The federal government has announced major changes to its superannuation tax policy, including scrapping a proposed tax on unrealised gains and indexing a $3 million threshold that would have likely captured thousands more of Aussie workers.

Treasurer Jim Chalmers said the government would also increase the low-income superannuation tax offset (LISTO) by $310 to $810 from July 1, 2027, and raise the eligibility threshold from $37,000 to $47,000.

Chalmers said the change was a part of a plan to “help low-income workers earn more, keep more of what they earn and retire with more too”.

“This will help deliver a more secure retirement for 1.3 million Australians, of which around 60 per cent are women, with the total number of Australians eligible for LISTO increasing to 3.1 million,” he said.

“This change will ensure low-income workers receive a fairer tax concession on their super contributions to align with the Government’s third round of tax cuts taking effect in 2027.

“It will benefit all workers with incomes between $28,000 and $45,000, with an average increase in the LISTO payment of $410.

“These workers could receive a potential benefit at retirement of around $15,000 depending on an individual’s income over their career.”

Chalmers has backed down on two of the policy’s most controversial aspects by indexing the $3 million threshold, adding a $10 million threshold (also to be indexed) and taxing only realised gains.

The original $3 million threshold, as planned, would not have been indexed, which would have captured more people in the tax over time.

The proposal also would have targeted unrealised gains, such as the increase in value of a property, even if the asset had not been sold and therefore subject to capital gains tax.

“For earnings on super balances between $3 million and $10 million, the rate remains 30 per cent,” he said.

“The rate for over $10 million becomes 40 per cent.

“This is still a concessional tax arrangement but it’s better targeted.”

The changes will come into effect from July 1 in 2026.

Mary Delahunty, CEO of superannuation peak body ASFA, welcomed the changes.

“It’s vital that the super system is equitable and sustainable, and the changes proposed today by the treasurer are important moves to achieving those goals,” Delahunty said.

“The proposed changes to tax concessions on earnings in accounts with more than $3 million and $10 million will require Australia’s superannuation funds to do extra work, but we will work with treasury and the Australian Tax Office on behalf of the sector to make sure the changes are smooth and achievable for our member funds.

“We look forward to taking part in treasury’s consultations on behalf of the sector, to ensure these proposals for a fairer super system are enacted.”