The Albanese government's revised superannuation tax legislation has cleared the House of Representatives and now faces its critical test in the Senate, where Labor will need Greens support to pass the measure into law before its proposed 1 July 2026 start date.
What Division 296 Changes
Under the Better Targeted Superannuation Concessions package, investment earnings on super balances above $3 million will be taxed at 30%, double the current concessional rate of 15%. Earnings on balances below that threshold remain at 15%, while a new upper tier will apply a 40% effective rate to earnings on amounts exceeding $10 million.
Both thresholds will be indexed: the $3 million mark rising in $150,000 increments and the $10 million threshold in $500,000 steps. The government estimates fewer than 0.5% of super fund members, approximately 80,000 Australians, will be affected in the 2026-27 financial year.
The Unrealised Gains Retreat
The most significant revision was the removal of taxation on unrealised capital gains. The original proposal drew fierce criticism from across the political spectrum. Former Prime Minister Paul Keating and former ACTU secretary Bill Kelty, both architects of Australia's compulsory superannuation system, publicly opposed the measure. Treasurer Jim Chalmers confirmed the amended legislation would only tax realised earnings: dividends, interest, rental income, and capital gains from assets actually sold.
Political Battle Lines
The Coalition has drawn a firm line against Division 296. Shadow finance minister Jane Hume described it as "a brand new kind of tax, one we haven't seen in Australia before," and pledged the Coalition would repeal the measure if it wins government. Opposition members argued that Labor treats the retirement savings system "like it's their own plaything."
Chalmers has framed the reform as a fairness measure, arguing it makes tax concessions "fairer" while funding increased support for low-income earners through an expanded Low Income Superannuation Tax Offset. From 2027, the LISTO threshold rises to $45,000, making 3.1 million Australians eligible for a government top-up of up to $810.
The Path Forward
Tax professionals have raised concerns about the policy design. The Tax Institute described the consultation process as a "missed opportunity" that replaced "thoughtful policy development with political theatre." Practical questions remain about compliance costs for self-managed super funds and the administrative burden of the tiered structure.
The Greens, whose Senate votes Labor needs, have signalled openness to the revised bill, though they previously criticised the government for "going weak on taxing the wealthy." Whether the measure passes in its current form or faces further amendment remains one of the final significant policy contests before the next election.