This month brought significant developments on proposed superannuation changes.
The Treasurer announced key revisions to the Division 296 tax to address contentious issues. The Government plans to shift from a total balance change method to a fund-level realised-earnings approach, introduce a second $10 million threshold (both thresholds indexed to CPI), and defer the start date to 1 July 2026 for further consultation and implementation.
In addition, legislation has been introduced to Parliament for the Payday Super measure, which will require employers to pay super contributions at the same time as wages, rather than quarterly.
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Inside this month, Jason Hurst (Technical Superannuation Adviser), Michael Carruthers (Tax Director) and Amy Yan (Associate Tax Director) bring you:
On 13 October 2025 the Federal Treasurer announced some significant changes to the design of the proposed Division 296 tax. Some of the key changes are:
Rather than ATO-reconstructed member-level earnings based on balance movements, the revised model moves to a fund-level realised-earnings approach. Funds (including SMSFs) will calculate their taxable/realised earnings for the year, attribute an appropriate share of those earnings to members whose total superannuation balance (TSB) exceeds the lower threshold, and report those figures to the ATO. The ATO will continue to aggregate TSBs across all super interests for each individual and issue any liability notices. This is a practical shift of compliance responsibilities from ATO reconstruction to trustee calculation and reporting.
The tax outcome is progressive across two bands. For the portion of a member's TSB between $3 million and $10 million, an additional 15% tax applies to the attributable earnings (on top of the fund's existing 15% rate). For amounts above $10 million, an additional 25% tax applies to attributable earnings (on top of the fund’s existing 15% rate, bringing the total tax rate to 40%). Both thresholds will be indexed (the $3m threshold in $150,000 increments and the $10m threshold in $500,000 increments).
The start date is proposed to be 1 July 2026 with the first time an individual’s TSB will be assessed against the Division 296 thresholds to be 30 June 2027. This will make 2026-27 the first Division 296 income year with the first assessments to issue in 2027-28.
On 9 October 2025 the Government introduced the Payday Super legislation into Parliament. The new system is proposed to take effect from 1 July 2026 and will basically ensure that employer superannuation guarantee (SG) contributions are paid at the same time as salary and wages and need to be received by the employee’s fund within seven business days. Otherwise, employers face updated superannuation guarantee charges (SGC).
The ATO is also reminding taxpayers that they will retire the Small Business Superannuation Clearing House (SBSCH) platform from 1 July 2026 for all users and alternative options should be sought to ensure compliance with the new Payday Super laws.
The ATO has issued a draft Practical Compliance Guideline PCG 2025/D5 which outlines a risk-based compliance approach for the first year of Payday Super (1 July 2026 to 30 June 2027). Further details on the legislation and draft PCG can be found below.
The Government has announced proposed changes to the low-income superannuation tax offset (LISTO) from 1 July 2027.
The maximum LISTO payment will increase by $310 to $810, and the eligibility threshold will rise from $37,000 to $45,000.
Draft legislation is expected to be introduced in 2026 for consultation.
The ATO has issued PCG 2025/D5 which outlines when the ATO is likely to apply compliance resources in the first year of Payday Super (FY 2027), and the risk framework that will be adopted.
Employers are categorised into three risk zones:
The ATO will prioritise compliance resources on high risk employers. Medium risk cases may be investigated, but with lower priority.
Employers may shift risk zones during the year, with compliance reviews applied only to medium or high risk qualified earnings days.
The draft document suggests that the ATO will be lenient to some extent when it comes to employers who make a genuine effort to comply with the new rules, at least until 30 June 2027.