Treasurer Jim Chalmers has announced a significant revision to the government’s contentious superannuation tax plan, responding to widespread criticism. The overhaul includes two major changes:
- the removal of the proposed tax on unrealised capital gains and
- the introduction of indexation for the tax thresholds.
Under the revised plan, superannuation tax concessions will now be capped at two indexed thresholds—$3 million and $10 million—to prevent bracket creep over time. Earnings on balances between these thresholds will be taxed at 30%, while earnings on balances above $10 million will attract a 40% tax rate. Currently, super earnings are taxed at 15%.
The removal of the tax on unrealised gains addresses one of the most controversial aspects of the original proposal. Critics had warned that taxing unrealised gains could unfairly impact those with illiquid assets, create a compliance burden for funds, and set a dangerous precedent.
The start date for the new super tax measures has been delayed to 1 July 2026, with the legislation to be introduced in 2026 – allowing more time for consultation and legislative preparation.
Increase to Low-income Super Tax Offset
In addition to these changes, the government will boost the Low-Income Superannuation Tax Offset (LISTO). From July 2027, the offset will increase from $500 to $810, and the income eligibility threshold will rise from $37,000 to $45,000. This move is expected to benefit 3.1 million Australians, with 60% being women, potentially adding $15,000 to their retirement savings.
These changes mark a pragmatic shift in the government’s approach, aiming to balance fairness, simplicity, and long-term sustainability in Australia’s superannuation system.