New Superannuation Tax Laws Passed
What the New $3 Million Superannuation Tax and boost to the Low-Income Super Tax Offset (LISTO) means for Retirement Planning.
The Treasury Laws Amendment (Building a Stronger and Fairer Super System) Bill 2026 has now passed both houses of Parliament, marking one of the most significant super reforms in recent years. The new law aims to make the super system more equitable by reducing tax concessions for extremely large super balances while boosting support for lower-income workers.
For most Australians, the impact will be minimal. But for some high-balance investors, self-managed super funds (SMSFs), and strategic retirement planners, these reforms are worth understanding.
The legislation introduces two main reforms:
- ·A new tax treatment for very large super balances
- ·A boost to the Low-Income Super Tax Offset (LISTO)
Higher Tax for Super Balances Over $3 Million
The most widely discussed change is the introduction of Division 296, which reduces tax concessions on super balances above certain thresholds. Currently, earnings inside super are generally taxed at 15%. Under the new rules:
• Balances up to $3 million: No change
• Balances between $3 million and $10 million: earnings taxed at 30%
• Balances above $10 million: earnings taxed at 40%
This change is designed to target a very small group of Australians. Only around 0.3% of super accounts are expected to be affected by the higher tax rates. The government has also indexed the $3 million and $10 million thresholds to inflation, meaning they will gradually increase over time rather than remaining fixed. The new tax rules are expected to apply from 1 July 2026.
Boost for Low-Income Workers
While much of the media attention has focused on high-balance super accounts, another key part of the legislation is aimed at helping lower-income Australians build retirement savings. The government has expanded the Low-Income Super Tax Offset (LISTO). Under the changes:
• The income threshold for LISTO increases from $37,000 to $45,000
• The maximum offset increases from $500 to $810
This change means more low-income workers will receive a refund of tax paid on super contributions, ensuring they do not pay a higher tax rate on super than on their regular income. Around 1.3 million Australians are expected to benefit, many of whom are women and younger workers. These LISTO changes are scheduled to begin from 1 July 2027.
What SMSF Trustees and High-Net-Worth Investors Should Consider
For individuals with large super balances, particularly those running Self-Managed Super Funds (SMSFs), the new rules may require careful planning.
Potential considerations may include:
• Reviewing the long-term strategy for large super balances
• Considering whether additional savings should be invested outside super
• Reviewing pension strategies and withdrawal planning
• Monitoring future legislative changes
Need help reviewing your super strategy?
At Cashflow Financial, we help individuals, investors, and business owners across Wollongong, the Illawarra, Sutherland Shire and Greater Sydney understand the tax implications of superannuation, retirement planning and investment structures. A proactive strategy today can make a significant difference to your financial future. Contact us. We are here to help.