In a surprise pivot, Treasurer Jim Chalmers today unveiled major revisions to the superannuation tax reforms, backing away from a controversial proposal to tax unrealised capital gains and instead restricting the levy to future realised earnings. The move represents a significant change in direction from the original plan.
Under the new design, the additional tax will be imposed only on earnings that crystallise (such as dividends, interest or realised capital gains) — not paper gains on assets still held. The original version would have dragged super accounts into a novel world of taxing asset appreciation before a sale.
Key features of the new structure
- The reforms are expected to take effect from July 1, 2026.
- A two-tier regime will apply: super balances between $3 million and $10 million will face a 30% tax on the relevant earnings; balances above $10 million will be hit at 40%.
- Both thresholds will now be indexed (i.e. adjusted over time with inflation), an explicit concession to concerns that a fixed cap would gradually ensnare more retirees.
- The reform also adjusts the Low-Income Super Tax Offset (LISTO): from July 1, 2027, the cap on the offset will increase (from $500 to $810) and the eligibility threshold will rise (from $37,000 to $45,000).
Treasury estimates suggest that only a relatively small group of Australians — those with very large super balances — will be directly affected. The revised model is projected to reduce expected revenue relative to the previous design (due to the delay, narrower base, and indexation) over the short term.
Industry response: equity, certainty, and capital for growth
Navleen Prasad, CEO of the Australian Investment Council, welcomed the changes.
“I commend the government on listening to, and acting on, industry feedback — these changes will support access to much-needed capital for early-stage investments,” he said. “This ensures that long-term investing in industries that are in the nation’s interest remain appealing to investors and has a role to play in a more competitive and dynamic economy.
“Asking superannuants with high balances to pay a fairer share of tax has never been the issue with this proposal. From our perspective this has always about the equity of making people pay tax on gains that haven’t crystalised with no clawback facility if it never does.”
The Association of Superannuation Funds of Australia (ASFA) also endorsed the LISTO reforms.
“We’re delighted the government has listened to the super sector’s consistent calls for the LISTO to be reformed. These changes will make a material difference to the retirement prospects of 1.3 million Australians, and make our super system fairer for low-income workers,” said ASFA CEO Mary Delahunty.
CPA Australia called the refinements “common-sense changes” that will make Australia’s super system “fairer and more equitable”.
“The indexing of the Division 296 proposal and taxing of realised earnings will ensure that Australia’s superannuation system remains fit for purpose for future generations,” said CPA Australia superannuation lead Richard Webb.
What’s next (and what to watch)
- The legislation implementing these changes must still pass Parliament. The government may need support from the Greens or crossbenchers, particularly given the shifts from the earlier proposal.
- The delayed implementation (2026) gives stakeholders and industry bodies time to refine technical design details, especially around treatment of negative returns, multi-fund holdings, timing of crystallisation, and fund-level compliance.
- Advisers and funds will need to prepare for new reporting regimes, calculations of “earnings” vs contributions/withdrawals, and tax flows tied to realised events.
- How indexing is calibrated will be crucial — if the thresholds lag inflation, the base of affected accounts may still creep upward over time.