iscoverAfter countless months of debate against the government's proposed Div 296 tax, Treasurer Jim Chalmers has unveiled significant changes to the proposed legislation.
‘Common sense’: Government bows to super tax pressure
14 October 2025
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11 minute read
The superannuation and tax community has welcomed the government’s super tax changes announcement with open arms, after months of campaigning against it.
At a press conference yesterday (13 October), Treasurer Jim Chalmers announced that taxing unrealised capital gains would be abandoned, the low-income superannuation tax offset (LISTO) would be increased and the details of the super concessions tax would be revisited.
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Chalmers said the changes would be made with the motivation to deliver more help to low-income workers and reforming the superannuation system to make it “stronger, fairer and more sustainable”.
“We are boosting the low‑income superannuation tax offset (LISTO) and making a number of important changes to better target superannuation concessions for large balances,” he said.
The LISTO was to be increased by $310 to $810 and the eligibility threshold would be increased from $37,000 to $45,000 from 1 July 2027.
According to the government, this would have the effect of improving retirement circumstances for all Australians as the LISTO eligibility would capture up to 3.1 million people.
Chalmers noted that after a significant amount of feedback and debate towards Div 296, the government would look to make “practical changes” to the design and implementation of its policy to “better target” superannuation concessions.
The government would introduce a second threshold to better target super concessions on the earnings of large balances over $10 million, would index the large balance thresholds of $3 million and $10 million and would apply the changes to realised earnings, pushing the start date back one year to consider details and prepare legislation.
“The original model was the best option identified at the time, but we have taken the decision to adjust the model to recognise the views we have heard since then. With these changes we are continuing to deliver on our longstanding commitment to better target superannuation concessions that we took to the last election.”
Chalmers said the announced changes would mean:
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The total concessional tax rate applied to earnings on balances between $3 million and $10 million would be 30 per cent.
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The total concessional tax rate applied to earnings on balances over $10 million would be 40 per cent.
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Both the $3 million and $10 million super balance thresholds would be indexed to maintain relativity with the transfer balance cap introduced by the Coalition.
A welcome change
Following the shock announcement, multiple professional bodies have shared their support for the new direction taken by the government and have said it was “common sense” for these changes to be made.
Richard Webb, CPA Australia superannuation lead, said the government had finally listened to the concerns surrounding the legislation and the outcome would help make the super system fairer and more equitable.
“The indexing of the Division 296 proposal and taxing of realised earnings will ensure that Australia’s superannuation system remains fit for purpose for future generations,” he said.
“If legislated, this change is expected to benefit millions of low-income earners by improving their capacity to contribute to superannuation and build long-term retirement savings.”
CPA also welcomed the changes to the government's plan in taxing unrealised capital gains as part of its superannuation reform.
“This was a particularly egregious element of the government’s initial proposal. Providing certainty and financial stability for this and future generations of retirees is critical. Taxing unrealised gains would have distorted our tax system, which needs broader reform,” Webb said.
In terms of the LISTO eligibility changes, HESTA shared that it was thrilled to welcome the change as it would boost the retirement outcomes of more than a million Australians.
Debby Blakey, chief executive of HESTA, said changes to increase the LISTO eligibility to the second marginal tax threshold of $45,000 and lifting the payment amount in line with SG served as important equity measures.
“The changes announced today will help ensure no working Australian is paying more tax on their super contributions than on their take-home pay,” she said.
“For many years, HESTA and others in the sector have passionately advocated for this reform, which is a significant step forward in addressing the gender super gap that still sees women retire on average with around 25 per cent less super than men.”
“The LISTO is the only tax concession more likely to be paid to women than men, as they tend to have lower incomes than men and face higher effective marginal tax rates than men.”
The Australian Council of Social Service (ACOSS) also weighed in on the conversation and said it welcomed the determination of the government to make superannuation fairer.
The council urged federal parliament and all stakeholders to work together to finalise and support the government's legislation to tax high-wealth superannuation accounts.
“Superannuation was designed to give people a decent retirement – but it is being used by people who are very well-off to accumulate wealth, pass it on to their adult children and avoid tax,” ACOSS said.
“ACOSS has backed the Government’s efforts to make superannuation fairer through the Superannuation Tax Targeting Bill and will continue to do so after the Treasurer’s announcement today of changes to the proposal.”
Despite the wide support from the superannuation community towards the announcement, the Greens shared a different perspective on the matter and said, “It’s clear Labor doesn’t have the guts to tax big corporations and billionaires fairly”.
A further weakening of the system, Greens say
Nick McKim, Greens economic justice spokesperson, said the party would look at the detail of the proposed changes, yet was concerned the government had “further weakened” what should have been a tax to ensure the super wealthy top 0.5 per cent paid their fair share of tax.
“Of course, low-income people need some tax relief on their super contributions. This is something the Greens have called for for some time, so we will run the ruler over the changes to low-income earners’ superannuation,” McKim said.
“Labor has stripped out the tax on unrealised gains and indexed the $3 million threshold, a gift to the super-rich that will cost the budget billions. This is a capitulation to the wealthiest people in the country, and a slap in the face to everyone else who pays their tax straight out of their pay packet.”
Chalmers further revealed that the government would introduce the legislation to implement the changes as soon as possible in 2026.
“These reforms maintain the concessional treatment of superannuation, but ensure it is provided in a more equitable and sustainable way,” he said.
“We’re increasing LISTO, better targeting super concessions, paying super on paid parental leave and introducing payday super, and we have increased the superannuation guarantee to 12 per cent and legislated the objective for superannuation.”
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