Michelle Bromley CFP®, Director – Strategy & Advice
Treasurer Jim Chalmers recently reaffirmed the Government’s commitment to the Better Targeted Superannuation Concessions bill, otherwise known as the Division 296 tax. This proposed measure, aimed at individuals with high-value superannuation balances, has generated significant public discussion since the Government was re-elected.
However, it’s important to note: the legislation is not yet law, and the final version may still change. Now is a good time to stay informed, but not a time for hasty decisions.
Here's a simplified breakdown of what it means, how it works, and what clients should consider.
How the Proposed Tax Will Work
Division 296 would impose an additional 15% tax on the earnings associated with the portion of an individual’s Total Superannuation Balance (TSB) that exceeds $3 million, bringing the effective tax rate on earnings over this threshold to 30%.
What sets this proposal apart is that the tax would apply to unrealised gains—that is, increases in the paper value an asset that hasn’t actually been sold—making it a significant departure from the usual practice of taxing realised gains.
The tax is calculated based on:
- The growth in a member’s TSB over the financial year (adjusted for contributions and withdrawals), and
- The proportion of the TSB over $3 million.
For example: if your super grows from $3.5 million to $4 million, and 25% of your balance is over the threshold, only 25% of the $500,000 growth would be subject to the additional 15% tax.
Proposed Commencement and Key Measurement Dates
- Proposed Commencement: 1 July 2025
- First Measurement Date: 30 June 2026
This means the first tax assessments would be based on the change in super balance between 1 July 2025 and 30 June 2026.
Current Status of the Legislation
The Treasury Laws Amendment (Better Targeted Superannuation Concessions) Bill 2023:
- Passed the House of Representatives in the previous Parliament.
- Was blocked in the Senate due to concerns over taxing unrealised gains and the lack of indexation on the $3 million threshold.
- Is expected to be reintroduced, though at the time of writing the Senate timetable for reconsideration has not been released, so the timing of its next hearing is uncertain.
Until the Bill receives Royal Assent, there is no certainty about its final form—or even whether it will pass.
Why the Government is Pushing Ahead
Despite opposition, the Government remains firmly committed to implementing Division 296. The tax is expected to raise $2.3 billion in its first full year (2027–28) and $40 billion over a decade, helping fund key election promises like Medicare, housing, and cost-of-living support.
What Can Clients Consider Now?
For clients who may be impacted, there are some early planning options worth exploring – but not necessarily acting on just yet:
- Maximise real estate valuations at 30 June 2025: Obtaining the highest possible valuation for real estate could reduce the apparent growth by 30 June 2026, thereby lowering the taxable amount.
- Review asset allocations: Consider shifting a portion of your growth assets outside super. Older Australians eligible for Senior and Pensioner Tax Offset can earn taxable income of up to ~$35,800 before paying tax and up to $45,000 before reaching the 30% marginal tax rate.
- Withdrawals: If eligible, withdrawing funds to bring the balance below $3 million may help, though this could trigger capital gains tax.
The Key Message: Don’t Rush
While Division 296 is likely to affect a small portion of Australians initially, it is not yet law, and no action is required at this stage. Even if it is passed, the first measurement date won’t be until 30 June 2026.
It’s wise to be prepared and to understand what’s on the horizon—but equally important not to make changes until there’s legislative certainty. Acting too soon could have unintended tax consequences or limit your future flexibility.
If you have concerns about your super balance or want to explore what this might mean for you, we recommend speaking to your adviser.
The information in this article contains general advice and is provided by Primestock Securities Ltd AFSL 239180. That advice has been prepared without taking your personal objectives, financial situation or needs into account. Before acting on this general advice, you should consider the appropriateness of it having regard to your personal objectives, financial situation and needs. You should obtain and read the Product Disclosure Statement (PDS) before making any decision to acquire any financial product referred to in this article. Please refer to the FSG (www.primefinancial.com.au/fsg) for contact information and information about remuneration and associations with product issuers. This information should not be relied upon as a substitute for professional advice, and we encourage you to seek specific advice from your professional adviser before making a decision on the matters discussed in this article. Information in this article is current at the date of this article, and we have no obligation to update or revise it as a result of any change in events, circumstances or conditions upon which it is based.
