Division 296: What It Means for Large Super Balances
The Federal Government has proposed a new tax aimed at individuals with superannuation balances above $3 million. Known as Division 296, this tax is expected to apply from 1 July 2025, subject to the passage of legislation. If you hold a large super balance, it’s worth understanding how this change could affect your future tax obligations.
Under the proposal, individuals with a total superannuation balance (TSB) exceeding $3 million at the end of the financial year will be liable for an additional 15 per cent tax on the earnings associated with the portion above that threshold. Importantly, your TSB includes all superannuation accounts – including self-managed super funds, retail and industry funds, and defined benefit schemes.
This tax will be assessed personally, meaning the ATO will calculate the liability at the individual level. However, the tax can be paid either from your personal funds or from your super account. Super earnings, in this case, are broadly defined to include the increase in your total balance across the year, adjusted for withdrawals and certain contributions.
For example, if your super balance increases from $4 million to $4.12 million in a year (a $120,000 gain), only the portion of the gain related to the amount above $3 million would be taxed at the additional 15 per cent rate. In this case, 25 per cent of your balance is over the threshold, so 25 per cent of the earnings ($30,000) would be subject to the new tax, resulting in a $4,500 tax bill.
If passed, the first testing date will be 30 June 2026. That gives individuals time to review their position and prepare. You may want to reassess your super strategy, review valuations of unlisted assets, or consider liquidity if you have a self-managed fund.
If you think your super balance may exceed the $3 million threshold, it’s worth seeking professional advice now to ensure you’re prepared. Contact Simmons Livingstone on 1800 618 800 or email admin@simmonslivingstone.com.au to discuss your options.
