BY WEALTH ADVISER
David and Michelle sit across from each other at the kitchen table on a Sunday evening in late June, laptops open, trying to make sense of what’s about to change. David earns $92,000 as a project manager. Michelle works three days a week in aged care, earning $41,000. Between them, they have a mortgage, two teenagers, and a combined super balance that’s finally starting to look like something.
From 1 July 2026, a cluster of changes to tax and superannuation take effect — a personal income tax cut, higher contribution caps, payday super, and the new Division 296 tax on very large super balances. Alongside these, the first superannuation payments on government Paid Parental Leave will also start landing in super accounts from July 2026, following a reform that took effect for births and adoptions from 1 July 2025. Some of these changes will put a few extra dollars in the household’s pockets. Others will change how and when super arrives. One won’t affect David and Michelle directly, but it signals a shift worth understanding regardless.
What’s unusual about this period isn’t any single change in isolation. It’s that so many are arriving in the same window, and for households like David and Michelle’s, several of them interact. Here’s what’s happening, what it means, and where it creates planning opportunities worth discussing with your adviser.
A small tax cut that reaches further than it looks
The most immediate change is a reduction in the personal income tax rate for the second bracket — the one covering taxable income between $18,201 and $45,000. That rate drops from 16 per cent to 15 per cent on 1 July 2026, with a further reduction to 14 per cent from 1 July 2027.
In dollar terms, the maximum benefit is $268 per year — roughly $5 per week — for anyone earning $45,000 or more. That’s not a figure that changes anyone’s life. But it applies to every taxpayer who earns above the tax-free threshold, because Australia’s progressive system means even high earners pay the lower rate on that slice of their income.
For Michelle, earning $41,000, the saving is around $228 per year. For David, earning $92,000, it’s the full $268. Combined, the household is roughly $496 better off — enough to notice, not enough to celebrate. The practical value lies less in the amount itself and more in how it interacts with other decisions. A small increase in take-home pay can make it marginally easier to redirect money into super via salary sacrifice, particularly with the higher contribution caps now available.
Those caps are worth noting. From 1 July 2026, the concessional (before-tax) contribution cap rises from $30,000 to $32,500 per year, and the non-concessional (after-tax) cap increases from $120,000 to $130,000. The general transfer balance cap — the limit on how much can be moved into the tax-free retirement phase — also rises from $2.0 million to $2.1 million. For anyone with unused carry-forward concessional cap amounts from 2020–21, this is the last financial year to use them — they expire permanently on 30 June 2026.
Payday super: your contributions arrive faster
From 1 July 2026, employers must pay superannuation guarantee (SG) contributions at the same time as salary and wages, with funds required to reach the employee’s account within seven business days of each payday. This replaces the existing quarterly system, under which employers have up to 28 days after the end of each quarter to make SG payments.
For employees, the change is straightforward: super gets invested sooner. Under the old system, an employer could legally hold SG contributions for up to four months before they reached your fund. Over a working life, the compounding benefit of receiving contributions fortnightly rather than quarterly is meaningful — Treasury estimates it could add thousands of dollars to retirement balances for younger workers.
The change also makes it easier to spot when something has gone wrong. Under the quarterly system, many employees had no idea their employer was behind on super until the annual statement arrived. With payday super, contributions should appear in your fund within days of each pay cycle. If they don’t, the gap is visible much sooner, and the ATO will have real-time visibility of late or missing payments from day one.
This was covered in detail in a previous article in this series, so for the full picture of how payday super works, what employers need to prepare, and how it interacts with salary sacrifice arrangements, that earlier piece is worth revisiting.
For David and Michelle, the practical effect is simple: both should see super contributions appearing in their fund accounts within a week of each payday, rather than arriving in a lump every few months.
Parental leave super: closing a gap that shouldn’t have existed
Paid Parental Leave has attracted a 12 per cent government super contribution for children born or adopted from 1 July 2025, with the ATO paying that contribution directly to the recipient’s super fund after the end of the relevant financial year. The first payments will land from July 2026. From 1 July 2026, the Parental Leave Pay entitlement itself increases from 24 weeks to 26 weeks.
This is a structural reform, not a windfall — but the numbers are more meaningful than many people realise. At the current Parental Leave Pay rate of $948.10 per week, a full 24-week entitlement generates roughly $2,730 in super contributions before any future minimum-wage indexation. On 26 weeks, that figure rises to around $2,960. Over a lifetime, the compounding effect is more significant again — the Super Members Council estimates that a mother of two children could be around $14,500 better off at retirement as a result.
The rationale is that time spent on government-funded parental leave should be treated the same as time spent at work, at least as far as super accumulation is concerned. For years, PPL was one of the few forms of income that attracted no SG — a gap that disproportionately affected women, who take the vast majority of parental leave. One detail worth noting: the PPL super contribution counts toward your concessional contributions cap, so anyone combining employer super, salary sacrifice, and PPL super in the same financial year should check that the total stays within the $32,500 limit.
This change was also covered in an earlier article. The key point for households planning ahead is that parental leave no longer creates a complete gap in super accumulation. It’s a smaller contribution than most employees receive from their employer, but it’s no longer zero.
Division 296: a new tax on large super balances
From 1 July 2026, Australians with total super balances above $3 million will face an additional 15 per cent tax on the proportion of their earnings attributable to the amount above that threshold — bringing the effective rate on those earnings from 15 per cent to 30 per cent. For balances above $10 million, a further 10 per cent applies, bringing the rate to 40 per cent. Both thresholds are indexed to CPI in increments of $150,000 and $500,000 respectively, so they will rise over time.
