The revised framework aims to address concerns around fairness, bracket creep, and the taxation of unrealised gains, while still targeting high-balance superannuation accounts.
What we know so far
Threshold Adjustments:
The original $3m threshold remains, but a new $10m tier has been introduced.
- $3m–$10m: Earnings taxed at 30%.
- Above $10m: Earnings taxed at 40%.
Indexation introduced
Both thresholds will now be indexed to inflation, preventing bracket creep and ensuring fewer Australians are unintentionally captured over time.
No tax on unrealised gains
The revised proposal removes the controversial element of taxing unrealised capital gains, with the Treasurer announcing that the Division 296 tax will only apply to future realised earnings.
Implementation date
The revised tax framework is scheduled to commence from 1 July 2026, allowing time for consultation and strategic planning for those affected.
Planning considerations
With the tax expected to apply for the 2027 financial year, there is time to assess any plans and implement strategies prior to 30 June 2027 to reduce the impact of the Division 296 tax.
It’s critical to wait until the final legislation is passed rather than withdrawing funds prematurely in anticipation of the tax, as re-contribution may not be possible if the legislation does not proceed as expected.
The effective tax deferral on unrealised capital gains is welcomed, but it will be a matter of understanding the details of the transitional rules so that the value generated pre-1 July 2026 can be protected from the new tax.
For many, superannuation will remain a tax-effective structure even with the new tax. For others, it may be an opportunity to review their current and alternative investment vehicles to identify the most tax effective strategies moving forward.
We’re here to help
Division 296 represents a significant change for individuals with high superannuation balances. It is crucial for individuals to seek tailored advice and plan accordingly to navigate these changes and the implications for their superannuation and wealth strategies. If you’d like to discuss your current superannuation strategy, please reach out to one of our experts today.
Learn more about how our Superannuation and SMSF services can help you
The above information is provided as an information service only and, therefore, does not constitute financial product advice and should not be relied upon as financial product advice. None of the information provided takes into account your personal objectives, financial situation or needs. You must determine whether the information is appropriate in terms of your particular circumstances. For financial product advice that takes account of your particular objectives, financial situation or needs, you should consider seeking financial advice from an Australian Financial Services licensee before making a financial decision in relation to any of the matters discussed.
