The Labor government has backed down from several controversial features of its high-balance superannuation tax introduced two years ago, cancelling the plan to tax unrealised gains and introducing indexation to the $3 million threshold.  

But announcing the concessions on Monday, Treasurer Jim Chalmers has stopped short of admitting to any missteps in the original policy design and stated that the government “found another way to satisfy the same objectives”. As a result of the adjustments, the new tax regime will begin a year later on 1 July 2026.  

“This is a government which takes feedback seriously, which works through issues and advice in a methodical and a considered way, and you’re seeing the fruits of that today,” he said at a press conference in Canberra. 

Chalmers first flagged the high-balance super tax, or Division 296 changes, at the 2023 Conexus Financial Political Series. The updated policy will introduce six major changes, including a new $10 million balance threshold. 

The concessional tax rate will be 30 per cent for earnings on balances between $3 million and $10 million, and 40 per cent for earnings on balances above $10 million. Both thresholds will be indexed to address so-called ‘bracket creep’ fuelled by inflation.  

“We have always had in our back pocket… an indexation like this, in order to get it through the Parliament. We have also always said to you, publicly and privately, that we expect future governments would have lifted the old threshold. Here we are indexing that to make that clear,” Chalmers said. 

The calculation method on earnings will also be changed to only account for future realised earnings on large balances, and the Treasury plans to consult on best formulas and ways of assigning the earnings to individual fund members.  

At the press conference, questions were raised about super funds’ capacity to process the calculation and attribution of earnings to high balance members, recognising the compliance cost, but Chalmers said that he is confident that there is “a way through” after having a conversation with selected funds and peak bodies.  

He rejected the suggestion that the policy backflip indicates Labor is backing down from difficult, but meaningful tax reform. 

“I don’t accept the characterisation that any of this [tax change] is simple, or easy, or uncontested – it always is [contested],” he said. 

“The difference between a Labor Treasurer and a Coalition Treasurer is we take our responsibility to superannuation seriously, and that means making the necessary changes and some of them are hard.” 

Shadow Treasurer Ted O’Brien called the policy adjustments “publicly humiliating” for Chalmer. 

“We have known for a very long time that this tax is very bad for Australians, but the treasurer refused to budge,” he said in a press conference from Queensland.  

“Finally, the government has made the right decision to dump its superannuation tax regime that it was planning on introducing.” 

On the other end of the spectrum, Chalmers announced changes to the low‑income superannuation tax offset (LISTO) which will see the annual payment lifted from $500 to $810, and the eligibility threshold raised from individuals with a yearly income of $37,000 to $45,000 from 1 July 2027.  

The adjustment will see the total number of Australians eligible for LISTO increasing to 3.1 million, Chalmers said.  

Around 8,000 Australians hold more than $10 million in super, representing less than 0.1 per cent of Australians with super, according to superannuation industry group ASFA. 

ASFA CEO Mary Delahunty said reforms on both and high and low-end of the superannuation balance spectrum will ensure a “fair and more sustainable” system. 

“The proposed changes to tax concessions on earnings in accounts with more than $3 million and $10 million will require Australia’s superannuation funds to do extra work, but we will work with Treasury and the ATO on behalf of the sector to make sure the changes are smooth and achievable for our member funds,” she said.