The legislation — the Treasury Laws Amendment (Building a Stronger and Fairer Super System) Act 2026 — passed Parliament in March 2026, after more than three years of consultation and redesign. A significant change from the original 2023 proposal is that the tax now applies only to realised earnings, not unrealised or “paper” gains. This was the industry’s central objection, and the government accepted it.
The first measurement point is 30 June 2027, meaning the earliest any tax liability could arise is the 2026–27 financial year. Treasury estimates that fewer than 0.5 per cent of Australians will be affected at the $3 million level, and fewer than 0.1 per cent at $10 million.
For David and Michelle — with a combined super balance well below $3 million — this change has no direct effect. But it’s worth understanding for two reasons. First, super balances can grow over decades, and someone well below the threshold today may approach it by retirement. Second, the change signals a broader policy direction: the government increasingly views super as a retirement income vehicle, not a wealth accumulation tool with indefinite tax advantages. That framing is likely to shape future policy, and understanding it helps when thinking about how much wealth to hold inside super versus outside it.
This was the subject of a detailed article in a previous issue of this series, including the mechanics of the proportional formula, the cost-base reset election for SMSF members, and the transitional rules. Readers with balances approaching $3 million should revisit that piece and discuss the implications with their adviser.
The bigger picture: what does it add up to?
Taken individually, none of these changes is dramatic for most households. A tax cut worth $5 a week. Super that arrives fortnightly instead of quarterly. A parental leave top-up that compounds over decades. Higher contribution caps that matter most to those in a position to use them. A new tax on very large balances that affects a fraction of the population.
Taken together, they represent a meaningful recalibration of the system. Lower earners get more support through the tax cut and — from 1 July 2027 — an expanded Low Income Superannuation Tax Offset (LISTO) that will raise the eligibility threshold from $37,000 to $45,000 and increase the maximum payment from $500 to $810. For Michelle, earning $41,000, that future change alone could be worth several hundred dollars a year in super top-ups. Higher earners retain the core advantages of super but face reduced concessions once balances pass $3 million. And everyone benefits from a system that gets super into accounts faster and closes gaps during parental leave.
For households looking at this from a planning perspective, a few observations are worth flagging. The combination of a small increase in take-home pay and higher contribution caps creates a window for anyone considering salary sacrifice. Even redirecting $20 or $30 per fortnight into super — roughly the value of the tax cut — turns a modest income boost into long-term retirement savings at a concessional tax rate.
The expiry of unused carry-forward concessional cap amounts from 2020–21 on 30 June 2026 is a hard deadline. If your total super balance was below $500,000 at 30 June 2025 and you have unused cap space from that year, this is the last opportunity to use it. After 30 June, those amounts are gone permanently.
And while the increased transfer balance cap of $2.1 million doesn’t affect most working-age Australians today, it may open up non-concessional contribution opportunities for people approaching retirement whose balances have previously been near the threshold. Anyone in that position should check their eligibility before making decisions — the interaction between the transfer balance cap, the total super balance test, and the bring-forward rules can be complex, and getting it wrong has tax consequences.
Back at that kitchen table, David and Michelle don’t need to act on every one of these changes. But understanding how they interact — and which ones create a planning opportunity — is exactly the kind of conversation that makes a financial review worthwhile.
Questions worth thinking about
As you look at these changes in the context of your own situation, a few questions are worth considering before your next review.
Are you making the most of the higher concessional contribution cap — and do you have any unused carry-forward amounts from 2020–21 that expire on 30 June 2026?
If you’re on parental leave or planning to be, do you understand how the new PPL super contribution interacts with your employer’s own parental leave arrangements?
With payday super starting, is your super fund set up correctly to receive more frequent contributions — and do you know how to check that contributions are arriving on time?
If your super balance is growing toward $3 million over the longer term, have you considered the trade-offs between holding wealth inside super versus outside it?
And if someone in your household earns under $45,000, are you aware of the expanded LISTO coming from 1 July 2027 — and is salary sacrifice still the best strategy, or would other contribution approaches deliver a better result?
These are the kinds of questions your adviser can help you work through in the context of your full financial picture.
References
• Treasury Laws Amendment (Building a Stronger and Fairer Super System) Act 2026. Parliament of Australia. Enacted March 2026.
• Australian Taxation Office. “Better targeted superannuation concessions.” Updated March 2026. ato.gov.au.
• Australian Taxation Office. “Payday superannuation announcements.” Updated February 2026. ato.gov.au.
• Treasury. “Low Income Superannuation Tax Offset — Fact Sheet.” October 2025. treasury.gov.au.
• Australian Taxation Office. “Contributions caps.” Key superannuation rates and thresholds. ato.gov.au.
• Fair Work Ombudsman. “Payday Super: New rules starting 1 July 2026.” fairwork.gov.au.
• Colonial First State / AustralianSuper. “Superannuation Changes — Federal Budget 2025–26.” Contribution cap indexation and transfer balance cap increases from 1 July 2026.
• Services Australia. “Paid Parental Leave scheme changes.” Updated March 2026. servicesaustralia.gov.au.
• Australian Taxation Office. “Paid Parental Leave Superannuation Contribution.” ato.gov.au.
• Department of Social Services. “Super on Paid Parental Leave and expansion of the scheme.” dss.gov.au.
