Div 296 officially introduced to parliament

On Wednesday (11 February), Treasurer Jim Chalmers introduced the Superannuation (Building a Stronger and Fairer Super System) Imposition Bill 2026 to parliament, which included the government’s Div 296 tax and updates to the low income super tax offset (LISTO).

Chalmers said the bill would make the superannuation system fairer by paring back tax concessions for larger balances and increasing the LISTO threshold from $37,000 to $45,000, matching the top of the second income bracket.

“From 1 July 2026, superannuation tax concessions will be made fairer and more sustainable by reducing tax breaks for those with balances over $3 million,” Chalmers said of the changes.

“These changes are consistent with the legislated objective of superannuation, to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way.”

Under the proposed Div 296 bill, an additional 15 per cent tax will be applied to the earnings of super balances above $3 million, and an additional 10 per cent tax on earnings of balances above $10 million.

The median super balance for Australians aged 60-64 was $189,618 in 2023, according to the Association of Superannuation Funds of Australia (ASFA). For a comfortable retirement, ASFA recommends singles to have $595,000 in superannuation savings by 67.

The proposed Div 296 tax has been contentious amongst tax professionals. In October, the government moved to scrap controversial aspects of the tax, including its application to unrealised gains and the lack of indexation of the $3 million threshold.

In December, Treasury released the updated draft bill for consultation, allowing industry members to contribute feedback from 19 December to 16 January. This sparked criticism that the consultation period had been rushed.

The updated draft bill no longer applied the Div 296 tax to unrealised gains, included an additional tax on balances above $10 million, and stipulated that the $3 million and $10 million thresholds would be indexed to inflation. It also included some technical tweaks, following industry feedback.

The Liberals and Nationals are opposed to the Div 296 bill, meaning that Labor would need the support of the Greens to pass it through the Senate.

The Greens have demanded stronger taxation of wealthier superannuation balances and argued that the decision to amend the tax so as not apply to unrealised capital gains significantly reduced the effective tax rate paid by those with high superannuation balances.

If passed in the Senate, the Div 296 bill would take effect from 1 July 2026.

The Super Members Council welcomed the government’s push to unfreeze the LISTO, calling it a “historic reform” that would lift the retirement incomes of the lowest paid workers across Australia.

“Unfreezing the LISTO will give 1.3 million low-paid workers right across Australia, mostly women, a much stronger retirement and more income to live on every single fortnight,” SMC chief executive Misha Schubert said.

“We especially welcome the Government’s decision to peg the LISTO payment rates and thresholds with the personal income tax thresholds and the Superannuation Guarantee rate. This will help to protect against the LISTO’s value eroding over time.”