Unrealised Gains Tax Australia: What It Means & How to Prepare

 

What is an Unrealised Gain?

An unrealised gains tax australia is the increase in value of an asset you own that you haven’t yet sold. For example, if you purchase a property or shares for $100,000 and its market value rises to $150,000—but you haven’t sold it—the extra $50,000 is an unrealised gain. Under the current rules in Australia, capital gains tax (CGT) only applies when the gain is realised—i.e., when you sell the asset.

Proposed Changes: Introducing Tax on Unrealised Gains

Australia is considering significant changes to this system via proposals such as the Treasury Laws Amendment (Better Targeted Superannuation Concessions) Bill 2023, often referred to in public debate. One of the core changes under this proposed bill is taxing unrealised capital gains on superannuation balances exceeding $3 million, effectively applying tax annually to increases in value even if the asset hasn’t been sold.

Under this proposal:

  • Superannuation balances above $3 million would lose the standard 15% tax concession on gains above the threshold and be taxed at 30% on earnings above that amount.

  • The definition of “earnings” would broaden to include unrealised gains—meaning the rise in market value of assets held inside super funds, whether from shares, property, or other investments.

Key Concerns & Impacts

These proposed changes raise several concerns among Australians:

  • Liquidity Issues: Some assets, like property, are illiquid—meaning you can’t easily sell them to raise cash. Paying tax on paper gains without cash flow to cover the liability could force sales or reduce investment flexibility.

  • Valuation & Compliance Burden: Annual valuations of complex, privately held assets are difficult and costly. Questions persist about fairness—how often values are updated, who verifies them, and how to handle fluctuations.

  • Effect on Retirement & Superannuation Planning: Individuals nearing retirement, especially those with large super balances or funds invested in property or illiquid assets, may be disproportionately affected. Planning strategies may need to shift.

What Can Investors Do Now

Even though this unrealised gains tax proposal isn’t law yet, here are proactive steps to consider:

  • Review your asset allocation – Assess how much of your super or investment portfolio is tied up in illiquid or volatile assets.

  • Seek financial advice – Experts like Hudson Financial Planning can help model potential tax exposure under proposed changes and explore alternatives for structuring assets.

  • Consider liquidity management – Make sure your portfolio includes assets that can be sold or converted if needed to meet tax obligations.

  • Stay informed – Keep up with legislative developments. Bills can change before being passed; thresholds, rates, or exemptions might be adjusted.

Bottom Line

The idea of taxing unrealised gains shifts a major tax principle in Australia: taxing wealth before it’s turned into cash. While proposals target high-balance superannuation accounts, the ripple effects could be broader. Being prepared with savvy financial planning now, understanding your exposure, and seeking expert guidance will help you navigate this changing tax landscape with more confidence.


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