$3 Million Super Tax Bill Passes Lower House, Heads to the Senate
The Building a Stronger and Fairer Super System Bill 2026 passed the House of Representatives on Thursday 5 March and will now move to the Senate for consideration.
If Parliament passes the legislation, the changes will reduce the tax concessions currently available to individuals with very large superannuation balances.
What the proposed changes mean
Under the revised legislation, individuals with a total superannuation balance above $3 million would pay additional tax on a portion of the earnings on those balances.
The updated bill introduces two thresholds.
Balances between $3 million and $10 million
Individuals with super balances above $3 million would pay an additional 15 percent tax on earnings, calculated based on the proportion of their total balance that exceeds the $3 million threshold.
Balances above $10 million
Individuals with super balances above $10 million would pay a further 10 percent tax on earnings on the portion of their balance above the $10 million threshold.
Superannuation funds would calculate the Division 296 earnings attributable to each member and report that information to the Australian Taxation Office.
Changes made to the original proposal
The government revised the legislation after earlier versions of the bill failed to pass Parliament.
The updated version addresses some of the most controversial aspects of the original proposal.
The revised bill introduces a new method for calculating Division 296 earnings, and both thresholds will now be indexed to inflation, meaning they may increase over time.
Ongoing concerns from the industry
Despite these changes, several professional bodies and industry groups have raised concerns about parts of the legislation.
The Tax Institute warned that the proposed Division 296 tax still contains areas of uncertainty.
Julia Abdalla, Tax Counsel at the Tax Institute, said the legislation raises questions about how the tax would apply to deceased estates.
She explained that while the tax would not apply in the first year after a member’s death, it may apply in later years, creating uncertainty for trustees managing estates.
She also noted that the legislation does not provide transitional capital gains tax relief for individuals who later exceed the $3 million threshold.
This means gains that accrued while a member remained below the threshold may still face tax if the balance later exceeds $3 million.
Another concern relates to the lack of clarity around review or appeal rights if a member disagrees with an assessment or if a super fund makes an error when calculating Division 296 earnings.
Proposed amendments rejected
During debate on the bill, several MPs proposed amendments.
Independent MP Allegra Spender proposed allowing younger members affected by the tax to make a one-off withdrawal from their super account.
The Liberal Party also proposed grandfathering existing super balances, which would have limited the new tax to future growth rather than existing amounts.
Parliament ultimately rejected both amendments.
Government’s position
Labor MP Libby Coker said the changes aim to maintain the concessional treatment of superannuation while targeting those concessions more effectively.
She explained that the superannuation system provides tax concessions because it helps Australians build income for retirement.
According to the government, the reforms aim to ensure those concessions remain sustainable and more equitably distributed.