On 13 October 2025, the Government announced important changes to the Better Targeted Superannuation Concessions (BTSC) measure after strong industry feedback.

What are the Changes?

The key change is that the new super tax will now apply only to realised earnings, not unrealised gains. This is a major shift that addresses one of the biggest concerns raised by superannuation funds and advisers.

From 1 July 2026, Division 296 will introduce an additional tax on earnings from superannuation balances above $3 million. The updated structure will be:

  • Balances between $3 million and $10 million: 30% total tax on the proportion of earnings in this threshold;
  • Balances above $10 million: 40% total tax on earnings above the threshold; and
  • Both thresholds will be indexed to inflation.

The biggest improvement is that the new tax will only apply to realised earnings, meaning you will only be taxed when an asset is sold, or cash is received. Under the original proposal, the tax would have applied to unrealised gains, meaning people could have faced a tax bill even if they hadn’t sold any assets or received any cash.

Previously, if a super fund owned a property worth $4 million that went up in value by $500,000 in a year, the fund could have been taxed on that unrealised gain even though the property wasn’t sold and no cash was available to pay the tax. Under the revised version, the tax will only apply when the asset is sold, and the gain is realised.

This change brings the proposal back in line with normal tax principles and removes the risk of people being forced to sell assets just to cover a tax bill.

Division 296 will mainly affect people with superannuation balances above $3 million, typically high-net-worth individuals, business owners, self-managed super fund members and professionals with large employer contributions. It is estimated that this includes less than 90,000 superannuation accounts (ABC News, 2025). The addition of indexation means these thresholds will rise over time so that the measure continues to target only very large balances.

Overall, those with large super balances should still review their super structure and long-term plans before 1 July 2026 to understand the potential impact and prepare early.

Issues

There are still unanswered questions regarding the proposed changes. For example, how does CGT discounting apply to the new thresholds?

It will also require changes to the ATO Self-Managed Superannuation Fund (SMSF) reporting forms because while member balances are reported, splits between unrealised and unrealised gains will need to be split out and reported separately to the ATO.

Finally these changes will make it tax inefficient to hold investment assets in a superannuation fund – especially for those funds with balances over $10 million. Members will be better off holding their investment balances in a company or via a trust structure.