Treasury has released a consultation paper on the proposed tax on superannuation fund earnings above $3m.

The paper is broadly consistent with the Treasury fact sheet released with the original announcement and confirms the $3m cap will not be indexed (consistent with Div 293 and the low income superannuation tax offset).

The paper clarifies that payment of insurance benefits under an insurance policy held by a member will be deducted (i.e., treated as contributions) for the purposes of calculating earnings.

It also changes the order of the earnings calculation from the earnings calculation in the fact sheet:

Earnings = Total Savings Balance “TSB” Current Financial Year – TSB Previous Financial Year + Withdrawals – Net Contribution

To the revised earnings calculation in the consultation:

Earnings = (TBS Current Financial Year + Withdrawals – Net Contribution) – TSB Previous Financial Year

The consultation seeks input on:

• Whether the current calculation of Total Super Balance, is adequate to calculate the earnings tax liability.
• Whether modifications are required to how the proportion of earnings are calculated (or alternatives).

Any unintended consequences of:

• The method used to determine the tax liability; or
• The options for paying the tax liability.

For defined benefit funds, whether:

• the existing valuation methods in pre-pension phase work for the calculating balances over $3m.
• the existing valuation methods in pension phase provide the appropriate value for calculating earnings
• Alternative methods that should be considered.

For SMSFs reporting would be part of the year-end tax return process.

If enacted, the 2025-26 financial year is likely to be reported in the first half of 2027 – first notifications for the new tax liability are expected in the second half of 2027.