The $3M Super Tax

What It Means for Property Investors and How Smart Investors Are Responding.

From 2025, high net-worth investors will face a 30% tax on super balances exceeding $3 million. But what does this really mean for property investors, especially those using SMSFs or planning for retirement? Here's how this change could impact your portfolio, and how savvy investors are already adapting.

Jim Doriean — Gro Buyers Agency

Founder, Director

May 26, 2025

What's Changing and Why It Matters

From 1 July 2025, earnings on the portion of a super balance above $3 million will be taxed at 30%, up from the current 15%. While it's pitched as a tax on the ultra-wealthy, its implications go much further.

Why this isn't just a high-income issue?

The $3M cap isn’t indexed, meaning more investors will be caught by it over time due to inflation and compounding returns.
The ATO will tax both realised and unrealised gains, creating uncertainty in years where asset values rise but aren't sold—particularly relevant for property.
The tax could disincentivise long-term superannuation growth, especially in SMSFs holding illiquid assets like real estate.

“It’s the first time in our history that you’ll be taxed on money you haven’t made yet.”

— Noel Whittaker

Watch: What the $3M Super Tax Means for SMSFs and Property Investors.

Duration: 5:47 | Published: 2 May 2023

This video features financial expert Noel Whittaker explaining the key concerns around the $3 million superannuation cap, including the impact of taxing unrealised gains, the lack of indexation, and how SMSFs with property may be especially affected.

How Smart Investors Are Thinking About It

Forward-thinking investors are making structural and behavioural changes in response to the looming tax.

1. Portfolio Diversification Beyond Super

Investors are rebalancing out of super and reallocating wealth into family trusts, companies, and direct investment structures. This avoids the punitive tax while maintaining control and tax-effective income distribution.

2. Restructuring SMSFs

Some are selling down illiquid assets (like residential property) in SMSFs to improve liquidity. Others are shifting towards multi-member SMSFs (e.g. adding adult children) to spread balances and remain under the threshold.

3. Targeting Growth Assets Outside Super

High-growth regions and cash-flow positive commercial assets are seeing more demand from personal structures rather than SMSFs. This shift is shaping where and how buyers compete, particularly in off-market deals.

4. Estate Planning Adjustments

Super has long been a tax-friendly intergenerational wealth tool—but the new rules may cause some to rethink their estate strategies, favouring more flexible structures.

What Does This Mean for the Property Market?

While the broader market may not feel immediate effects, investor behaviour will change:

We may see short-term SMSF divestments of residential property as investors liquidate to reposition.
Commercial assets with higher yields may become more attractive outside of super.
Increased competition for properties bought through trusts or companies could drive price growth in high-performing regional areas.

Okay so now what?

Here’s how investors are proactively responding:

Actions to take

Understand Your Super Growth Trajectory

It’s worth modelling how your super balance may grow over time. Tools and advisors can help you estimate whether you might exceed the $3 million cap in the years ahead.

Know Your SMSF Liquidity Risks

Property inside SMSFs can be illiquid. Some investors are reviewing whether they have the flexibility to meet unexpected costs—especially if taxes apply to unrealised gains.

Learn About Trust Structures

Structures like discretionary or unit trusts are used by some investors outside of super to manage flexibility, tax, or succession. You may want to learn more and seek professional guidance.

Explore Multi-Member SMSFs

Some SMSFs include multiple family members to share the balance and access greater flexibility. It’s something to consider discussing with your adviser.

Speak to a Licensed Professional

Whether you're buying property inside or outside super, it's worth speaking to a financial adviser or tax professional about how new rules may impact your strategy.

Speak to a Trusted Advisor

Final Word: It’s Not Just a Tax, It’s a Signal

This isn’t a one-off rule—it’s a broader trend of tightening super concessions. The smartest investors see this as a chance to rethink strategy, not just tweak tactics. If you're building a portfolio for generational wealth, you can't afford to ignore how the game is changing.

Jim Doriean
Gro Buyers Agency

Founder, Director

May 26, 2025

STILL NOT SURE?

Frequently Asked Questions

About the $3 Million Super Tax and What It Means for Property Investors

Has the $3 million super tax been implemented yet?

Not yet. As of May 2025, the legislation (Division 296) has passed the House of Representatives but still needs Senate approval. The government aims to introduce it from 1 July 2025, with the first assessments based on your super balance as of 30 June 2026. Final details could still change.

What exactly is the $3 million super tax?

It’s an additional 15% tax on the earnings associated with the portion of your super balance that exceeds $3 million. It starts on 1 July 2025 and applies to both realised and unrealised capital gains—this is key.

What is an unrealised gain?

An unrealised gain is the increase in value of an asset you still own. For example, if a property in your SMSF was valued at $1 million last year and is now worth $1.2 million, the $200,000 is an unrealised gain—you haven’t sold it, but on paper, its value has gone up. Under this tax, you could be taxed on that $200,000 increase, even without selling the asset or receiving cash.

Does this tax apply to the entire super balance?

No. It only affects the portion above $3 million. For instance, if your total balance is $3.8 million, only the $800,000 over the threshold is subject to the additional 15% tax.

What does it mean when the balance is indexed?

Indexing means adjusting a value over time to account for inflation or economic changes. In this case, the $3 million threshold is not indexed—which means it stays fixed over time, even as inflation rises. So over the next decade, more Australians may hit the threshold, even if their buying power stays the same.

Why is this a concern for property investors in particular?

Because property inside a super fund is typically illiquid (you can’t just sell part of a property to free up cash). If the property’s value increases, you could owe tax on gains that are only on paper—without any cash to pay that tax unless you sell or refinance.

Can I restructure my investments to avoid or reduce this tax?

Yes, in many cases. Strategies may include:

Using discretionary or family trusts to hold assets outside super
Shifting some wealth into companies or joint ventures
Creating multi-member SMSFs to spread the super balance across family members
You’ll need a tailored strategy based on your specific position.

I’m not near $3 million in super—should I still be worried?

Yes. With rising property prices and compounding investment growth, many investors could hit this threshold over time. The earlier you plan, the more options you'll have to protect and structure your wealth tax-effectively.

Is this the only change expected to super?

No. Many experts see this as the beginning of a broader crackdown on high super balances. The lack of indexation and focus on unrealised gains suggests the government is future-proofing this policy. More restrictions could follow.

How does this impact SMSFs (Self-Managed Super Funds)?

SMSFs give you more control over your investments, but they also expose you to this tax if your balance exceeds $3 million. You’ll need to factor in asset valuations, future gains, and liquidity when planning contributions or asset purchases inside the fund.

What can I do now to stay ahead?

Get your investment strategy reviewed. At Gro, we work with property investors to: Analyse exposure to future super tax liabilities Review SMSF structures Plan for liquidity Explore smarter ownership structures beyond super

👉 Book a Strategic Call to protect and future-proof your portfolio.