Proposed ‘Division 296’ Super Tax: What You Need to Know
The federal government is advancing legislation to impose an additional 15% tax (on top of the standard 15%) on superannuation earnings above $3 million. This measure would bring the total tax rate on those excess earnings to 30% and applies to both realised gains (e.g., when assets are sold) and unrealised gains (i.e., increases in the value of assets not yet sold).
The measure, part of Division 296, has sparked strong reactions. Supporters argue the change is necessary to ensure the super system remains equitable and sustainable by targeting a small group, around 0.5% of Australians, with excessively high balances. Critics, including industry leaders and former officials, warn that taxing unrealised gains sets a troubling precedent akin to taxing uncashed property value, and may discourage long-term investments and confidence in the super system.
Currently, the proposal remains under debate in Parliament and has not yet been enacted into law. High-balance super members, including defined benefit pension holders, should stay alert as the legislation could be backdated to 1 July 2025 if passed.
Why It Matters:
- For individuals approaching or exceeding the $3 million threshold, this means a significant increase in their tax burden – even without selling assets.
- High-net-worth retirees, SMSF members, and expatriates should immediately assess the impact on their long-term financial and estate planning.
If you or you’re tracking balances near or above the $3 million mark, or are investing via an SMSF, now is the time to act. Review your super strategy, consider diversifying assets or splitting contributions, and discuss potential implications with your Simmons Livingstone Advisor before legislation is finalised. Early planning can help manage future liabilities, whatever the outcome.
For more information, speak with your Simmons Livingstone advisor on 1800 618 800 or via email at admin@simmonslivingstone.com.au.
