Treasurer Jim Chalmers introduced a bill on 4 February 2026 proposing a tax on realised earnings associated with high super accounts. The measure, called Division 296, sets one threshold at $3 million and a second at $10 million.
The proposal no longer includes unrealised gains. It would apply from 1 July 2026, while second-reading debate in the House continued on Wednesday, 4 March 2026.
The legislation forms part of the government’s Better Targeted Superannuation Concessions policy. It also pairs the large-balance changes with a planned boost to the Low Income Superannuation Tax Offset.
Rates rise by balance band, not across the whole account
The proposed rates depend on the relevant slice of a person’s total superannuation balance, rather than applying the higher rate to the entire account. In the accumulation phase, earnings tied to balances below $3 million continue to face a 15 per cent rate.
For the portion between $3 million and $10 million, the combined headline rate would be 30 per cent. Above $10 million, it would be 40 per cent. The additional tax is 15 percentage points in the middle band and 25 percentage points above $10 million.
Those rates concern earnings associated with the amount above each threshold. Earnings corresponding to balances below $3 million remain tax free in the retirement phase. Both thresholds are indexed, with the indexation aligned with the Transfer Balance Cap.
The October redesign removed unrealised gains from the calculation
The government announced revisions on 13 October 2025, following criticism of the earlier design. That version would have applied a 30 per cent rate to all earnings above $3 million, included unrealised gains and left the threshold unindexed.
The revised proposal limits the calculation to realised investment earnings, including interest, dividends, rent and capital gains. It also shifted the start date from 1 July 2025 to 1 July 2026 and made both thresholds rise with inflation, a change intended to limit “bracket creep.”
Chalmers described the redesign as “difficult tax reform… but we've worked to make it fairer and more sustainable,” acknowledging pushback from industry and voters over the initial drafting.
The government estimates fewer than 0.5% of account holders will be affected
The government estimates less than 0.5% of Australians with superannuation accounts will be affected in 2026-27. It estimates less than 0.1% will face the higher 40% rate.
Separate estimates put the number of Australian taxpayers with balances above $3 million at approximately 90,000. Approximately 8,000 have balances exceeding $10 million.
Chalmers told Parliament the measure would affect “less than half a per cent of all Australians.” He also described the package as supporting workers across several sectors:
“disability and aged care workers, retail and hospitality staff, and early childhood educators and nurses get the secure retirement that they need and deserve.”
He said the bill “does two key things. Firstly, it boosts the Low Income Superannuation Tax Offset, or LISTO… Now secondly, the legislation will reform super tax concessions so they are better targeted for large super balances”. The offset boost is scheduled from 1 July 2027. Chalmers thanked the super industry and wider community for their “engagement and feedback.”
First notices are expected in the 2027–28 financial year
The first liability would apply to people with a balance of at least $3 million as at 30 June 2027. The first notices of assessment are expected in the 2027–28 financial year.
The Australian Taxation Office would notify individuals and use balance information that super funds already report annually. It would also ask funds to provide the share of applicable realised earnings attributable to an individual above the threshold.
Defined benefit funds are intended to receive parity treatment. Treasury is consulting on assessment methods and possible exemptions for those funds.
The bill also proposes a boost to the low-income offset
Chalmers said the offset changes and the large-balance provisions form two parts of the bill. He told Parliament: “This measure will effect less than half a per cent of all Australians and will take effect from July this year”.
The proposal’s 1 July 2027 offset change comes after the planned 1 July 2026 start for the large-balance rules. Chalmers said the package was intended to direct more super support to workers on lower incomes while targeting concessions for people with larger balances.
Contribution and pension limits remain part of the planning picture
For 2026-27, the concessional contribution cap is $32,500. Unused cap amounts from the last five years can sometimes be carried forward. Concessional contributions are generally taxed at 15% when paid in, compared with up to 45% plus the Medicare levy at the top marginal rate for 2026-27.
The non-concessional cap for 2026-27 is $130,000. Eligible people under 75 may be able to bring forward up to $390,000 over three years, subject to the relevant total-balance threshold.
The Transfer Balance Cap, which limits the amount in the tax-free pension phase, is $2.1 million for FY2026-27, up from $2.0 million in FY2025-26. Amounts above that limit remain in the accumulation phase, where they are taxed at 15%.
Planning commentary also flags estate-planning questions and liquidity needs for self-managed super fund trustees, including the timing of asset sales. Suggested approaches include considering investment options with different tax consequences, family trusts and superannuation guarantee recycling. The rules are also relevant to people using super as a long-term wealth-building vehicle, as balances can grow toward the thresholds over a career.
A companion bill was also before the House
Chalmers introduced the Treasury Laws Amendment (Building a Stronger and Fairer Super System) Bill 2026 to the House of Representatives on the morning of Wednesday, 4 February 2026. The companion Superannuation (Building a Stronger and Fairer Super System) Imposition Bill 2026 was also before the House.
Second-reading debate continued on Wednesday, 4 March 2026. Chalmers argued that opponents would reject both the low-income offset and the proposed targeting of tax concessions:
“Voting against this bill would be a vote against a fairer super system. It would be a vote against more super for Australians on the lowest incomes, and it would be a vote for bigger tax breaks for those who already have millions in their super”
This article is for informational purposes only and does not constitute tax advice. Consult a qualified tax professional or CPA about your specific situation.
