Understanding the 2026 Superannuation Tax Changes
From 1 July 2026, individuals with a total super balance above $3 million pay additional tax, known as Division 296, on the earnings connected to the part of their balance above that threshold. A higher threshold also applies for very large balances above $10 million.
From 1 July 2026, the Albanese government’s Superannuation Tax Changes 2026 will redefine how large superannuation funds are taxed across Australia. These difficult tax reform updates aim to create a fairer superannuation system that is more sustainable while maintaining super as a reliable way for Australians to save for retirement and ensure economic security. Division 296 is now law: the Treasury Laws Amendment (Building a Stronger and Fairer Super System) Act 2026 was assented on 13 March 2026 and applies from 1 July 2026.
A second threshold will also apply for super balances above $10 million, with an even higher tax rate of 40%. At the same time, Australia’s lowest-paid workers will benefit from an increased Low Income Super Tax Offset (LISTO), designed to help low-paid workers and key workers build stronger retirement savings.
Although these superannuation tax changes mainly affect the wealthiest people, they will influence the wider superannuation system. Understanding what is changing now will help you plan ahead, stay compliant with the new tax rules, and make informed choices about your retirement strategy. The Superannuation Guarantee (SG) rate also increased from 11.5% to 12% on 1 July 2025.
What Has Changed in the 2026 Super Tax Plan
The superannuation tax concessions starting in July 2026 will significantly alter how earnings on large super funds are taxed. The new system, commonly known as Division 296 introduces two tax tiers and addresses major criticisms of the original proposal.
Division 296 does not apply a flat tax to a person’s entire superannuation balance. Instead, the tax applies to a proportion of superannuation earnings that relates to the part of the individual’s total super balance above the relevant threshold. In broad terms:
- The ATO determines whether an individual’s total super balance exceeds the relevant threshold.
- Superannuation earnings are calculated under the Division 296 rules.
- The portion of those earnings that relates to the balance above the threshold is identified.
- The additional Division 296 tax rate is applied to that portion.
For balances above $3 million and up to $10 million, an additional 15 per cent tax applies to the relevant earnings. This can bring the effective tax rate on those earnings to 30 per cent when combined with the standard 15 per cent superannuation fund tax rate.
For balances above $10 million, a further 10 per cent tax applies to the relevant earnings. This can bring the effective tax rate on earnings above that higher threshold to 40 per cent.
| Total super balance | Division 296 impact |
|---|---|
| Up to $3 million | No Division 296 tax |
| Above $3 million | Additional tax may apply to earnings linked to the portion above $3 million |
| Above $10 million | A further additional tax may apply to earnings linked to the portion above $10 million |
Example: Balance Above $3 Million
Assume an individual has a total super balance of $4 million. The amount above the $3 million threshold is $1 million. That means 25 per cent of the individual’s super balance is above the threshold. If the individual has $200,000 of Division 296 earnings, then 25 per cent of those earnings, or $50,000, would be linked to the portion of the balance above $3 million. The additional Division 296 tax would be 15 per cent of $50,000, which is $7,500.
This is a simplified example only. The actual calculation may depend on the type of fund, the individual’s superannuation interests, fund reporting, adjusted earnings and any regulations that apply.
To keep the system fairer and protect future generations, both thresholds will be indexed annually to the Consumer Price Index (CPI) to prevent bracket creep, where inflation pushes more super funds into higher tax bands without real increases in wealth. The $3 million threshold is indexed in $150,000 increments, and the $10 million threshold in $500,000 increments.
A key improvement to address a major criticism is the removal of tax on unrealised gains. Previously, the government planned to tax increases in the value of assets such as shares or property, even if they were not sold. Under the 2026 plan, only realised earnings — income actually received, such as dividends, interest, or profits from selling an asset, will be taxed. Tax on superannuation balances will now apply only when the assets are sold, not based on the increase in value until that point.
These changes reflect the government’s appetite for reform in a considered and methodical way, balancing the need to raise billions in revenue with fairness. They limit the impact to only those with very high superannuation balances, while providing investors and super funds greater certainty about how earnings will be taxed in the future.
Why Were These Changes Made
The 2026 superannuation tax changes were introduced to create a fairer superannuation system and make superannuation tax concessions more sustainable. The Labor government aims to ensure that generous tax concessions support retirement savings rather than providing excessive benefits to the wealthiest Australians.
The original plan faced strong opposition, including from shadow treasurer Ted O’Brien and various industry experts. Taxing unrealised capital gains was a major sticking point, seen as unfair and complex, potentially forcing individuals to pay tax on increases in asset values that had not yet been realised through sales. The proposed superannuation tax changes were in response to criticism from both politicians and lobby groups. The Albanese government has reworked its major tax policy in response to this criticism.
Additionally, the fixed $3 million threshold in the original proposal was criticised for not being indexed, which would have led to bracket creep and eventually affected more super funds without real increases in wealth.
