The Building a Stronger and Fairer Super System legislation passed through the Parliament on 10 March 2026. It includes two changes to superannuation tax settings, the LISTO and Division 296, impacting two groups of Australians. Here’s a quick explainer to help you understand the changes using case study examples.
1 in 6 workers now benefit from retirement savings boost, 1 in 200 receive lower concessions on investment earnings
ASFA welcomes the passage of the Building a Stronger and Fairer Super System legislation through the Parliament, which includes two sets of changes to superannuation tax settings
The first change strengthens the Low-Income Superannuation Tax Offset (LISTO). Around 3.1 million low-income workers, about 1 in 6 Australians with super, will receive new or higher government contributions into their accounts. The maximum payment will increase from $500 to $810, with eligibility now linked to the upper threshold of the second-lowest tax bracket.
The legislation also introduces a tiered system for taxing earnings on the highest super balances (Division 296 tax), which will affect around 80,000 to 90,000 Australians, roughly 1 in 200 people with super.
How the LISTO boost will work
LISTO is a government payment into eligible members’ super accounts that offsets the 15 per cent tax on contributions to super. It is designed to ensure people in the lowest income tax brackets still receive a genuine tax concession on super, rather than paying a similar or higher rate of tax on super contributions than on their wages.
For example, those earning less than $18,201 are not liable for tax on their wages. However, they pay 15 per cent tax on contributions to super. Without the LISTO, super would be a tax penalty rather than a concession. The LISTO corrects this.
The below case study example shows the LISTO change and impact:
Damon, 35 year-old warehouse worker (earning $44,000)

Damon is a 35-year-old warehouse worker earning $44,000. Previously ineligible for the Low Income Super Tax Offset (LISTO) due to the $37,000 threshold, he will qualify in FY27 when the threshold rises to $45,000.
With a 12% super guarantee, Damon will receive $5,280 in contributions and pay $792 in contributions tax. LISTO is designed to offset this tax, so the full $792 will be credited back to his super account.
ASFA modelling shows that receiving around $790 annually could increase Damon’s projected retirement balance from approximately $293,000 to $342,000 (in today’s dollars). An increase of $49,000.
How the Division 296 tax will work
Currently, earnings on superannuation investments are taxed at a flat rate of 15%, regardless of whether an account holds $10,000 or $10 million.
The Division 296 tax introduces a tiered system for earnings on the high-balance portions of super accounts. Specifically, the tax rate on earnings will increase:
- By an additional 15% (effectively 30%) for the portion of an account balance exceeding $3 million, below $10 million.
- By an additional 25% (effectively 40%) for the proportion of an account balance exceeding $10 million.
The tax will only apply to realised earnings. That is, earnings in cash after an investment asset has been sold, rather than “paper gains” on assets that have not been sold.
The ATO will calculate the liability for the affected 80,000 Australians, who will have the option to pay the tax directly from their super funds rather than out-of-pocket.
The below case studies show the Division 296 changes:
Joan, 50-year-old dermatologist
Joan is a 50-year-old dermatologist with a $3.2M balance in a large, institutional super fund. In 2026-27, her fund reports $250,000 in investment earnings on her account, of which only $125,000 is realised from the sale of investment assets.
The ATO will calculate Joan’s Division 296 tax liability as follows:
- Portion above $3M: $3.2M minus $3.0M = $200,000, which is 6.25% of Joan’s balance.
- Realised earnings attributable to the amount above $3M: 6.25% of $125,000 realised earnings = $7,812.50.
- Additional Division 296 tax (15 per cent of attributable earnings): 15% of $7,812.50 = $1,171.88 (about $1,172).
Joan will pay $1,172 in tax on the $200,000 increase in her balance.

Fred, 62-year-old retiree farmer

Fred, 62, retired from farming last year while his daughters continue to run the business, paying rent to his SMSF, which holds the farm as an investment.
The farm was valued at $3M on 30 June 2026, and in 2026–27 the fund generated $190,000 in net realised earnings from rent, investments and a taxable capital gain.
By 30 June 2027, Fred’s SMSF balance had grown to $4M, placing $1M (25%) above the $3M threshold. As a result, $47,500 of earnings are attributable to this portion, leading to an additional Division 296 tax liability of $7,125 for FY27.
Emily, 55-year-old lawyer
Emily, 55, is a partner at a boutique law firm she founded and has $12.9M in her SMSF as at 30 June 2027. In 2026-27 she sells a business property held in the SMSF and realises $840,000 in taxable capital gains. She sells no other assets.
Of her total balance, $7M sits between the $3M and $10M thresholds (54.26%), while $2.9M is above $10M (22.48%). Applying these proportions to her earnings results in $455,814 attributable to the $3M–$10M portion and $188,837 to the amount above $10M.
Division 296 therefore, applies an additional 15% tax to the first portion ($68,372) and 25% to the amount above $10M ($47,209), bringing Emily’s total additional tax liability for FY27 to $115,581.

For further information and ASFA commentary read ASFA’s media release here.