Introduction of $3m Super Tax Bills effective 1 July 2025

The Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023 and the Superannuation (Better Targeted Superannuation Concessions) Imposition Bill 2023 were introduced in the Parliament of Australia yesterday, 30 November 2023.  

The bills aim is to reduce the tax concessions for individuals with a total superannuation balance (TSB) above $3m by imposing an additional 15 per cent tax on certain earnings under a new Division 296 of the Income Tax Assessment Act 1997.

They were subject to public consultation from 3 October 2023 to 18 October 2023, and received submissions from various stakeholders, including Grant Thornton Australia Limited. However, the various submissions did not make much impact on the final bill.

A summary of the tax is outlined below

For each income year from 2025-2026, individuals with a TSB in excess of $3m will be issued a DIV 296 Notice of Assessment by the ATO in the event that they have a positive growth from year to year.

The formula used to calculate the adjusted TSB at the end of each financial year is:

1. Calculate Earnings: TSB at the end of the year + withdrawals – contributions. An individual’s prior year adjusted TSB is then subtracted from this to provide the amount of adjusted earnings above $3m.
2. Calculate proportion of earnings attributable: Step 1 above / closing TSB for that financial year
3. Tax Liability: 15 per cent x earnings (step 1) x Proportion of earnings (Step 2)

Important items to note

• TSB is inclusive of any unrealised capital gains within the fund and its investments (inconsistent with existing taxation law, whereby the taxing point generally occurs when upon disposal of an asset).
• Any negative earnings in a relevant year (decrease in value) will result in a carry forward loss to apply against future year positive earnings, rather than provide a refund of previous years DIV 296 tax paid.
• The tax is imposed on the individual, requiring the individual to pay the tax personally or opt to have the amount released from their superannuation entitlements.
• The Bills do not provide for any future indexation of the $3m threshold, being inconsistent with previous superannuation thresholds which allow for things such as inflation.
• The ‘withdrawal’ component in the formula also includes compulsory minimum pension withdrawals, increasing the earnings amount, resulting in higher additional tax liabilities.
• Individuals who are yet to meet a condition of release to access superannuation will not have the opportunity to reduce superannuation balances by withdrawing funds from their superannuation entitlement.
• Those affected are likely to incur increased compliance costs due to additional superannuation fund reporting requirements.

Should you have any concerns about how you may be affected by the introduction of DIV 296 tax, please reach out to our Grant Thornton National Superannuation Team.