SUPER BULLETIN
BREAKING NEWS - Division 296 Super Tax Overhaul + Boost for Low-Income Super
13 October 2025
Treasurer Jim Chalmers has announced significant changes to the stalled superannuation tax proposal and introduced measures to support low-income earners.
KEY CHANGES
Division 296 – Tax on Superannuation balances > $3million
• No tax on Unrealised Gains: Tax will now apply only to realised earnings.
• Indexation applied to Caps: The thresholds will be indexed for inflation.
• Two-Tier Thresholds for Income tax on super balances beyond $3m
- $3 million – $10 million - 30%
- Above $10 million - 40%
• Start Date Delayed: 1 July 2026, with first measurement at 30 June 2027.
Low-Income Superannuation Tax Offset (LISTO) Boost
• Offset Increased: From $500 to $810.
• Eligibility Threshold Raised: From $37,000 to $45,000.
The government contends that the changes target “ultra-high balances” while maintaining fairness and sustainability in the super system and the LISTO bonus will benefit hundreds of thousands of low-income earners, improving equity in the super system.
IMPLICATIONS
These modifications indicate that the Division 296 legislation must be rewritten to address the calculation method, assessing realised gains rather than movements in balances. Hopefully in this rewrite the government will work with industry on the modification to earnings, ensuring that it does not have other unintended consequences.
Members with superannuation balances above $3 million, and particularly those exceeding $10 million, should consider the impact of these announced changes. A 30% tax rate on taxable income will likely be commensurate with other available corporate structures, but 40% may not. Therefore, understanding restructure costs and any legacy taxes is critical to forming a strategy. Scenario modelling will be helpful to understand potential liabilities under alternate structures compared with potential taxes assessed under the proposed tiers. While liquidity pressures will ease with the removal of the taxing of unrealised gains, the higher tax rates for large balances means proactive planning remains critical.
For low-income earners, the LISTO boost offers an opportunity to maximize contributions and take advantage of improved offsets.
NEXT STEPS
For further discussion on these changes or assistance with modelling, please contact Tracey Norris or Rebecca Nipperess.
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