The Federal Government has announced key changes to its proposed superannuation tax, following strong feedback from industry and investors. These adjustments aim to make the policy more practical, equitable and sustainable.

Key changes include

• Only realised earnings will be taxed (not unrealised gains).
• $3 million threshold will be indexed to inflation.
• New $10 million tier will be introduced: earnings above this taxed at 40%.
• Start date pushed to 1 July 2026.
• Defined benefit pensions included for consistency.
• Low-income support increased via LISTO boost and broader eligibility.

 

“These changes are a welcome refinement to the government’s original proposal. By focusing on realised earnings and indexing thresholds, the revised approach is more balanced and practical. It provides greater certainty for clients with larger super balances, while also enhancing support for lower-income earners.

Importantly, it reinforces that superannuation remains one of the most tax-effective and secure long-term investment environments available to Australians.”  – Mark La Bozeztta, Wealth Advisory Partner.

 

What this could mean for you

• Realised vs Unrealised Gains: Only actual earnings (not paper gains) will be taxed, addressing fairness and liquidity concerns.
• Indexed Thresholds: Both the $3 million and new $10 million thresholds will rise with inflation, helping avoid bracket creep over time.
• Tiered Tax Rates: Earnings between $3m–$10m will be taxed at 30%, and earnings above $10m at 40%.
• Delayed Start: The new rules will now take effect from 1 July 2026, giving individuals and funds more time to prepare.
• Defined Benefit Pensions: These will be brought into the framework to ensure consistent treatment across superannuation types.
• Support for Low-Income Earners: The Low Income Superannuation Tax Offset (LISTO) will increase from $500 to $810, and the income threshold will rise from $37,000 to $45,000 – benefiting over 3 million Australians, particularly women.

 

Questions you may be asking

1. How will this affect my super contributions and retirement planning?
   Your super contributions and retirement planning may be impacted if your total superannuation exceeds the new thresholds, as Division 296 tax could apply.
   There are still several important details to be ironed out, e.g. will investment cost bases be reset on 1 July 2026 so that prior unrealised capital gains are not taxed.
   If you’re concerned about what these proposed changes might mean for you, you’re welcome to reach out to our team.

2. Are there strategies to manage tax exposure before 1 July 2026?
   While the legislation has not yet been passed, it may be wise to review your super and investment approach with a financial advisor before 1 July 2026. There may be beneficial strategies available to you.

2. Do I need to provide additional reporting or take action now?
   No immediate reporting is required, but you should monitor your super balances and prepare for potential changes once full guidance is released.

 

Next steps

• Review your current super balance and growth projections.
• Consider meeting with a financial advisor or tax professional to understand your personal position.
• Stay updated. We are anticipating more detailed guidance from the ATO and government soon.

 

We will continue to keep you updated as more details on Division 296 become available.

If you’d like to understand what these changes could mean for your personal situation, our team is here to help.

Contact us.