TITLE: Proposed CGT Relief Gap: Life Insurer Super Members Face Different Tax Outcomes
Understand the gap before it affects returns
CALI says the Treasury Laws Amendment (Tax Reform No. 3) Bill 2026 does not explicitly extend its proposed capital loss ordering relief to life insurers’ complying superannuation class. Life companies that write superannuation business hold the assets backing those policies in a separate tax class, which is taxed on the same basis as a super fund.
That distinction matters because the tax treatment is meant to preserve parity between life company superannuation business and other superannuation structures. CALI warns that, without a clear amendment, members could receive lower after-tax returns because of the legal structure holding otherwise identical investments.
Its submission says an amendment is necessary so two members with the same investments and retirement purpose do not end up with different after-tax results solely because one invests through a life company structure.
The concern relates to section 320.125 of the Income Tax Assessment Act 1997, which deals with capital losses from complying superannuation assets. CALI’s request is specific: make clear that the proposed relief reaches life insurers’ complying superannuation class, including VPST businesses.
Separate the wider CGT reform from the super rules
The bill is the second stage of CGT changes announced in the May 2026 budget. Under the proposed regime, from 1 July 2027, the 50% CGT discount for assets held more than 12 months would be replaced by cost base indexation, alongside a 30% minimum tax on net capital gains.
The bill also covers a minimum tax on discretionary trusts and negative gearing changes. Superannuation funds sit outside the new CGT regime and retain their one-third discount. The proposed capital loss ordering rules would apply losses to non-discounted capital gains before discounted gains, helping preserve that one-third super discount.
This is a broader legislative package, not just a change for life insurers. For context on the trust and fund provisions in the wider reform, read our earlier coverage of the CGT overhaul rules.
The key point is to distinguish the overall reform from this particular drafting concern. CALI is asking for the relief to clearly cover a specific class of life company superannuation business. The proposal remains subject to parliamentary consideration.
Track the trust issue alongside life company super
SMSF trustees also have a related issue to monitor. The SMSF Association has raised concerns about managed investment trusts (MITs) and attribution managed investment trusts (AMITs).
When an SMSF invests through a trust, the trust applies capital losses internally before distributing gains. That ordering can use up discount-eligible gains at the trust level. As a result, the SMSF may not be able to use its preferred loss-ordering approach, potentially increasing its tax burden compared with holding an investment directly.
This is not the same drafting issue raised by CALI, but both concerns focus on how tax outcomes can differ when investments are held through different structures. If you are an Australian taxpayer with superannuation investments, the way a gain or loss flows through an insurer or trust may matter as much as the underlying investment.
Use the reporting window to organise your records
The committee’s report is expected by 13 November 2026. Its findings may show whether members of the Senate are recommending a technical amendment, but the report will not by itself make the proposed measure law.
Use this window to prepare, rather than assume how the final rules will work:
- Identify your investment structure. Record whether your super is held directly, through a life company product, a VPST, or a trust. This helps you understand which structure is relevant to the discussion.
- Keep statements and tax records together. Preserve investment, distribution and capital gains information so you can trace how gains and losses are reported.
- Watch the official bill page. Check the Australian Parliament’s bill information for progress and amendments.
- Recheck the final law before acting. The proposed changes have a future start date, and the bill may be amended before passage.
Keeping a clear record of your structure and investment information will make it easier to follow the final rules and support accurate reporting when they take effect.
What are life insurers asking the Senate to change?
CALI wants the bill to explicitly extend capital loss ordering relief to life insurers’ complying superannuation class, including VPST businesses. It says this would help maintain tax parity with other superannuation structures.
Is the capital loss relief already law?
No. The relief is part of a proposed bill. The final wording and commencement depend on the parliamentary process and the law ultimately passed.
Why are SMSFs concerned about managed investment trusts?
A trust may apply capital losses before distributing gains to an SMSF. This can reduce the discount-eligible gains available to the SMSF and affect the tax outcome compared with direct investment.
What should Australian taxpayers do before 1 July 2027?
Keep records of your superannuation and investment structures, retain statements showing gains and losses, and monitor the bill’s progress. Do not treat proposed provisions as final law.
This article provides general information only and is not tax, financial or legal advice. The bill remains proposed law, and individual outcomes depend on the facts and final legislation.
Sterlinx Global operates as a Global Tax Compliance Suite, supporting ongoing bookkeeping, tax calculations, filings and year-end compliance across relevant jurisdictions. Contact us to discuss structured compliance support for your business.