Introduction
The Australian Government has announced key updates to its proposed Division 296 tax for high-balance super funds and enhancements to the low income superannuation tax offset (LISTO). These changes could significantly impact individuals with large super balances and low-income earners alike. In this post, we explain the new developments and what they mean for your super.
Changes Announced to Proposed Division 296 Tax
The Division 296 tax is a personal tax on certain earnings for individuals with super balances above $3 million. After extensive consultation, the Government has announced the following changes:
- New start date: The tax will now commence on 1 July 2026, with the first notices of assessment issued in the 2026–2027 financial year.
- Realised earnings only: Tax will apply to realised earnings attributed to members, rather than estimated or “unrealised” earnings.
- Two indexed thresholds:
- $3 million threshold, indexed in $150,000 increments
- $10 million threshold, indexed in $500,000 increments
- Additional personal tax:
- Earnings above $3 million: 15% extra (total 30%)
- Earnings above $10 million: 10% extra (total 40%)
Example Calculation
Emma has a total super balance of $12.9 million in an SMSF at the end of 2026–2027, with $840,000 in realised earnings. The personal tax liability will be calculated as follows:
- Proportion of TSB above $3M: (12.9M – 3M) / 12.9M = 76.74%
- Proportion of TSB above $10M: (12.9M – 10M) / 12.9M = 22.48%
Personal tax:
(0.15 × 0.7674 × $840,000) + (0.10 × 0.2248 × $840,000) = $115,581
The Government will consult further with superannuation industry stakeholders before introducing legislation in early 2026.
How the Enhanced LISTO Could Help Build Your Super
The Low Income Superannuation Tax Offset (LISTO) helps low-income earners by reimbursing up to 15% of concessional contributions, up to a capped amount.
Key Enhancements from 1 July 2027:
- Eligibility threshold increased: From $37,000 to $45,000 annual income
- Maximum LISTO amount increased: From $500 to $810
For eligible earners, this means the first $5,400 of employer super contributions may be effectively tax-free, boosting retirement savings.
What This Means for You
- High-balance super holders: Review your super strategy and consider professional advice on how Division 296 could affect your retirement savings.
- Low-income earners: Check your eligibility for LISTO to maximise contributions and reduce tax on super.
Stay updated on the Government consultation process, as further changes may occur before legislation is passed.
Practical Steps
- Check your super balance and contributions for potential exposure to Division 296.
- Review your super contributions to ensure you receive the full LISTO offset if eligible.
- Seek professional advice to understand implications for your personal situation.
- Monitor updates via Treasury and ATO websites.