In response, the government revised the policy to address these concerns, including indexing thresholds to the Consumer Price Index and removing tax on unrealised gains. These changes better target superannuation concessions and are designed to protect the purpose of superannuation: helping every single Australian save for retirement rather than accumulate unlimited wealth within a tax-advantaged structure. These changes to the superannuation tax structure reflect government adjustments based on feedback from industry and experts.
Treasurer Jim Chalmers confirmed that the changes were made after more than two years of feedback, separating genuine concerns from partisan criticism. He emphasised that the reforms represent a compromise that balances fiscal responsibility with fairness and simplicity. The treasurer acknowledged that there was significant internal pressure to revise the superannuation tax plan. The changes to the superannuation tax policy were approved by the Albanese cabinet’s expenditure review committee.
Who Will Be Affected by the New Super Rules
The 2026 superannuation tax changes will affect a small group of Australians but have a significant impact on those with the largest super balances.
Treasury estimates indicate that around 90,000 Australians have super balances above $3 million, and about 8,000 have balances exceeding $10 million. These individuals will face the higher tax rates of 30 per cent and 40 per cent on realised earnings above the respective thresholds.
Most Australians, with super balances below $3 million, will not be directly affected and will continue to pay the standard 15 per cent tax rate on earnings.
However, future governments will need to monitor bracket creep despite the indexation, as high earners or those with strong investment growth could eventually reach the taxable range. Members of self-managed super funds (SMSFs) and defined benefit schemes should review their investment strategies carefully. SMSF trustees need to ensure sufficient liquidity to pay tax on realised earnings, especially if their portfolios include illiquid assets like property. An SMSF property valuation can be one of the first ways a trustee can strengthen their documents.
These changes highlight the importance of staying informed and actively managing your superannuation to remain tax efficient and compliant under the new rules.
How your total super balance is counted
The new law is assessed at the individual level, not separately for each superannuation fund. This means a person’s total super balance is calculated across their Australian superannuation interests, including SMSFs, retail funds, industry funds and other relevant superannuation interests.
From 1 July 2026, an individual’s total super balance will generally be calculated by reference to the value of their Australian superannuation interests. The ATO has indicated that the changes are designed to support annual valuation requirements and remove the link to transfer balance account concepts. Foreign superannuation interests are excluded from the individual’s total super balance for these purposes.
This means individuals with more than one superannuation fund should not look at each account in isolation. The ATO will consider the combined value of relevant Australian superannuation interests.
For the first year, 2026-27, your total super balance is tested at 30 June 2027.
SMSFs and Division 296
SMSF members with balances near or above $3 million need to take the new rules seriously. The ATO has stated that SMSFs with members whose Division 296 total super balance exceeds the large super balance threshold will need to report new information in the SMSF annual return from the 2026-27 financial year onwards.
For SMSFs, Division 296 earnings are expected to be calculated using fund taxable income, with adjustments for items such as assessable contributions, pension-related exempt income, non-arm’s length income and certain other amounts. Where an SMSF has multiple members, earnings may need to be attributed between members. This may create extra administration, actuarial and reporting requirements for some funds.
SMSF trustees should also review whether any available small-fund CGT election or cost base reset mechanism is relevant to their fund. This should be considered with specialist tax and SMSF advice.
Can the Tax Be Paid from Super?
Division 296 tax is assessed to the individual, not directly to the superannuation fund. You can pay the liability yourself, or elect (within 60 days of your Division 296 notice of assessment) to have the amount released from one or more of your super funds. This is similar in concept to some other superannuation tax payment mechanisms.
What About Low and Middle Income Earners
While much attention has been on taxing the wealthiest superannuation funds, the reforms also include significant benefits for low-income superannuation tax earners.
From 1 July 2027, the Low Income Super Tax Offset (LISTO) will increase from $500 to $810 per financial year. The income eligibility threshold will also rise from $37,000 to $45,000, expanding access to this tax offset to approximately 3.1 million Australians, including Australia’s lowest-paid workers and key workers. The low-income superannuation tax offset (LISTO) will increase from $500 to $810 from 2027. Furthermore, the Australian government will pay superannuation on its funded Paid Parental Leave scheme starting July 1, 2026.
This increase means low-paid workers earning up to $45,000 will receive more government support to build their retirement savings, potentially adding up to $15,000 more to their super balances over their working lives.
The LISTO changes encourage voluntary contributions and reward consistent saving habits, helping to improve economic security for millions of low-income workers.
Reactions and Debate Around the 2026 Superannuation Reform
The superannuation tax changes have sparked mixed reactions across the political spectrum and industry. Major stakeholders have expressed a mix of support and opposition to the government’s revised superannuation tax changes.
Treasurer Jim Chalmers described the reforms as a considered and methodical way to raise billions while creating a fairer superannuation system. He highlighted how the government balanced the same objectives of fiscal sustainability and equity.
The Coalition, led by shadow treasurer Ted O’Brien, criticised the government for being publicly humiliated and accused it of a major backdown, particularly over the removal of tax on unrealised gains.
