Government Updates to Division 296 and LISTO
What Could These Changes Mean for You?
The Government has announced practical changes to the design and implementation of its proposed Division 296 tax, which applies to individuals with more than $3 million in superannuation. It has also announced enhancements to the Low Income Superannuation Tax Offset (LISTO) for people earning less than $45,000. These updates follow more than two years of industry consultation and feedback and are intended to refine how the measures operate in practice.
Changes Announced to Proposed Division 296
The proposed Division 296 tax is a personal tax on certain earnings of high balance super funds. The Government has confirmed several key changes to how the tax will be designed and implemented.
New Start Date
The start date for Division 296 will be pushed back to 1 July 2026. The first notices of assessment are expected to be issued in the 2026–2027 financial year.
Use of Realised Earnings
Rather than applying to estimated or unrealised earnings, the calculation will use the super fund’s realised earnings that are attributed to members above the relevant thresholds.
Two Indexed Thresholds
There will be two thresholds, both indexed to the Consumer Price Index. The thresholds are $3 million, indexed in $150,000 increments, and $10 million, indexed in $500,000 increments.
Additional Tax Rates
In addition to the standard 15% tax on super fund earnings paid by the fund, an additional personal tax of 15% will apply to earnings on the proportion of super balances over $3 million, resulting in a total tax rate of 30%. A further personal tax of 10% will apply to earnings on the proportion of super balances over $10 million, resulting in a total tax rate of 40%.
How the Division 296 Tax May Be Calculated
While the final calculation method has not yet been confirmed, the Government has released an indicative example in its Fact Sheet to demonstrate how the tax could work.
Example Calculation
Emma has a total super balance of $12.9 million at the end of the 2026–2027 financial year in an SMSF and was attributed $840,000 of the fund’s realised earnings.
The ATO calculates the proportion of Emma’s total superannuation balance exceeding $3 million for the current financial year as ($12.9 million minus $3 million) divided by $12.9 million, resulting in 76.74%.
The ATO then calculates the proportion exceeding $10 million as ($12.9 million minus $10 million) divided by $12.9 million, resulting in 22.48%.
Emma’s personal tax liability, in addition to the 15% tax already paid by the fund, will be calculated as (0.15 × 0.7674 × $840,000) plus (0.10 × 0.2248 × $840,000), equalling $115,581.
The Government will continue consulting with the superannuation industry and other stakeholders to finalise the methodology and implementation of these changes. Legislation is expected to be introduced in early 2026.
How the Enhanced LISTO Could Help Build Your Super
LISTO is the Low Income Superannuation Tax Offset. It is a Government payment made to your super fund equal to 15% of the concessional, before-tax super contributions made on your behalf, up to a capped amount. The offset is designed to ensure low-income earners do not pay more tax on their super contributions than they do on their take-home pay.
Changes to LISTO From 1 July 2027
From 1 July 2027, the Government will increase the LISTO eligibility threshold from $37,000 to $45,000 and raise the maximum LISTO payment from $500 to $810.
If you earn less than $45,000 per year, this means the first $5,400 of employer super contributions made on your behalf each year will effectively not be taxed. Further details on eligibility and payment estimates are available on the ATO website.
Want to Learn More?
The Government’s Fact Sheets outlining these changes are available on the Treasury website. Further updates are expected as the consultation process continues. If you have concerns about how these changes may affect your superannuation position, seeking professional advice is recommended.
