Major Changes Announced
The Federal Government has made significant revisions to its controversial plan to increase tax on superannuation earnings above $3 million, marking one of the most substantial policy reversals in recent years.
Treasurer Jim Chalmers confirmed that the Division 296 tax will no longer apply to unrealised capital gains, meaning only realised investment earnings on super balances exceeding $3 million will now be subject to the higher tax rate.
Under the updated framework, individuals will continue to pay 15% tax on earnings up to $3 million, while those with balances above that threshold will face a 30% tax on realised earnings. A new upper threshold of $10 million has also been introduced, with earnings above that level to be taxed at a total of 40%. Both thresholds will be indexed in line with the Transfer Balance Cap to ensure fairness over time.
The government has also pushed back the start date for the new regime by a year – from 1 July 2025 to 1 July 2026 – to allow for further consultation and implementation planning.
The announcement has been widely welcomed across the superannuation sector.
The SMSF Association said the changes represented a complete reset of the policy direction, with the removal of unrealised capital gains tax being the only viable way forward.
Industry groups, including the Association of Superannuation Funds of Australia (ASFA) and AustralianSuper, also endorsed the revisions. ASFA highlighted the importance of ensuring equity and sustainability within the system, while AustralianSuper praised the reforms as a positive step toward improving retirement outcomes and fairness.
In a further boost for low-income earners, the government will increase the Low-Income Superannuation Tax Offset (LISTO) from $500 to $810, while lifting the eligibility threshold from $37,000 to $45,000.
While the Treasurer acknowledged that the revised measures would raise significantly less revenue than originally projected – around $2 billion instead of $6.2 billion over the forward estimates – he emphasised that the reforms strike a better balance between fairness, sustainability and fiscal responsibility.
These changes are expected to reshape the superannuation landscape, easing concerns among SMSF trustees and fund members, while reaffirming the government’s commitment to maintaining a fair and sustainable retirement savings system.
Stay informed about how the latest super tax changes could affect your retirement strategy — talk to your financial adviser today.
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