Life insurers have asked a Senate committee to amend the government’s latest tax reform bill. They said a relief measure meant for superannuation funds does not clearly cover superannuation business written through life companies.
The Council of Australian Life Insurers (CALI) told the Senate Economics Legislation Committee that the Treasury Laws Amendment (Tax Reform No. 3) Bill 2026 does not explicitly extend proposed capital loss ordering relief to life insurers’ complying superannuation class. That class includes their virtual pooled superannuation trust (VPST) businesses.
Life companies that write superannuation business hold the assets backing those policies in a separate tax class. The aim is to tax them on the same basis as a super fund. CALI said that without an amendment, members could end up with lower after-tax returns. It warned this would undermine the intended tax parity between life company super business and other superannuation structures.
The council said the change was needed so that two members holding identical investments for the same retirement purpose do not receive different after-tax returns purely because of the legal structure they invest through.
The bill is the second stage of the capital gains tax (CGT) changes announced in May’s budget. From July 1, 2027, the 50% CGT discount will be replaced by cost base indexation for assets held for more than 12 months, with a 30% minimum tax on net capital gains. The bill also contains a minimum tax on discretionary trusts and further changes to negative gearing.
Superannuation funds are outside the new CGT regime and keep their one-third discount. The new capital loss ordering rules have raised questions about how gains flow through to super investors in other structures. The SMSF Association has raised a similar concern about managed investment trusts, arguing that a super fund should get materially the same CGT outcome whether it holds an investment directly or through a trust.
The committee is due to report on the bill by November 13.
The issue affects a relatively small part of the life insurance market, but the principle is one that financial advisers recommending life company super products to clients should track. If the amendment is not made, a client invested through a life company’s VPST could receive a lower after-tax return than one in a standard super fund holding the same assets - a material consideration when assessing product suitability.
The argument is the same one the super sector has made about managed investment trusts: relief that is meant to protect super members’ returns needs to reach every structure those members use. Whether the committee recommends a fix will indicate how much room the government has left for technical amendments before the CGT changes take effect in 2027. Risk advisers and those placing life company products should watch the committee’s November 13 report closely.
