At midday on 13 October 2025, Treasurer Jim Chalmers announced significant revisions to the proposed Division 296 tax, marking a major shift in the treatment of high-balance superannuation accounts and a clear win for SMSF trustees, financial advisors, and superannuation members across Australia.
The Government’s updated approach introduces several pivotal changes aimed at improving fairness, simplicity, and sustainability in the system:
Tax limited to realised earnings — only future realised gains will be taxed, removing the controversial plan to tax unrealised capital gains.
The tax rate applied to earnings on balances between $3 million and $10 million will be 30 per cent, up from 15 per cent.
Indexed thresholds — the $3 million threshold will now be indexed, protecting more Australians from being gradually captured by the regime over time.
New $10 million tier introduced — earnings above this level will attract a 40% tax rate up from 15% and the $10m threshold will be indexed.
Start date delayed — implementation deferred by one year to 1 July 2026, giving industry and trustees additional time to prepare.
Defined benefit pensions included — ensuring consistent treatment across different super structures.
Boost for low-income earners — the Low Income Superannuation Tax Offset (LISTO) will rise to $810 (from $500), and the eligibility threshold increases to $45,000.
Today’s announcement represents a major victory for common sense and the many advocates who highlighted the inherent flaws of taxing unrealised gains; a move that threatened liquidity, fairness, and trust within the superannuation system.
By returning to a tax on realised earnings, the Government has reinforced the importance of certainty and integrity in retirement savings policy. For SMSFs, this shift ensures that tax liabilities will be aligned with actual cash outcomes, rather than fluctuating market valuations.
While this update provides welcome clarity, many questions remain about how this will operate in practice. The industry now awaits draft legislation and consultation materials to understand:
How “realised earnings” will be defined and calculated.
How the rules will apply to complex structures such as SMSFs, pooled super funds, and defined benefit schemes.
The treatment of transitional balances and how past unrealised gains might be handled.
The sector’s focus will now turn to ensuring that the final framework is not only equitable and practical, but also sustainable for the long term.
The Division 296 update is a positive and pragmatic development that restores confidence in the superannuation system. The decision to index thresholds, defer implementation, and abandon taxation of unrealised gains shows a clear willingness to listen to industry feedback.
However, as with all reforms of this scale, the devil will be in the detail. Ongoing consultation will be critical to ensuring that Division 296 achieves its intended goals without creating new complexity or inequity.
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