Will the revised Division 296 changes impact your super?

Prior to the last Federal Election, the Government announced a superannuation reform known as Division 296. The  reform proposed additional tax measures for super balances over $3 million dollars and was originally intended to take effect from 1 July 2025. 

The Division 296 bill was considered by Parliament back in 2024, but wasn't passed. In response, Treasurer Jim Chalmers has announced an amended version of these super reforms.

We’ve outlined the changes announced below, and how they may impact Australian’s and their super balances.

What is Div 296

Division 296 is a proposed new tax measure for individuals with a total super balance over $3 million dollars across all their super fund accounts. It would impose extra tax on earnings on balances over the $3 million threshold, on top of the the standard tax rate of 15% 

What are the proposed changes to the legislation
 

1. There are two new tax rates for large super balances

At the moment most people pay about 15% tax on their super earnings. Under the revised changes, earnings on the share of a person’s balances over $3 million will be taxed at 30%. Earnings on the share of any balances over $10 million will be taxed at 40%. 

2. Unrealised gains will no longer be taxed.

Under the original plan, increases in the value of an investment would be taxed, whether or not that gain had actually been realised from the sale of the asset. This has been scrapped – the revised proposal only taxes people on realised earnings in their super accounts, like interest earned, or selling an asset for profit, which maintains the current approach for taxing earnings in a super fund. 

3. The balance thresholds will be indexed

Originally, the threshold for Division 296 tax was to be fixed at $3 million. That meant over time, thanks to inflation, rising wages and investment returns, more and more people could have ended up paying the higher tax. The revised version will see the $3 million and $10 million thresholds indexed in line with the Consumer Price Index.

Proposed changes for low income earners

In addition to the above, the Treasurer also announced additional government support for low income earners.

Right now, if you earn less than $37,000 a year, the government helps you grow your super with an additional top-up, this is called the LISTO (Low-Income Super Tax Offset). The government’s revised proposal would see the maximum amount paid into an eligible individual’s super balance rise from $500 to $810, and the income cap to receive a payment rising to $45,000.

What happens next?

If the legislation passes, Division 296 tax is scheduled to take effect from 1 July 2026. This means the first tax assessments (including this tax) will for the 2026-27 year, which will be issued after 30 June 2027.