Industry experts have welcomed the removal of tax on unrealised gains, calling it a big difference that simplifies the system. However, some warn that SMSFs may face challenges with liquidity due to the higher tax rates on realised earnings.
Former Prime Minister Paul Keating praised the changes, saying they restore much-needed equity following the Howard Costello rampage of 2007 and provide a fairer superannuation system.
What These Changes Mean for Your Retirement Planning
The superannuation tax changes in 2026 will have varying impacts depending on your super balance and investment approach.
If your super balance is below $3 million, your earnings will continue to be taxed at the 15 per cent rate. The indexed thresholds protect average workers from bracket creep, while the higher Low Income Super Tax Offset (LISTO) supports Australia’s lowest-paid workers.
Those with balances above $3 million, especially SMSF members, should review their portfolios to ensure sufficient liquidity to pay tax on realised earnings. Those holding illiquid assets may need to adjust their investment strategy to avoid cash flow issues.
Working with a qualified adviser or tax professional can help you navigate these changes in a considered and methodical way, model your future tax position, and align your superannuation strategy with your retirement goals. For the property tax changes in the 2026 Federal Budget, such as the capital gains tax and negative gearing changes, see our Federal Budget 2026 guide.
Summary of the 2026 Super Tax Changes
The superannuation tax changes effective from 1 July 2026, aim to create a fairer superannuation system and raise billions in revenue sustainably. Key points include: These changes are expected to yield a lower revenue than initially projected due to the revised thresholds.
Two-tier tax system on superannuation earnings:
30 per cent total tax rate on the share of earnings linked to the part of a balance above $3 million.
40 per cent total tax rate on the share of earnings linked to the part of a balance above $10 million.
Both thresholds indexed to the Consumer Price Index to prevent bracket creep.
Tax only on realised earnings, not on unrealised gains.
Increased Low Income Superannuation Tax Offset (LISTO) from $500 to $810.
Eligibility for LISTO rose from $37,000 to $45,000.
Start date: 1 July 2026.
Defined benefit and SMSF members should prepare for the new tax framework.
Frequently Asked Questions – Superannuation Tax Changes 2026
1. When do the new superannuation tax changes start?
The new rules start on 1 July 2026. This timing gives individuals, employers and super funds enough time to prepare for the updated tax rates and reporting requirements.
2. Who will be affected by the 2026 super tax changes?
It applies to individuals whose total super balance exceeds the large super balance threshold, which is $3 million for the 2026-27 income year.
3. Are unrealised gains still taxed under the new rules?
No. The government removed the plan to tax unrealised gains. Only realised income — money actually earned through dividends, interest or the sale of assets — will be taxed under the new rules.
4. Why did the government introduce these changes?
The goal is to make the super system fairer and more sustainable. The changes ensure that generous tax concessions go to those who need them most — ordinary Australians saving for retirement — rather than those using super as a low-tax investment vehicle.
5. What is changing for low-income earners?
From 1 July 2027, the Low-Income Superannuation Tax Offset (LISTO) will rise from $500 to $810, and the income cap will increase to $45,000. This means more Australians will receive extra government support to grow their retirement savings.
6. Should I get professional advice?
Yes. If your balance is close to or above $3 million, it’s worth speaking to a qualified financial adviser or tax specialist. They can help you understand your tax position, assess your investment strategy and plan for future compliance.
7. Is Division 296 law?
Yes. Division 296 is law under the Treasury Laws Amendment (Building a Stronger and Fairer Super System) Act 2026 and applies from 1 July 2026.
8. Does the $3 million threshold apply per fund?
No. The threshold applies at the individual level. A person’s relevant Australian superannuation interests are combined when calculating their total super balance.
9. Does the tax apply to the whole super balance?
No. The tax applies to earnings linked to the portion of the balance above the relevant threshold.
10. Does Division 296 affect SMSFs?
Yes. SMSFs with members above the threshold will have additional reporting obligations from the 2026-27 financial year.
11. Can I pay the tax from my super?
The tax is assessed to you, not your fund, but you can pay it yourself or elect to have the amount released from one or more of your super funds.
Preparing for the Future of Superannuation
The superannuation tax changes effective from 1 July 2026 represent one of the most significant updates to Australia’s retirement savings system in years. While targeting the wealthiest superannuation funds, these reforms strengthen fairness across the broader system.
For most Australians, the indexed thresholds provide confidence that super remains stable and protected against inflation. For those with higher balances, the message is clear: plan early. Reviewing investments, assessing cash flow, and seeking professional advice will help ensure your superannuation remains tax-efficient and compliant.
The expanded Low Income Superannuation Tax Offset (LISTO) is a welcome improvement, providing a big difference to the retirement savings of millions of low-paid workers and key workers.
As the start date approaches, staying informed and adjusting your strategy accordingly will be essential to achieving economic security in retirement. Superannuation remains one of the best ways to secure a dignified retirement, and these 2026 updates aim to make that goal more achievable and fair for every Australian. The government reassured that the revisions to tax policy aim to make the system more sustainable.
