What are Division 296 and LISTO?
- Division 296 tax is part of the Better Targeted Superannuation Concessions reforms. It imposes a 15% tax on the earnings portion of a superannuation balance that exceeds AUD 3 million, applying to individuals with large superannuation balances. This tax is separate from standard income tax and will directly apply to the individual.(au.andersen.com)
- LISTO (Low Income Super Tax Offset) is being updated alongside. From 2027-28, the threshold for eligibility rises—from AUD 37,000 to AUD 45,000—and the maximum offset increases from AUD 500 to AUD 810.(macquarie.com.au)
Key Dates & Transitional Rules
| Change | Effective Date |
|---|---|
| Division 296 tax | from the 2025-26 financial year (so applies from 1 July 2025) for relevant super balances, but with notice of assessment timing and reporting via SMSF annual return in 2026 |
| LISTO changes | from 2027-28 financial year |
Who is Affected?
- Individuals with total superannuation balances over AUD 3 million as of 30 June in the prior financial year will face Division 296 tax on the excess portion’s earnings.(ato.gov.au)
- Low-income earners with taxable incomes nearing previous LISTO thresholds might now qualify for larger offsets, helping reduce tax liability.(macquarie.com.au)
Practical Implications & Action Steps
-
Check your super balance now to see if you may exceed AUD 3 million. If close, consider strategies such as:
- Adjusting investment mix to reduce earnings volatility.
- Reviewing contribution patterns—personal, employer, salary sacrifice.
-
Report correctly for SMSFs (Self-Managed Super Funds):
- SMSFs must include two new labels on the SMSF Annual Return (SAR) from 2026 to capture info needed for Division 296 tax.(au.andersen.com)
-
For low income earners: anticipate larger super tax offsets from 2027-28. May enable better cash flow. Plan deductions and income to optimize LISTO benefit.
-
Stay updated on guidance & regulations: Some draft regulations are yet to be finalised, especially around transitional arrangements for Division 296.(macquarie.com.au)
Example Scenario
Jane is 58, has a total super balance of AUD 4 million at 30 June 2025. Her fund’s earnings for the year are AUD 200,000. Under Division 296, she’ll pay 15% on earnings proportionate to the AUD 1 million over the 3 million threshold. So ¼ of earnings (AUD 50,000) taxed at 15%, i.e. tax of AUD 7,500. She’ll receive a Notice of Assessment, payable within 84 days.(ato.gov.au)
Why the Change?
The government aims to make super concessions more progressive, essentially ensuring that tax benefits for large balances are scaled back, while boosting support for low income earners. The changes are also aligned with broader goals of cost-of-living relief and focusing resources on taxpayers with greater capacity.(macquarie.com.au)
Checklists Before Implementation
- Review super fund statements and forecast growth to anticipate exposure.
- Consult with financial advisors on whether to minimize earnings or redistribute balances for large super accounts.
- Low income earners: ensure you understand deduction eligibility to maximise LISTO benefit.
- SMSF trustees: prepare reporting systems for new labels and ensure compliance with assessment notices.
Bottom line: As of 2025-26, Australia is tightening super concessions. If your super balance is large, expect new taxes; if you’re a low income earner, expect stronger offsets. Knowing where you stand today is more important than ever.