Unrealised Gains Axed: Two‑Tier Super Tax Lands for 2026
14 Oct 2025
The reform that blinked — and what it means now
After two bruising years of debate, Canberra has walked away from taxing unrealised superannuation gains. In its place: a more conventional model that taxes realised earnings on very large balances, adds a higher tier over $10 million, and indexes the thresholds so more Australians aren’t dragged in by inflation alone. For small businesses and SMSFs across Miranda and Southern Sydney, this is a material shift. Liquidity pressure eases, but timing, thresholds and banded tax now matter a lot more.
“The changes will make the legislation more targeted and ensure the system is stronger, fairer and more sustainable.” — Treasurer Jim Chalmers
What Canberra changed — the facts in brief
Unrealised gains: scrapped. Only realised earnings come into the higher-rate net.
Two tiers: earnings attributable to the portion of your total super balance (TSB) between $3m and $10m are taxed at 30%; earnings attributable to the portion above $10m are taxed at 40%.
Indexation: both thresholds will be indexed, reducing bracket creep from inflation.
Start date: targeted for 1 July 2026 (subject to legislation).
LISTO lift: the Low Income Superannuation Tax Offset increases to $810, with income eligibility rising to $45,000 from 1 July 2027 if legislated.
These changes narrow the target to a small cohort at the very top, while boosting fairness for low‑income workers.
Who’s actually affected?
Let’s keep it simple. Think in slices of balance, not your whole fund:
First $3m of your TSB: taxed under the usual super settings (unchanged by this package).
$3m to $10m slice: earnings attributable to this slice are taxed at 30%.
Over $10m slice: earnings attributable to this slice are taxed at 40%.
This is not a flat 30% or 40% on your entire earnings — just the pieces of earnings linked to the balance above the thresholds.
How the math works (no jargon)
Example 1 — TSB $4.5m; fund earnings $225k (5% proxy):
First $3m: taxed under existing settings.
Next $1.5m slice: the earnings attributable to this slice are taxed at 30%.
Example 2 — TSB $12m; fund earnings $600k (5% proxy):
First $3m: existing settings.
$7m slice ($3m→$10m): attributable earnings taxed at 30%.
$2m slice (over $10m): attributable earnings taxed at 40%.
Because the $3m and $10m markers are indexed, fewer people drift into the higher bands from inflation alone. But if your assets grow faster than CPI, more of your earnings will still move into the higher bands over time.
Voices around the change
The politics cooled, but didn’t disappear.
“This is a package that deals with the core policy problem… the best place to start was the very high balances.” — Assistant Treasurer Daniel Mulino
“It wasn’t our preference… we wanted to see fairness in the system.” — Cassandra Goldie, ACOSS
“Governments should be able to change their mind and fix legislation when they get it wrong.” — Independent MP Kate Chaney
These reactions sketch the spectrum: design fixed, fairness still contested, and details to be scrutinised in the bill.
SMSFs: liquidity lives to fight another day
For property‑heavy or private‑asset SMSFs, scrapping unrealised gains removes the nightmare of paying annual tax on paper valuations. That’s the immediate relief. The new job is planning realisations:
Sale timing matters. Triggering a large gain after 1 July 2026 could push a bigger share of earnings into the 30%/40% bands if your TSB straddles those thresholds.
Sequencing helps. Consider staging disposals across years to smooth band exposure.
Pension vs accumulation mix still shapes your baseline — the reform overlays, it doesn’t replace, those settings.
For owners in Miranda and greater Southern Sydney, the practical upshot is calendar‑aware decisions rather than forced liquidity or fire sales.
For lower‑income workers: LISTO gets a real lift
LISTO increases to $810 and the income cap moves to $45,000 from 1 July 2027 (pending passage). For casuals and part‑timers, that’s not just a line in a press release — it offsets contributions tax and keeps compounding on track. In a tight labour market, it’s also a simple lever for employers to discuss super with their teams in good faith.
Business owners: what to do before 30 June 2026
You don’t need a 40‑page strategy — just a clean plan:
Project your TSB to 1 July 2026 and FY27 under conservative returns. If you’re near $3m or $10m, the slice exposure matters more than the headline balance.
Check realisation timing. If you’ve got embedded gains (e.g., business premises in an SMSF), model pre‑ and post‑1 July 2026 sale scenarios to see how banding shifts your effective rate.
Refresh your contribution/pension mix. The basics still drive most outcomes; the new bands just sit on top.
Hold your nerve. The scope is narrow. If you’re well under $3m, the headline fight is mostly noise; LISTO and contribution hygiene will matter more for you and your staff.
What to watch next
The bill and Explanatory Memorandum. This is where attribution mechanics, indexation detail and anti‑avoidance guardrails will live.
Senate maths. Expect negotiations around fairness and revenue; crossbench positioning will matter.
SMSF guidance. Watch for clarifications on event‑based income, valuation timing and record‑keeping during transition.
Editorial: A cleaner fix—just mind the creep
Here’s where I land (and where we’ll steer client conversations):
Realised over unrealised is the right call. Tax should follow cash events, not paper marks. Scrapping unrealised gains removes the liquidity cliff that would have punished SMSFs holding property and private assets.
Indexation helps, but it’s not a force field. CPI-linking the $3m/$10m thresholds is sensible; still, asset prices don’t always move with CPI. Without periodic review, more earnings can drift into higher bands simply because portfolios outpace inflation.
Keep the rules simple. The attribution mechanics for banded earnings need to be clear and automatable. If it takes bespoke spreadsheets to comply, we’ve missed the point.
Fairness cuts both ways. The cohort hit is small, but the symbolism is loud. We should avoid policy-by-envy while still protecting revenue integrity—close gaps, don’t punish good saving.
Predictability matters more than point-scoring. Give funds enough lead time, stable rules, and early worked examples. Constant tinkering burns trust and drives perverse timing decisions.
LISTO is a quiet win. Lifting the offset and eligibility puts real money back into low‑income workers’ super. Implementation should be visible on payslips and easy to understand.
As legislation lands, our bias will be boring and practical: model balances, sequence realisations, document decisions, and keep cash flow king. That’s how you lower risk without losing sleep.
Bottom line
The liquidity cliff has gone; the calendar and the balance slices now do the heavy lifting. If your TSB sits near the thresholds, timing and sequencing of realisations will be your biggest levers. If you’re a smaller balance or an employer, LISTO is the quiet win — and a reminder that good super settings are part of a healthy payroll rhythm.
If you want this mapped to your numbers, we can run a side‑by‑side comparison of pre‑ and post‑1 July 2026 outcomes for your fund or SMSF, including disposal timing.
Trident Accounting — practical super and tax advice for Australian small businesses.
Written by Aidan Walmsley