If your superannuation balance is below $3 million, you can relax for now. But if your balance is nearing that amount, or already exceeds it, the Government’s proposed changes could affect how your super is taxed in the coming years.
For some time, the Government has been developing new measures to limit the generous tax concessions available to people with very large super balances. This initiative, often referred to as the Division 296 tax, aims to ensure the system remains fair and sustainable.
Recently, the proposal was updated under the Better Targeted Superannuation Concessions (BTSC) policy. The revised version keeps the same goal — reducing tax advantages for high-balance accounts — but simplifies the approach and removes some of the earlier complications that raised industry concerns.
Here’s a breakdown of what’s changing and what it could mean for you.
What’s Changing and Why
The 2023 proposal planned an additional 15% tax on earning for super balances above $3 million, including unrealised gains — meaning members could be taxed on asset growth they hadn’t cashed in.
The revised model fixes this by taxing only realised earnings, such as income and capital gains from sold assets. This change makes the system simpler, fairer, and more in line with standard tax principles.
A Tiered System for Big Balances
The new model introduces a two-tier system for people with higher balances:
- Tier 1: $3 million to $10 million – Earnings on this portion of the balance will face an extra 15% tax, bringing the total tax rate to 30%.
- Tier 2: Over $10 million – Earnings on this portion will attract an extra 25% tax, giving a total rate of 40%.
Both thresholds will increase each year in line with inflation — by $150,000 for the first tier and $500,000 for the second. This prevents “bracket creep” as balances grow over time.
The changes are planned to start on 1 July 2026, with the first tax assessments expected in 2027–28. According to Treasury, fewer than 0.5% of Australians will be affected at the $3 million level, and fewer than 0.1% will fall into the $10 million tier.
How It Works in Practice
To understand how this tax might work, here are two examples.
Example 1:
Megan has a total super balance of $4.5 million across her SMSF and an APRA-regulated fund. Her fund earns $300,000 in realised income for the year. The portion of her balance above $3 million represents one-third of her total balance, so she will pay extra tax on one-third of her earnings. Her additional Division 296 tax will be:
15% × 33.33% × $300,000 = $15,000.
Example 2:
Emma has a $12.9 million super balance in her SMSF and earns $840,000 in realised income for the year. She pays 15% on the Tier 1 portion and an additional 10% on the Tier 2 portion, bringing her total additional tax to around $115,000.
These examples show the tax increases are proportionate — only the earnings related to the amounts above the thresholds are affected.
Why It’s Better News for Most
This update will come as a welcome relief for many SMSF members, as excluding unrealised gains reduces both valuation complexities and liquidity concerns — especially for those with property or unlisted assets. On the other hand, individuals with super balances exceeding $10 million could face total tax rates of up to 40%, which may encourage a review of long-term planning. It’s important to keep in mind, however, that the legislation for this measure has not yet been introduced to Parliament, so the rules could still change before they are finalised.
Low Income Superannuation Tax Offset (LISTO)
Alongside this change, the Government has announced an increase to the LISTO.
From 1 July 2027, the LISTO income threshold will rise from $37,000 to $45,000, and the maximum payment will increase to $810. Treasury expects that affected workers will receive an average increase of around $410.
What You Should Do Now
1. Understand your total super balance (TSB)
Start by reviewing your current balance and projecting where it’s likely to sit by 2026.
2. Get professional advice early
Thoughtful planning can make a real difference. Strategies such as managing liquidity, reviewing asset allocations, and timing asset sales can help you stay flexible and tax-efficient under the new rules.
3. Stay informed
We expect draft legislation in 2026 and will keep you informed via our newsletters or online article.
Overall, the revised rules aim to simplify super for the majority, though those with larger balances may see less advantage. If your super sits near or above $3 million, taking action now will put you in the best position for what’s ahead. With the right planning, you can safeguard your wealth and move forward with confidence.
Pitt Martin Group is a CPA accounting firm, providing services including taxation, accounting, business consulting, self-managed superannuation funds, auditing and mortgage & finance. We spend hundreds of hours each year on training and researching new tax laws to ensure our clients can maximize legitimate tax benefit. Our contact information are phone +61292213345 or email info@pittmartingroup.com.au. Pitt Martin Group is located in the convenient transportation hub of Sydney’s central business district. Our honours include the 2018 CPA NSW President’s Award for Excellence, the 2020 Australian Small Business Champion Award Finalist, the 2021 Australia’s well-known media ‘Accountants Daily’ the Accounting Firm of the Year Award Finalist and the 2022 Start-up Firm of the Year Award Finalist, and the 2023 Hong Kong-Australia Business Association Business Award Finalist.
Pitt Martin Group qualifications include over fifteen years of professional experience in accounting industry, membership certification of the Australian Society of Certified Practising Accountants (CPA), Australian Taxation Registered Agents, certified External Examiner of the Law Societies of New South Wales, Victoria, and Western Australia Law Trust Accounts, membership certification of the Finance Brokers Association of Australia Limited (FBAA), Registered Agents of the Australian Securities and Investments Commission (ASIC), certified Advisor of accounting software such as XERO, QUICKBOOKS, MYOB, etc.
This content is for reference only and does not constitute advice on any individual or group’s specific situation. Any individual or group should take action only after consulting with professionals. Due to the timeliness of tax laws, we have endeavoured to provide timely and accurate information at the time of publication, but cannot guarantee that the content stated will remain applicable in the future. Please indicate the source when forwarding this content.
By Angela Abejo @ Pitt Martin Tax
