Tax on Unrealised Capital Gains: What Australia’s Proposed Changes Mean for Investors

 Tax on Unrealised capital gains refer to the increase in value of an asset that hasn’t been sold yet — for example, property or shares that have appreciated in value but remain held. While no cash has exchanged hands, the “paper profit” exists. In Australia, the way such gains are taxed (or not) has become a hot topic.

What it means

Under current Australian tax rules, you only pay tax on a capital gain once the underlying asset is sold — that is, when the gain becomes “realised”. But there are proposed reforms which could change that for certain investors, particularly when housed inside superannuation.

What’s changing (or being considered)

One significant reform under discussion is that under the proposed Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023, earnings in superannuation accounts exceeding a $3 million threshold would be taxed at a higher rate — and these “earnings” include both realised and unrealised gains.

This means that holders of large super balances could face tax on growth in value of assets they haven’t sold, creating new planning challenges.

Additionally, industry bodies warn that applying tax to unrealised gains — especially on illiquid assets like unlisted property or direct business investments — could create serious cash-flow mismatches and administrative burdens.

Why it matters for you

  • If you have investments growing in value (but not sold) you may not yet face tax — but the policy environment may change.

  • If your superannuation balance is approaching or over $3 million, these reforms might impact you sooner than you think.

  • Planning becomes more important: you’ll need to assess how much of your wealth is “on paper”, how liquid it is, and what the tax risk might be.

  • It raises fairness and precedent questions: taxing “paper profits” means gains that could reverse still get taxed; the administrative burden is higher; and many other developed countries don’t broadly tax unrealised gains.

Strategy considerations

Although nothing has been fully legislated in all respects, some actions you might consider:

  • Review the composition of your investment portfolio to understand how much of your value is realised vs unrealised.

  • If you hold significant assets in your super, consider how growth in those assets (realised or not) could impact tax thresholds.

  • Consult a qualified adviser (such as the team at Hudson Financial Planning) to model scenarios and develop tax-efficient strategies.

Final thoughts

The idea of taxing unrealised capital gains is a shift in the tax landscape. While Australia currently taxes gains when assets are sold, the debates and proposals show what may be coming — especially for high-wealth individuals with large super balances. Being aware of where your assets stand, how growth is accruing, and how policy could evolve will help you be prepared rather than surprised.


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