The Government has announced practical changes to the design and implementation of its proposed Division 296 tax (applicable to individuals with more than $3 million in super) and also announced enhancements to the low income superannuation tax offset (LISTO) – for people earning less than $45,000.
What could these changes mean for you?
Changes announced to proposed Division 296 The proposed Div 296 tax is a personal tax on certain earnings of high balance super funds. After more than two years of feedback, the Government has announced the following changes to the proposed tax: new start date: the start date will be pushed back to 1 July 2026, with the first notices of assessment issued in the 2026–2027 financial year. earnings: rather than applying to estimated or “unrealised” earnings, the calculation will use the super fund’s “realised” earnings attributed to members above the thresholds; two indexed thresholds: there will be two thresholds indexed to the consumer price index: $3 million (indexed in $150,000 increments) and $10 million (indexed in $500,000 increments); extra tax: in addition to the standard 15% tax on super fund earnings paid by a super fund, additional personal tax of 15% will apply to earnings on the proportion of super an individual holds over $3 million (a total of 30%) and extra personal tax of 10% will apply to the earnings on the proportion of super over $10 million (a total of 40%). The calculation for realised earnings has yet to be finalised, but is expected to look something like the following example from the Fact Sheet released as part of the announcement.
Example: Emma has a total super balance of $12.9 million at the end of 2026–2027 in an SMSF and was attributed $840,000 of the fund’s realised earnings: ATO calculates the proportion of an individual’s total superannuation balance (TSB) exceeding $3 million for current financial year: ($12.9 million – $3 million)/$12.9 million = 76.74% ATO calculates the proportion of the TSB exceeding $10 million: ($12.9 million – $10 million)/$12.9 million: 22.48% Emma’s personal tax liability (in addition to the 15% tax the fund pays on earnings) will be = (0.15 × 0.7674 × $840,000) + (0.10 x 0.2248 × $840,000) = $115,581
The Government will undertake further consultation with the superannuation industry and other stakeholders to work out the methodology and implementation of the changes, and plans to introduce legislation in early 2026.
How the enhanced LISTO could help build your super LISTO is the low income super tax offset. It’s a Government payment to your super fund of 15% of the concessional (before tax) super contributions made to your fund, up to a maximum amount of $500. The offset is designed so low-income earners generally don’t end up paying more tax on their super contributions than on their take-home pay. The Government has announced that from 1 July 2027 it will: raise the LISTO eligibility threshold from $37,000 to $45,000; and increase the LISTO amount from $500 to $810. If you’re earning less than $45,000 per year, this means the first $5,400 of contributions your employer makes to super each year will effectively not be taxed. You can check out the ATO website for details on eligibility for LISTO and how to estimate your payment.
Want to learn more?
The Government’s Fact Sheets on the changes are available on the Treasury website. Keep an eye out for future developments as the Government consultation process continues. If you have concerns about your super and the proposed changes, seek professional advice.
