The Federal Government has proposed a new 15% tax on superannuation earnings for individuals with total super balances (TSB) over $3 million. This measure, known as the Division 296 super tax, is still not law and must pass through both Houses of Parliament.
While the legislation is pending, the Government originally proposed a start date of 1 July 2025, with the first tax assessments likely issued after 30 June 2026.
How Division 296 Would Work (If Passed)
- If your TSB exceeds $3 million on 30 June of a financial year, you may be taxed an additional 15% on a portion of your superannuation earnings above the threshold.
- The tax would be assessed personally and could be paid either from your superannuation or from your own funds.
- Superannuation earnings for this purpose reflect net growth in your super balance during the year, adjusted for specific contributions (such as inheritances) and withdrawals.
Key considerations:
- Your TSB includes all super interests—across SMSFs, APRA-regulated funds, and defined benefit schemes.
- The first test date would be 30 June 2026, assuming a 1 July 2025 start.
- Some exclusions apply, such as balances from structured settlements, children receiving pensions, and deceased estates.
Examples
Sam‘s Account
- 30 June balance: $4 million
- Annual earnings: $120,000
- Proportion above $3 million = 25%
- Taxable portion: $30,000
- Additional tax: $4,500
Lisa‘s Inheritance
- Balance grows from $2 million to $4.5 million due to a death benefit pension
- Only new investment growth (not inherited funds) is taxed
- But her TSB exceeds $3 million, so a Division 296 tax liability may still apply
What You Can Do Now
While we wait to see whether the legislation passes, consider taking the following steps:
- Review your super fund’s liquidity and cash flow to prepare for potential tax payments
- Ensure asset valuations are accurate and up to date, particularly for SMSFs
- Estimate your combined super balances across all funds
- Plan for any large transactions that could impact your balance
- Keep clear records of asset values and fund activity
- Seek tailored advice before making any structural or financial changes
If you’d like help assessing your position or preparing your super for potential changes, the team at Fortis is here to support you with strategic advice and planning.
Please do not hesitate to contact our office to speak to one of our team.
