Welcoming Positive Superannuation Reforms

The Federal Government has announced welcome reforms to the superannuation system, delivering meaningful improvements for both low-income earners and high-balance super holders. 

Targeted Super Taxation – Div 296 Amendments 

After extensive consultation, the Government has adjusted the Better Targeted Superannuation Concessions (Div 296) proposal. Key changes include two tax thresholds—balances between $3 million and $10 million will be taxed on realised earnings at 30%, while balances over $10 million will attract a 40% tax rate. Importantly, the tax will apply only to realised earnings, not unrealised gains, and both thresholds will be indexed over time. These practical adjustments ensure the measure remains fair and targeted. 

These changes, coming into effect from July 2026 (Div 296) and July 2027 (LISTO), represent a balanced improvement for all Australians planning for retirement.   

Boost for Low-Income Earners – LISTO Changes 

In addition to the Div296 changes, from 1 July 2027, the Low Income Superannuation Tax Offset (LISTO) will increase by $310 to $810, and the income threshold will rise from $37,000 to $45,000. This enhancement will benefit 1.3 million Australians—around 60% of whom are women—and expand eligibility to a total of 3.1 million people. Many workers earning between $28,000 and $45,000 will see their LISTO payments increase by an average of $410, potentially boosting their retirement nest egg by up to $15,000 over their career. 

For the time being, no action is recommended given the new measures have only been released as fact sheets and we are yet to see detailed legislation pass through parliament.  However, the proposed changes are welcome and will provide practical relief to those who were concerned about the taxation of unrealised capital gains in their super fund.