You may have read my earlier post in June this year about the proposed Division 296 Tax for super balances over $3 million. At the time, the proposal included taxing not only actual earnings (like interest or dividends) but also unrealised gains — that is, taxing increases in investment value that hadn’t yet been cashed in. In short, that concept tanked. The government has now bowed to political pressure and listened to persistent pleas from industry professionals (including yours truly) and announced a more common sense approach: the tax will apply only to actual earnings, not unrealised gains. Additionally, the thresholds will be indexed to inflation.[1]
Here’s how it will work now
If your super is under $3 million, nothing changes.
If your balance exceeds $3 million, earnings on the portion above that threshold will be taxed at 30%.
If you’re balance exceeds $10 million, earnings on the portion above that will be taxed at 40%.
It’s a tiered system, so only the portion above each threshold is taxed at the higher rate—not your entire balance.
Common-sense changes introduced
In addition to scrapping the tax on unrealised gains, the other major update is that the $3 million and $10 million thresholds will now increase over time with inflation. That means Australians won’t be penalised simply because their super grew naturally over time.
The start date has also been pushed back to 1 July 2026, giving those affected more time to prepare.
The bottom line
For most Australians – unless your super balance is well into the millions – these latest changes are unlikely to affect you. But if you’re in that high-balance group, even with the most controversial elements removed, it’s still worth discussing strategy with a financial adviser to ensure you’re ready.
If you need advice, I’m here to help. To make an appointment, call me at Align Financial on (02) 9913 9995.
[1] Treasury portfolio media release dated 13 October 2025 is available online at https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/media-releases/reforms-support-low-income-workers-and-build-stronger
