After more than a year of proposals and debate, new superannuation laws have now been passed, bringing a mix of changes that will affect how Australians build and manage their retirement savings.
The Treasury Laws Amendment (Building a Stronger and Fairer Super System) Bill 2026 introduces a combination of measures. Some are designed to increase support for lower income earners. Others tighten how tax concessions are applied at higher balance levels.
The changes come at a time when super has already been evolving. The Superannuation Guarantee has reached 12%, super is now being paid on parental leave, and payday super is due to begin on 1 July 2026. Together, these changes point to a system that is becoming more structured, but also more reliant on individuals making informed decisions about their super and broader financial planning.
While the changes apply across the system, the treatment of larger balances has drawn the most attention. This is where the most meaningful shift has occurred, even though it affects a relatively small group.
What the new legislation changes
Two key changes sit within the legislation. The first is an increase to the Low Income Superannuation Tax Offset (LISTO). Eligible workers can receive up to $810 per year into their super account, with an average benefit of around $410. This increased payment will apply from 1 July 2027. Around 1.3 million Australians are expected to benefit, including many younger workers and women.
The second change is the introduction of Division 296, which applies additional tax to individuals with very large super balances. The aim is to reduce the level of concessional tax treatment once balances move beyond a certain size.
How Division 296 works
Division 296 is not a tax on super funds themselves. It is a personal tax applied to the individual, based on their share of earnings across all of their super interests.
The calculation does not simply isolate a separate ‘slice’ of the account. Instead, it works by determining what proportion of a person’s total super balance sits above the relevant thresholds, and then applying that proportion to their total earnings for the year.
Importantly, the revised design applies only to realised earnings, such as interest, dividends, rent and realised capital gains. Changes in asset values without a sale do not trigger a tax liability.
The $3 million and $10 million thresholds explained
The rules introduce a tiered system. For balances above $3 million and up to $10 million, earnings attributable to that portion of the balance will face an effective tax rate of 30%. This reflects the existing 15% tax within super, plus an additional 15% under Division 296.
For balances above $10 million, the tax increases further. Earnings linked to the portion above this level will face an effective rate of 40%, made up of the standard 15% plus an additional 25%.
Both thresholds are expected to be indexed over time, subject to final legislative settings.
How the calculation works in practice
The impact depends on both the size of the balance and how it grows over time. Rather than applying a flat increase once a threshold is reached, the system works proportionally. As balances move higher above $3 million, a larger share of earnings becomes subject to the additional tax.
Someone with $4 million in super will not have a separate $1 million account taxed differently. Instead, a portion of their total earnings is taxed at the higher rate, based on how much of their balance exceeds the threshold.
This approach means the effect builds gradually. Those just above $3 million may see only a modest change, while larger balances will experience a more noticeable shift.
The Division 296 rules are expected to apply from 1 July 2026, under current legislation settings.
Transitional rules for SMSFs
For SMSFs and other small funds, transitional rules are expected to play an important role.
Trustees are likely to have the option to reset the cost base of assets to their market value as at 30 June 2026 for Division 296 purposes. This helps ensure that any capital growth that occurred before the new rules begin is not retrospectively taxed.
There are several conditions attached to this election. It must apply to all eligible CGT assets held by the fund and must be made by the time the 2026–27 return is lodged. Once made, the decision is irrevocable and records must be retained until five years after the asset is ultimately disposed of.
Importantly, making the election does not trigger a CGT event, does not restart the 12-month CGT discount period, and does not allow losses to be carried forward for Division 296 purposes.
For many SMSFs, this 30 June 2026 valuation point will be a critical reference. It will influence how future realised gains are assessed under the new tax settings and may form part of broader planning decisions leading up to the commencement date.
The impact at different balance levels
Lower-income earners are likely to benefit straight away. The LISTO increase means more money is added to super each year without requiring additional contributions.
Mid-career professionals are unlikely to be directly affected by the new tax rules, but the broader environment makes it worth reviewing contribution levels. With compulsory contributions now at 12%, even small increases can make a difference over time and support long-term retirement planning.
Those with higher balances need to take a more deliberate approach. Super remains tax-effective, but it may not always be the only structure used for long-term wealth. This may involve reviewing contribution levels, reassessing how investments are held, and considering how super fits alongside other structures as balances grow within a strategic financial plan.
People approaching or already in retirement should focus on income planning. Even with higher tax applying to part of the balance, super can still provide a strong income stream. For those just above the threshold, the additional tax is often relatively modest compared to overall retirement income.
Why a measured response matters
Some investors are already considering moving assets out of super in response to these changes. While that may be appropriate in some cases, it is not always the right move.
Super continues to offer tax advantages that are difficult to replicate elsewhere. Moving funds can trigger tax, reduce flexibility or change how assets are treated over time.
The rules have changed, but the role of super has not. It remains a central part of retirement planning. The difference is that it now requires more careful use as balances increase.
The broader direction of super
Recent reforms point to a clearer purpose for the system. Super is being positioned to support retirement income, rather than unlimited accumulation.
At the same time, contribution settings and employer obligations have strengthened. This gives most Australians a stronger base to build their super over time.
There is also a longer-term consideration. Investment growth means more people may approach the $3 million threshold over time, particularly those with long investment horizons.
What this means for you
These changes will not affect everyone in the same way. Many Australians will see either a benefit or no direct impact. Those with larger balances will need to review how their super fits within their overall financial position.
The main risk is reacting without a clear plan. A more effective approach is to understand how the rules apply to your situation and make considered adjustments where needed, often with the advice of a financial planner.
If recent changes to superannuation have prompted you to reconsider how your wealth is structured, or how your retirement income may be affected over time, contact RFS Advice to discuss how your strategy can be reviewed and adjusted in line with your goals and the current legislative environment.
Frequently asked questions
No. The additional tax on balances above $3 million is expected to affect less than 0.5% of Australians.
No. It only applies to the portion of your balance above $3 million.
That depends on your circumstances. There can be tax and structural implications, so it is important to seek advice before making changes.
The changes are expected to apply from 1 July 2026.
Yes. Super remains a tax-effective structure for most Australians, even with these changes.
General advice warning:
The information and any advice provided in this article has been prepared without taking into account your objectives, financial situation or needs. Because of that, you should, before acting on the advice, consider the appropriateness of the advice, having regard to those things.
