Michelle Bromley CFP®, Director – Strategy & Advice
13 October 2025
In a significant development, Treasurer Jim Chalmers has announced sweeping changes to the proposed Division 296 superannuation tax, following two years of industry feedback and public debate. These revisions mark a substantial shift from the original model outlined earlier this year, which drew criticism for taxing unrealised gains and lacking indexation.
What’s Changed?
The Government’s revised approach retains the core objective of better targeting superannuation concessions for large balances, but introduces several key modifications:
1. Two-Tier Thresholds:
- Earnings on balances between $3 million and $10 million will now be taxed at 30%.
- Earnings on balances above $10 million will attract a 40% tax rate.
2. Indexation Introduced:
Both thresholds will be indexed, maintaining alignment with the Transfer Balance Cap and addressing concerns about bracket creep over time.
3. Realised Gains Only:
The tax will now apply only to realised earnings, removing the controversial inclusion of unrealised gains from the original proposal.
4. Start Date Delayed:
Implementation has been pushed back to 1 July 2026, allowing time for further consultation on implementation details including the calculation of future realised gains and attribution to individual fund members.
5. Defined Benefit Interests & Judicial Exemptions:
Adjustments will be made to ensure consistent treatment across different fund types. The existing exemption for some judges will be extended.
What This Means for Clients
These changes significantly reduce the scope and potential impact of Division 296:
- Fewer Australians affected: Less than 0.5% of individuals will be impacted in 2026–27.
- Greater fairness and sustainability: The revised model better aligns with community expectations and long-standing superannuation principles.
- More time to prepare: With the start date now set for July 2026, clients and advisers have additional breathing room to assess strategies.
Our Advice: Stay Informed
While the revised Division 296 tax is more targeted and less disruptive than its predecessor, it still represents a meaningful change for high-balance super holders. The introduction of indexation and the focus on realised gains are welcome improvements, but the higher tax rate for balances above $10 million may prompt strategic reviews.
We continue to recommend a measured approach:
- No urgent action is required until legislation is finalised.
- Stay engaged with your adviser to understand how these changes may affect your long-term retirement strategy.
The Government will undertake further consultation with the superannuation industry and relevant stakeholders on implementation details, with the intention to introduce legislation to implement these changes as soon as possible in 2026. The proposed start date is 1 July 2026.
As always, we’ll keep you updated as further details emerge and legislation progresses.
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