From 1 July 2026, major changes to Australia’s superannuation tax system will come into effect, reshaping how higher superannuation balances are taxed. These reforms aim to strengthen the long-term sustainability of the superannuation system while preserving its role as a key retirement savings structure for Australians.

Key Change: Division 296 Tax on High Super Balances

The most significant reform is the introduction of Division 296, a new tax measure applying to individuals with a total superannuation balance above $3 million.

Importantly, this tax does not apply to the entire super balance. Instead, it applies only to the earnings attributable to the portion of the balance above $3 million.

An additional 15% tax will be imposed on those earnings at the individual level. This sits on top of existing superannuation tax rules, meaning the overall impact depends on whether the individual is in the accumulation or retirement phase.

• Accumulation phase: Earnings are generally taxed at 15% within the fund. Division 296 may add an additional 15% on the proportion above $3 million, resulting in an effective tax rate of up to 30% on that portion.
• Retirement phase: Fund earnings are typically tax-free. However, Division 296 may still apply a 15% tax on earnings attributable to balances above $3 million.

This effectively reduces tax concessions for very large superannuation balances, while leaving the majority of members unaffected.

Other Superannuation Changes Coming Into Effect

Alongside Division 296, several other important reforms are being introduced:

• Payday Superannuation (from 1 July 2026): Employers will be required to pay super contributions at the same time as wages, improving timeliness and transparency.
• Superannuation on Paid Parental Leave (from July 2025): Government funded Parental Leave Pay will include superannuation contributions for eligible parents.
• Proposed Low Income Super Tax Offset (LISTO) changes: Adjustments are proposed to increase support for low-income earners by lifting thresholds and payment limits.

What This Means for You

While these reforms target different groups, together they represent a broader shift toward enhanced reporting, compliance, and fairness in the superannuation system.

Key Takeaways

• From 1 July 2026, Division 296 introduces an additional tax on earnings linked to super balances above $3 million.
• The tax applies only to earnings above the threshold, not the full balance.
• Employers will need to pay super contributions at the same time as wages under Payday Super.
• Superannuation will apply to government-funded Parental Leave Pay from July 2025.
• Proposed LISTO changes aim to increase support for low-income earners.
• Early review of super balances and structures is recommended to prepare for the upcoming changes.