The Albanese government has significantly revised its controversial superannuation tax plan, responding to months of backlash from industry groups, economists, and political opponents. In a dramatic policy shift, key elements of the proposed tax increase have been scrapped, and new concessions have been introduced for low-income earners. The changes, which are set to take effect in 2026, aim to address concerns over the impact on large superannuation balances, while also offering additional support to lower-income workers.
The Reworked Plan: A Response to Criticism
The revised superannuation tax measures have come after sustained criticism, particularly over the original proposal to tax unrealised capital gains. Critics, including industry bodies and former politicians, warned that the tax would disproportionately affect those with illiquid assets like farms or properties.Â
According to Treasurer Jim Chalmers, the government has listened to the feedback, with the most significant change being the removal of the tax on unrealised gains. This policy tweak is expected to reassure individuals with non-liquid assets, who had feared they would be forced to sell property to meet new tax liabilities.
Furthermore, the government has introduced two new tax thresholds for balances exceeding $3 million. From 2026, balances between $3 million and $10 million will be taxed at 30%, while those over $10 million will be taxed at 40%. Both thresholds will be indexed to inflation, addressing concerns about “bracket creep” over time. This decision to index the thresholds aims to prevent more people from being captured by the tax as super balances grow with inflation.
Targeted Support for Low-Income Earners
In a notable shift, the government has increased its support for low-income earners through the low-income superannuation tax offset (LISTO). The LISTO will rise from $500 to $810, and the eligibility threshold will be extended from $37,000 to $45,000. According to government estimates, this change will benefit an additional 1.8 million Australians, with the total number of eligible individuals reaching 3.1 million by 2027. Workers earning between $28,000 and $45,000 will see a significant increase in their superannuation savings, with the potential to accumulate around $15,000 more by retirement.
These reforms represent a shift towards a more equitable superannuation system, where the government aims to provide greater financial security for low-income workers while still targeting the wealthiest superannuation balances. The government has emphasised that the new structure is designed to ensure fairness, with more than 14 times as many Australians benefiting from the LISTO increase compared to those impacted by the changes to large balances.
The government will formally introduce legislation for these reforms in 2026. While the changes are expected to reduce the immediate fiscal impact, the long-term goal remains to create a more sustainable and fair superannuation system.
