Government implements $3 Million Super Tax Amid Stakeholder Pressure
The Albanese government’s controversial plan to impose a new tax on superannuation balances above $3 million is under active review, following mounting pressure from stakeholders and internal discussions within Treasury and the Prime Minister’s Office.
At a Senate estimates hearing last week, Diane Brown, deputy secretary of the Treasury’s revenue division, confirmed that Treasury had held conversations with the Prime Minister’s office regarding the proposed legislation. While Brown declined to detail the substance of those talks, she acknowledged that Treasury had conducted modelling in response to stakeholder concerns.
“Stakeholders have raised concerns with us. In order for us to understand it better, we might have done some modelling, and that is for us to provide good advice to government,” Brown said.
Despite the modelling, Brown stated that no formal decision had been made to amend the bill, which remains unlegislated more than two years after it was first announced by Treasurer Jim Chalmers.
What Is the New Division 296 Tax?
The Better Targeted Superannuation Concessions Tax (BTSC Tax), commonly referred to as Division 296, is a new tax proposed by the Labor government. Updated details were released on 13 October 2025.
If legislated, Division 296 will apply to individuals with superannuation balances exceeding $3 million. It introduces a tiered tax structure:
- 30% tax on earnings from balances between $3 million and $10 million (an additional 15% above the current rate).
- 40% tax on earnings from balances above $10 million (an additional 25%).
Key features of the tax include:
- Indexation of the $3 million threshold.
- Tax applies only to realised earnings, not unrealised gains.
- Implementation date set for 1 July 2026.
- Division 296 is a personal tax, separate from the existing super fund tax, and applies to individuals regardless of whether they invest via an industry fund or a self-managed super fund (SMSF).
As part of the reform, the government will also increase the low-income superannuation tax offset from $500 to $810, and raise the eligibility threshold from $37,000 to $45,000.
Why the Review Matters
Concerns about the original proposal centred on:
- Liquidity risks from taxing unrealised gains.
- Compliance burdens for SMSFs holding illiquid assets.
- Bracket creep due to the lack of indexation in earlier drafts.
Stakeholders including the SMSF Association, CPA Australia, and the National Farmers’ Federation have voiced strong opposition, particularly regarding the impact on self-managed super funds and rural asset holders.
In response, the government has retreated from taxing unrealised gains and introduced the tiered structure and indexation. Treasurer Chalmers has denied being “rolled” by the Prime Minister, stating that the changes were the result of “considered and methodical” discussions.
Political and Economic Implications
The revised plan is expected to raise significantly less revenue than the original proposal—around $2 billion over the forward estimates, down from $6.2 billion. The delay and concessions have created a $4.2 billion budget hole, although the government argues that the reforms remain fiscally responsible.
Public polling continues to show support for cracking down on ultra-large super balances, but critics warn that constant tinkering risks undermining trust in the superannuation system.
What’s Next?
The legislation is expected to be introduced in early 2026, with the government seeking support from the Greens and crossbenchers to pass the bill. The Greens have expressed concern that the revised plan may be too lenient, while the Coalition remains opposed to the concept of taxing unrealised gains altogether.
As the debate continues, advisers and clients with large super balances should prepare for further scrutiny and potential changes. Treasury has confirmed that stakeholder engagement will remain ongoing until the bill is legislated.