Major Superannuation Changes: Division 296 and LISTO Updates Explained

General

| October 14, 2025

The Federal Government has announced significant reforms to Australia’s superannuation system, impacting both high-balance accounts and low-income earners. These changes aim to make the system fairer and more sustainable. Here’s what you need to know.

Division 296: What’s Changing?

An Additional Earnings Tax:

Division 296 introduces an additional tax on earnings for individuals with very large superannuation balances. After extensive consultation and feedback, the government has revised its original proposal.

Key updates include:

Start Date Deferred
The new rules will commence 1 July 2026, giving members and advisers more time to prepare.
Tiered Tax Rates
- Balances under $3 million: No change – earnings taxed at 15%.
- Balances $3 million to $10 million: Earnings taxed at 30%.
- Balances over $10 million: Earnings taxed at 40%.
Indexation Introduced
Both the $3 million and $10 million thresholds will now be indexed to inflation, preventing bracket creep.
No Tax on Unrealised Gains
The government has scrapped the controversial plan to tax unrealised capital gains. Tax will apply only to future realised earnings, aligning with long-standing tax principles.
Who Will Be Affected?
Around 90,000 Australians have balances above $3 million, and approximately 8,000 exceed $10 million. These changes primarily target the top 0.1% of super holders.

Why it Matters?

For high-net-worth individuals, these reforms may require a review of estate planning and retirement strategies. Consider alternative structures such as investment bonds, family trusts, or philanthropy to manage potential tax impacts.

LISTO: A Boost for Low-Income Earners

Design:

The Low Income Superannuation Tax Offset (LISTO) is designed to ensure low-income earners aren’t disadvantaged when contributing to super. From 1 July 2027, the government will:

Increase the Income Threshold
From $37,000 to $45,000, aligning with the second income tax bracket.
Raise the Maximum Offset
From $500 to $810, reflecting higher Superannuation Guarantee rates.

Impact:

These changes will benefit around 3.1 million Australians, with low-income earners potentially adding $15,000 more to their retirement savings over time. Women, who make up 60% of low-income earners, stand to gain the most.

What Should You Do Now?

The upcoming changes to superannuation rules mean it’s more important than ever to take a proactive approach. Whether you’re nearing retirement or just starting to grow your super, now is the time to assess your position and make informed decisions. Here’s how the changes could impact you:

High-Balance Members:
Review your superannuation strategy before July 2026. Consider diversification and tax-effective structures.
Low-Income Earners:
Ensure your superfund has your TFN on record to take advantage of the increased LISTO benefit (where applicable).