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The Australian government has announced a sweeping overhaul of its superannuation tax system, introducing reforms aimed at making the retirement savings framework fairer and more sustainable. Among the most notable changes are the scrapping of the proposed tax on unrealised gains and the indexing of the $3 million threshold — a move that will prevent thousands of additional Australians from being taxed in the future.
Treasurer Jim Chalmers revealed that the federal government will also increase the Low-Income Superannuation Tax Offset (LISTO) by $310, bringing it to $810 from July 1, 2027. In addition, the eligibility threshold will rise from $37,000 to $47,000, helping more low-income Australians benefit from the scheme.
“This will help deliver a more secure retirement for 1.3 million Australians, around 60 per cent of whom are women, increasing the total number of people eligible for LISTO to 3.1 million,” Chalmers stated. He emphasized that the reforms are part of a broader plan to “help low-income workers earn more, keep more of what they earn, and retire with more too.”
Under the new policy, the government has backed down from two controversial aspects of the previous proposal. The $3 million threshold will now be indexed, and only realised gains — not unrealised ones — will be taxed. Additionally, a $10 million threshold (also indexed) will be introduced, with earnings between $3 million and $10 million taxed at 30 per cent and those exceeding $10 million taxed at 40 per cent.
“This remains a concessional tax arrangement but one that’s better targeted,” Chalmers explained, noting that the reforms will take effect from July 1, 2026.
Superannuation peak body ASFA welcomed the government’s decision, with CEO Mary Delahunty describing the changes as “vital to ensuring the super system is equitable and sustainable.” She added, “We’ll work closely with Treasury and the Australian Tax Office to ensure a smooth transition and to represent our members’ interests in consultations.”
The updated tax structure is expected to significantly improve retirement outcomes for millions of Australians, especially those on lower incomes, while ensuring the long-term sustainability of the nation’s superannuation system.
