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The Albanese Government’s ambitions to reform superannuation taxation — especially targeting the largest super balances — have again been reshaped under political pressure.  After the original plan stalled, Treasurer Jim Chalmers last week unveiled a revised design intended to make the changes more politically palatable.

In this article, our experienced tax accountant team from Infinity Solution Tax Plus explains what’s changed, who will be impacted, where the legislation is heading, and what individuals and businesses should prepare for. If you’re looking for trusted advice from a Box Hill accountant on how these superannuation changes could affect your retirement or investment strategy, this guide is for you.

What Happened: The Rework of the Super Tax Proposal

Original Proposal

• The reform first announced in February 2023 as the “Better Targeted Superannuation Concessions” measure. Its core was to impose an additional 15 percentage points tax on earnings (on top of existing taxation) for parts of a total superannuation balance (TSB) above $3 million. Effectively that portion would be taxed at 30%, rather than 15%.
• A controversial feature was that the measure would apply to unrealised gains (i.e. increases in value not yet sold or converted to cash), raising equity and practical concerns.
• Critics also flagged that the $3 million threshold was not indexed to inflation, meaning over time more Australians would be drawn in (bracket creep).
• Treasury modelling suggested only a small minority (perhaps 80,000 or fewer) would initially be affected — less than 0.5% of super accounts.

Because of intense pushback — from economists, super funds, industry, and crossbench senators — the original proposal never made it to a final vote in Parliament as it “failed to get enough support in the Senate during the last parliament”.

The Revised Proposal

On 13 October 2025, Treasurer Chalmers announced the Government would revise the design of the super tax to address criticisms and improve its prospects of passing. The key changes are:

1. No tax on unrealised gains
   The tax will now only apply to realised earnings — such as interest, dividends, or gains when assets are sold — removing the contentious element of taxing unrealised gains. This practice aligns with other tax concessions, such as the Australian Carbon Credit Unit.
2. Indexing the $3 million threshold
   The threshold at which the higher rate kicks in will now be indexed to inflation, which helps prevent gradual widening of the tax net via bracket creep.
3. Introduction of a higher tier at $10 million
   A new higher tax tier is proposed: for super balances above $10 million, earnings would be taxed at 40%.
4. Enhanced low-income offset / higher threshold
   The Low-Income Superannuation Tax Offset (LISTO) is to be increased from $310 to $810. The income eligibility threshold will also rise from $37,000 to $45,000. These changes will be effective from 1 July 2027.
   It is estimated that more than one million low-income workers (especially in retail, care, or part-time roles) are expected to benefit.
5. Delayed start and reduced revenue expectations
   The revised scheme is now expected to commence from 1 July 2026, if passed by parliament – one year later than initially planned.
   Because of the indexation and removal of unrealised-gain taxation, projected revenue is considerably lower. Some estimates suggest a revenue shortfall of billions relative to the original design. However, this is mainly due to the delayed start date instead of more relaxed measures.

Chalmers said these changes are intended to make the reform more “targeted” and viable politically while maintaining progress on fairness in super taxation.

Who Will Be Impacted

High-Balance Superannuation Holders

• The primary target remains individuals with very large super balances. Under the reworked design, balances between $3 million and $10 million will face the 30% tax on realised earnings, and balances above $10 million will face an even higher 40% rate.
• However, the threshold being indexed and removal of unrealised gain taxation means fewer people over time will be swept into the net than under the original proposal.

Low- and Middle-Income Workers

• Many in lower-income brackets will benefit under the changes to LISTO. Workers earning up to $45,000 will be eligible, receiving larger offsets at retirement.
• This change is particularly aimed at workers who make concessional super contributions, where contributions tax can eat into their returns. The offset ensures their effective net positions improve.

Super Funds, Administrators & Treasury

• Administrative complexity may increase: funds and systems will need to adjust to compute and collect tax on only realised gains, track indexing, and manage multiple tiers.
• Treasury and the government will face trade-offs: with reduced revenue under the new design, the budgetary impact must be managed elsewhere to ensure its sustainability.

Political Stakeholders

• The Greens, crossbench senators, and the Coalition will have increased leverage in negotiating or influencing final tweaks.
• Within Labor there is pressure to avoid a political misstep — this rework reflects the pushback forces at play.

When It Is Likely to Be Legislated & Implementation Timing

• The Government’s revised plan is not yet law. As of 13 October 2025, it is a cabinet-endorsed design requiring passage through Parliament.
• The legislation is expected to commence 1 July 2026 (i.e. for the 2026–27 financial year).
• The first assessments and notices of liability would follow after the first full year of operations.
• Further consultation is planned with the superannuation industry, fund administrators, and stakeholders to refine provisions such as treatment of defined-benefit interests.
• A key success factor will be securing Senate support (or support from crossbenchers). Without that, the bill could stall again.

It’s worth noting that uncertainties remain around timing and detail. The Government may further adjust thresholds, carve-outs, or transitional arrangements during legislative drafting.

Final Thoughts

Sienna Jiang, Managing Director at Infinity Solution Tax Plus, shared her professional insights on the government’s reworked superannuation tax proposal. She explained that the changes highlight the ongoing challenge of balancing revenue generation, equity, and political practicality within Australia’s superannuation system. The original plan, while bold, attracted wide criticism for being too aggressive and unfairly complex. The revised design is more moderate, better targeted, and more politically defensible — but at the cost of budgetary implication and narrower reach.

Ms. Jiang also noted that by shifting the focus to taxing realised gains, the reworked proposal will likely influence investment and asset management strategies for individuals with superannuation balances exceeding $3 million.

From a citizen’s perspective:

• If you hold a super balance well under $3 million, you are unlikely to face direct effects — especially under the new design.
• If you are a low- to middle-income earner, the changes to LISTO and the offset expansion may deliver a modest benefit.
• For high-balance holders, the tax burden will remain real, though more graduated and tempered.

For the legislation to succeed, the Government will need to navigate the Senate, industry pushback, and the constraints on revenue in a tight budget environment. The fate of this reform also signals how ambitious Australia’s broader tax reform agenda may or may not be in the coming years.

At Infinity Solution Tax Plus, our specialised team endeavour to provide you with practical insights into tax policy and business opportunities. If you are seeking expert guidance to structure your tax strategies and secure your financial future with confidence, contact us today — your trusted Box Hill accountant. We at Infinity Solution Tax Plus is ready to support you with reliable, proactive, and results-driven tax solutions tailored to your goals.