wonder and all compliments of the tax payer.

 

[Squizzy1]

Why do the politicians ALWAYS exclude themselves from these revenue raising exercises, they are the worst people in the country at doing their job, but the best at screwing every possible cent they can out of the public purse for themselves. (lurks and perks) They give themselves pay increases every year in the quietest way possible yet scream as loud as possible when trying to take our money.

They are not excluded, even those few from b4 2004 eventually pay.

 

[Squizzy1]

Hi Giannidifirenze,

Hi agree with you sentiments. i.e, especially that when drafted & in place, the tax on super accounts of $3M + will certainly filter down the line to affect may of us, the "Unfortunates" of the population. Especially to those trying for their betterment,&, for their offspring who could well be in need of financial assistance at the parents eventual demise.

This is certainly the case in my life.

As we all know, when the government changes the goal posts, its for the betterment for the government, &, nobody else.

How do u know what the rules will be in 40yrs time, that is a copout. This change is not just for the betterment of Govt coffers, but most taxpayers too.

 

[Squizzy1]

This gentleman should be applauded for his stellar discipline in making a comfortable position for his and his wife's retirement. There are several ways to view this situation. For this person to accumulate $8 million, I can suggest that he was a high-income earner. Several years ago, before the Labor Party changed the rules, you could bring forward up to $500,000 over three years and top up your superannuation. If he was a high-income earner, he would have paid 30% tax, not 15% when it went into his superannuation account. He also would have paid double the Medicare Levy. Hardly fair in my opinion. Then, what about the pension he and his wife have saved the government paying them over the life of their retirement. We can assume he and his wife retired at 65, for this exercise. The current couple's full Age Pension is $1585/fortnight or $41,210. If this couple lives to 85, so 20 years of retirement, they will have saved the government $824,200.

It's their money, they have paid double the tax at the front end of their accumulation phase, and they aren't a burden on the government nor the community; they would receive little to no government benefits. AND, more significantly, look at what the government has saved in not having to pay them an Aged Pension. I'll point out this $ amount again, seeing as some people are getting bent out of shape on the value of the couple's superannuation balance, $824,200.

The government should stop means testing people to receive the Aged Pension; every person who paid income tax over their work life should get the Age Pension, they deserve it, irrespective of their accumulated wealth. Let's face it, half may go back to the government in tax when it's added to someone's income.

It would be a very interesting exercise to name and shame how much tax people pay and how much they take from the government in benefits.

Ur suggestion that the battlers should continue to support the wealthy with benefits is misguided imo. This is already in mid to late 80s and this change to super was first proposed by the Turnbull Govt, and the cap was $500k, they never wanted super at all except for themselves.

 

[gordon1940]

This gentleman should be applauded for his stellar discipline in making a comfortable position for his and his wife's retirement. There are several ways to view this situation. For this person to accumulate $8 million, I can suggest that he was a high-income earner. Several years ago, before the Labor Party changed the rules, you could bring forward up to $500,000 over three years and top up your superannuation. If he was a high-income earner, he would have paid 30% tax, not 15% when it went into his superannuation account. He also would have paid double the Medicare Levy. Hardly fair in my opinion. Then, what about the pension he and his wife have saved the government paying them over the life of their retirement. We can assume he and his wife retired at 65, for this exercise. The current couple's full Age Pension is $1585/fortnight or $41,210. If this couple lives to 85, so 20 years of retirement, they will have saved the government $824,200.

It's their money, they have paid double the tax at the front end of their accumulation phase, and they aren't a burden on the government nor the community; they would receive little to no government benefits. AND, more significantly, look at what the government has saved in not having to pay them an Aged Pension. I'll point out this $ amount again, seeing as some people are getting bent out of shape on the value of the couple's superannuation balance, $824,200.

The government should stop means testing people to receive the Aged Pension; every person who paid income tax over their work life should get the Age Pension, they deserve it, irrespective of their accumulated wealth. Let's face it, half may go back to the government in tax when it's added to someone's income.

It would be a very interesting exercise to name and shame how much tax people pay and how much they take from the government in benefits.

How do you fund the Age Pension for "Everyone" ???

 

[Cheezil]

What also stinks is that if you work you don't even get a choice whether or not you want to pay into super so the govt are winning big time on this one! Even worse that it will eventually affect everyone in years to come!
Another form of controlling the population !
Politicians & their cronie mates will be the only wealthy ones in society eventually