Government reworks proposed $3 million super tax – Division 296 tax
While the Division 296 tax is still yet to be legislated, it’s looking likely the tax will be introduced. For individuals who may be impacted by the change, it’s critical to understand how different scenarios might play out and what they should consider.
Some of the key components of Monday’s announced changes include:
- Delayed start date
The commencement date has been deferred for one year to 1 July 2026 (focusing on a taxpayer’s TSB at 30 June 2027), allowing time for consultation and legislative drafting.
- Two-tier thresholds introduced for higher superannuation balances
A progressive tax model is now proposed to apply:
Balances up to the $3 million threshold: taxed at 15% on earnings
Balances between $3 million and $10 million threshold: taxed at 30% on earnings
Balances above $10 million: taxed at 40% on earnings
- Indexation will apply to the new $3 million and $10 million thresholds
Both thresholds (i.e., $3 million and $10 million) will be indexed to maintain alignment with the Transfer Balance Cap and to reflect inflation over time.
- ‘Realised earnings’ taxed under changes
The new rates will apply only to future realised earnings and not to unrealised gains.
This shift addresses strong criticism that the original design could create cash-flow issues for SMSFs or funds with illiquid assets. Treasury will consult on how realised gains will be calculated and attributed to members.
- Defined benefit parity
Defined benefit schemes will receive commensurate treatment to ensure equivalent tax outcomes. Treasury will consult on the calculation method.
