With a new tax on large super balances many people are asking where the best place is to grow wealth for retirement. The answer for many people is that super remains a great place to grow wealth. In fact, super may now be more attractive than ever before.

The change that affects super

From 1 July 2026, a new tax called Division 296 applies to people with a total super balance above $3 million. A higher tier applies above $10 million. It adds an extra layer of tax on earnings linked to the part of your balance above these levels.

The changes that affect investing outside super

At the same time, the rules for investing in your own name are becoming less generous.

The 50% capital gains tax (CGT) discount is being replaced from 1 July 2027. Instead of halving your gain, you will index your cost base for inflation and pay a minimum 30% tax on the real gain. Negative gearing on residential property is also being limited mainly to new builds.

In short, realising gains on personal investments will often mean paying more tax than before.

Why super looks better by comparison

These CGT changes do not apply to super funds. Super keeps much of its concessional treatment.

Inside super, earnings in the accumulation phase are taxed at just 15%. Earnings supporting a pension are generally tax free. Super funds also keep the one third CGT discount on assets held longer than 12 months. This means that capital gains on assets held for longer than 12 months in accumulation are effectively taxed at 10%.

However, keep in mind if you have a super balance over $3 million you may have to pay the additional Division 296 tax.

So while investing in your own name is becoming more expensive, super continues to offer some of the lowest tax rates available particularly on balances below $3 million. For many people, that growing gap makes super more appealing.

What this means for you

If your super balance is well under $3 million, the new Division 296 tax will not affect you. You keep all the benefits of super, while investing outside super becomes less tax effective. Super may be a stronger option than before.

If your balance is near or above $3 million, the answer is less clear. You need to weigh the extra Division 296 tax against the higher tax you would pay on the same money held outside super. In many cases super still comes out ahead, but it is worth checking.

The takeaway

Super remains one of the most tax effective ways to save for retirement. The new tax on large balances is real, but the changes outside super are arguably the bigger story. For a lot of people, super has become more attractive, not less.

This article is general information only. It does not take account of your objectives, financial situation or needs, and it is not personal financial or taxation advice.