Navigating the Superannuation Tax Changes & Division 296 Threshold: What High-Balance Accounts Must Know

Overview of New Superannuation Measures

Australia’s “Building a Stronger and Fairer Super System” Bill 2026 introduces key changes applicable from 1 July 2026 and 1 July 2027:

• Division 296 tax: Individuals with Total Superannuation Balances (TSB) over $3 million are taxed 15 % on only super earnings above that threshold. For those whose TSB exceeds $10 million, there’s an additional 10 % tax on earnings above the $10 million Very Large Super Balance Threshold (VLSBT).(community.ato.gov.au)
• Low Income Superannuation Tax Offset (LISTO) enhanced: Threshold raised from $37,000 to $45,000 in income, and maximum LISTO payment increased from $500 to $810, effective from 1 July 2027.(aph.gov.au)

Impacts & Compliance Considerations

• High-balance accounts will see reduced concessional advantage: Super fund holders over $3 million will see higher immediate taxation on earnings above the threshold, which may affect long-term compounding.
• Earnings attribution vs balance snapshot: Tax is based on earnings over the threshold, not the entire super balance. Correctly tracking the TSB at end of financial years is crucial.
• LISTO enhancements help low earners: Beneficiaries with income up to $45,000 will receive more super tax benefit from July 2027, helping reduce cost of retirement saving.

Practical Strategies for Super Accounts

1. Monitor super balance carefully: Project your growth trajectory; if likely to exceed thresholds, consider timing contributions or pension conversions before threshold effects materialize.
2. Consider split-balance strategies: Using spouse contributions or non-concessional strategies to even out balance or reduce taxable earnings.
3. Evaluate product structures: Some super fund investment options may generate high earnings volatility — choosing more stable earnings or diversified portfolios may reduce exposure to the Division 296 tax.
4. Ensure you receive LISTO benefits: Low income earners should keep records and check entitlements post law change; adjust withholding if needed.

Example Cases

• Carol, whose super account balance is $3.5 million at 30 June 2026. Earnings above the $3 million threshold will be taxed at 15 %. If at 30 June 2027 her balance hits $10.5 million, earnings above $10 million will incur an extra 10 %.
• David, earning $42,000 per year. Under new LISTO settings from 1 July 2027, he’s eligible for more offset, increasing his tax-effectively lower super tax rate, and boosting retirement savings.

Steps to Stay Ahead

• Review your super fund’s earnings reports to gauge exposure.
• Plan large voluntary contributions before balance exceeds threshold if feasible.
• For fund managers, ensure systems are ready to apply new thresholds and tax rates from 1 July 2026 and 2027.
• Low income earners should check with their ATO digital services and tax agents to claim the enhanced LISTO.

Compliance Reminders

• Accurate record-keeping of super balances at financial-year end is essential.
• If Bill is passed, ensure your fund correctly calculates earnings above thresholds.
• Be aware of timing lag: when a threshold is exceeded, tax applies moving forward on earnings, but not retrospectively.

Takeaways

If your superannuation balance is heading toward or exceeding $3 million—or especially $10 million—strategic planning is required to mitigate additional tax liabilities. Low income earners meanwhile stand to gain from expanded super tax offsets. Understanding when changes take effect will be critical.