Major Changes to Division 296 Superannuation Tax
The Federal Treasurer, Jim Chalmers, yesterday announced significant changes to the proposed Division 296 superannuation tax following strong industry feedback. These revisions simplify the regime, reduce complexity and remove several of the most controversial elements.
Key Changes Announced
1. Unrealised gains will no longer be taxed
The proposed additional 15% tax will now apply only to realised earnings (such as dividends, interest, rent and realised capital gains) on the portion of a member’s super balance above the relevant threshold. This means members will not be taxed on “paper” increases in asset values.
2. Tiered tax rates introduced
- Balances between $3 million and $10 million: taxed at an effective rate of 30%
- Balances above $10 million: taxed at 40%
- Both thresholds will be indexed to inflation to prevent bracket creep.
3. Start date deferred
Implementation has been delayed to 1 July 2026, allowing more time for super funds, advisers and accountants to prepare.
4. Support for low-income earners
The Low- Income Superannuation Tax Offset (LISTO) will be expanded:
- Maximum offset increased from $500 → $810
- Income threshold lifted from $37,000 → $45,000
5. New legislation to follow
The previous Division 296 legislation lapsed prior to the 2025 election. A new Bill incorporating these changes will be introduced to Parliament, with further consultation expected around defined benefit funds, valuation rules and transition arrangements.
What This Means for You
- Balances under $3 million remain unaffected.
- High-balance members should review investment and drawdown strategies ahead of 2026.
- SMSF trustees should prepare for new reporting requirements once legislation is finalised.
- The deferred start date provides time to plan (e.g. rebalancing, crystallising gains, restructuring), but we recommend waiting for the final law before making any changes.
Our View
The government’s decision to remove unrealised gains from the tax base and to introduce tiered thresholds is a positive development. While the changes have been welcomed by most of the superannuation industry, the finer details are still to come.
Next Steps
We will continue to monitor developments closely and provide further updates as legislation progresses. If you would like to discuss how these changes may impact your personal or SMSF situation, please contact our Team.
