Author Annie Lillico Lewis

Expert Reviewer Andrew Mackenzie, CFP®

Better Targeted Superannuation Concessions (BTSC) update.

The Federal Government has announced significant updates to its proposed Better Targeted Superannuation Concessions (BTSC) policy, easing earlier concerns about fairness and practicality. The revisions address key implementation challenges raised during consultation and provide individuals with greater flexibility to plan for the upcoming changes.

Key policy updates.

No tax on unrealised gains.

The initial proposal to tax unrealised, or “paper,” gains has been withdrawn. Only realised gains will be subject to tax under the revised model. This change to the Better Targeted Superannuation Concessions proposal removes the risk of investors being required to sell assets to fund tax liabilities on unrealised profits.

Tiered tax structure for large super balances.

The updated Better Targeted Superannuation Concessions policy introduces a two-tier tax system for superannuation fund earnings, applied progressively across balance thresholds. The rates are inclusive of the existing 15% tax on super fund earnings.

• Earnings on accumulation balances up to $3 million per member — taxed at 15%
• Earnings on balances between $3 million and $10 million — taxed at 30% (15% + 15%)
• Earnings on balances above $10 million — taxed at 40% (15% + 25%)

Under the revised Better Targeted Superannuation Concessions, funds in pension phase with balances up to $3 million per individual remain tax-free.

Indexed thresholds.

Both the $3 million and $10 million thresholds will be indexed in line with the Transfer Balance Cap, reducing the risk of bracket creep over time.

Revised implementation timeline and transitional provisions.

The new Better Targeted Superannuation Concessions regime is set to commence on 1 July 2026, with the first assessment based on balances as at 30 June 2027.

Members with balances below $3 million at that time will not be subject to the BTSC tax. This timeline effectively provides a 12-month transitional window post–1 July 2026 to review and restructure superannuation arrangements before the first assessment period.

Implications for superannuation members.

The revised BTSC framework is intended to make the system more equitable and practical.

Removing tax on unrealised gains eliminates one of the biggest practical concerns, while indexing the thresholds helps maintain long-term equity.

The delayed implementation date also provides valuable time to plan and make thoughtful adjustments.

Key considerations for super members:

Plan ahead:

• If your super balance is nearing $3 million, it’s time to assess the potential impact of moving into the 30% tier.
• For those with very large balances (above $10 million), the 40% rate will affect you. However, there may be strategies to manage your exposure effectively.

The transitional window between July 2026 and June 2027 allows time to review and, if necessary, restructure member balances before the first BTSC assessment.

Reach out to your advice team to discuss how the BTSC changes may impact you.

Focus on realised gains:

Because only realised earnings are taxed under the revised BTSC, the timing of asset sales will become a more strategic decision.

Portfolio structure:

With no tax on unrealised gains, investors can continue to hold a broad range of assets, including illiquid investments. However, these proposed BTSC changes are a great reminder to review your overall asset allocation and strategy.

Get in touch for advice on how to manage the BTSC changes effectively.

Comparative context and the bottom line.

Despite the higher tax rates for large balances, superannuation remains one of the most tax-effective investment structures available.

With these revisions, the Government has stepped back from the most concerning elements of the original proposal. Even under the new rules, earnings within super will generally be taxed between 15% and 30%, with earnings on balances up to $3 million in account based pensions continuing to be tax-free.

By contrast, earnings from investments held outside super — for example, through a company structure — would attract effective tax rates of 30%, and up to 47% once distributed as dividends.

Next steps for members and measures.

The Better Targeted Superannuation Concessions measures remain policy proposals and are not yet legislated. These announcements are subject to further consultation and parliamentary approval. Whilst the final details are still to be confirmed, the Government’s latest announcement provides a clearer policy direction and a more workable framework for implementation of the BTSC.

Kearney Group will continue to monitor developments and share updates as more information becomes available.

If you’d like to discuss how these changes may affect your personal situation, please contact our team — we’re here to help you plan with confidence.