Australia is reshaping how high superannuation balances are taxed.
From 1 July 2026, the Australian Government has proposed changes to reduce superannuation tax concessions for individuals with total superannuation balances above A$3 million. Under the proposed framework, an additional tax would apply to earnings attributable to balances above this threshold, with higher rates applying at larger balance tiers.
For Australians living overseas, the implications can be more complex than the headlines suggest. Superannuation remains subject to Australian rules regardless of where you reside, and decisions made before returning to Australia can materially influence future outcomes.
Understanding how and when this measure applies is critical for internationally mobile professionals and business owners.
Read below what Craig Holding has to say.
What is the $3m Super Tax (Division 296)?
From 1 July 2026 (subject to legislation), additional tax is proposed to apply to earnings on superannuation balances above A$3 million.
The additional tax applies only to the portion of annual superannuation earnings attributable to balances above A$3 million, and higher tax rates apply on earnings above higher balance bands in the proposed design. Two features make this tax especially impactful:
- It applies on top of existing super taxes
- The proposed design includes a $3m threshold and a $10m tier, with indexation mechanics flagged in technical commentary. These details may still change as legislation progresses
In practical terms, strong investment markets alone could push many Australians over the threshold over time, even if they are no longer making meaningful contributions.
Why this matters more than you think
While framed as targeting very high balances, the measure may increasingly affect:
- Senior professionals with long careers and consistent super contributions
- Business owners who have used super as a long-term accumulation vehicle
- Australians who worked overseas but retained or grew their Australian super
- Individuals holding illiquid assets inside super, such as property or private investments
Even with indexation mechanisms proposed, long-term inflation and sustained market growth may still result in more individuals approaching the threshold over time.
For Australians living abroad, this creates a unique problem: you may be taxed under Australian rules on wealth you cannot easily access or restructure once residency resumes.
The overlooked expat problem
Most discussion around Division 296 assumes the individual is living in Australia and contributing to Australian super.
Expats face a different reality.
Many Australians overseas have:
- Stopped contributing to Australian super years ago
- Built wealth offshore through employment, bonuses or business exits
- Retained Australian super that continues to grow passively
- Assumed Australian super would remain a tax-efficient “set and forget” asset
Under the current proposed design, the additional tax is assessed on realised superannuation earnings attributable to the portion of a member’s balance above the relevant threshold. Total superannuation balance remains important in determining whether the threshold is exceeded, but the tax is intended to apply to earnings rather than unrealised valuation movements.
For expats planning to return, decisions made before re-establishing Australian tax residency may affect future flexibility.
Craig Holding had previously explored how Australia’s tax and superannuation rules can impact Australians living overseas, including changes affecting foreign residents and internationally mobile individuals. For readers seeking a broader context, you may also find the following useful:
– Why Australian Expats Should Consider a Superannuation Refresh
– Tax Essentials for Australians Living or Investing Abroad
Does the $3m Super tax apply if I’m a non-resident?
Australian superannuation remains subject to Australian legislative rules regardless of where you live. While residency status affects how and when tax applies, Australians living overseas are not insulated from changes to the superannuation framework, particularly if they hold significant balances or plan to return. If you have met a condition of release, there may be alternative options available depending on your circumstances and residency position.
For many expats, exposure becomes more pronounced on re-establishing Australian tax residency, which is why forward planning matters.
What if my balance crosses $3m temporarily?
Under the current proposed design, Division 296 applies to realised earnings that are attributable to the portion of a member’s super balance above the relevant thresholds.
Short-term market movements can still affect your total superannuation balance at the relevant measurement date. If your balance exceeds $3 million at that point, the proportion of realised earnings attributable to the excess may be subject to the additional tax.
This is particularly relevant for individuals holding property, private equity or other illiquid assets within superannuation, including many SMSF members, where valuation changes may influence total balance calculations.
As the legislation has not yet been enacted, the final mechanics may change.
Common mistakes Australians overseas are making
We are increasingly seeing the same issues repeated:
- Waiting until after becoming an Australian tax resident to review super
- Assuming all offshore retirement structures are treated the same as Australian super
- Holding illiquid assets in super without considering valuation impacts
- Making investment decisions without understanding how Division 296 applies
Once residency changes, planning options narrow significantly.
Early planning creates flexibility. Late planning creates constraints.
Is this the end of Super as a planning tool?
No. But it is the end of super as a universally protected vehicle for high balances.
Importantly, international experience suggests these changes rarely stop at the first threshold. Caps tighten. Rules evolve. Complexity increases.
The A$3 million threshold is a policy setting, not a permanent fixture. As seen historically with superannuation, thresholds and concessions can be adjusted over time.
For Australians with global lives and global assets, relying solely on Australian super may no longer be sufficient.
The role of foreign Superannuation and international structures
For some internationally mobile Australians, foreign superannuation and offshore retirement structures form part of broader long-term planning.
These structures are not a replacement for Australian super, nor are they suitable for everyone. However, they can offer:
- Diversification of retirement assets across jurisdictions
- Greater flexibility around contributions and access
- Planning optionality ahead of Australian residency changes
- Alignment with international careers and future relocations
Critically, outcomes depend on individual circumstances, residency status and timing. Structure design matters more than the wrapper itself.
Why timing matters more than ever
Division 296 reinforces a principle experienced expats already understand:
Once Australian tax residency is re-established, options reduce quickly.
Whether it’s reviewing existing Australian super, assessing offshore arrangements, or understanding how future earnings may be taxed, the most effective planning typically happens before returning home.
What should Australian expats be doing now?
If you are living overseas and expect your retirement assets to approach or exceed A$3 million at any point, sensible considerations may include:
- Reviewing total retirement balances globally, not just Australian super
- Understanding how Division 296 applies to your situation
- Assessing whether existing structures still align with your long-term plans
- Taking advice that considers both Australian and international tax frameworks
This is not about avoiding tax. It is about avoiding unintended outcomes caused by complexity, timing and policy change.
Final thoughts
- The $3m super tax is not theoretical. It reflects a broader shift in how Australia views accumulated wealth.
- For Australians living overseas, the risks are amplified by distance, complexity and assumptions that no longer hold.
- Those who plan early tend to retain flexibility. Those who wait are often left managing consequences.
- If your career, assets or future plans cross borders, now is the time to pay attention.
Get in touch
Contact GSB today if you would like to discuss any of these matters with our in-house team.
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Disclaimer
This article is intended for general information purposes for Australian citizens or former Australian residents living outside Australia (“Australian expats”) and does not constitute financial, investment, tax or legal advice. It is not directed at individuals residing in Australia.
The information is not intended to be relied upon as a recommendation or statement of suitability for any individual. Tax treatment and outcomes depend on personal circumstances, residency status, timing and applicable legislation, which may change.
GSB does not provide tax advice. Readers should seek independent professional advice relevant to their own circumstances before making any financial or investment decisions.
GSB Capital Ltd is registered with the Dubai International Financial Centre (DIFC), licence no. CL4377, and is regulated by the Dubai Financial Services Authority (DFSA), reference no. F006321. This content is intended for informational and educational purposes only and does not constitute an offer, solicitation, or recommendation of any financial product or service. Past performance is not necessarily a reliable indicator of future results.