The Federal Government has announced important changes to the proposed Division 296 tax, which will affect individuals with superannuation balances over $3 million. These updates aim to make the tax fairer and more practical, especially for SMSF members and high-net-worth individuals.
What’s Changing?
Previously, the Division 296 tax was set to apply to unrealised gains—meaning you could be taxed on increases in asset value even if you hadn’t sold them. This raised concerns about fairness and liquidity.
Now, the government has confirmed:
- The tax will apply only to realised earnings (i.e. profits from sold assets).
- A tiered tax rate will apply:
- 30% for balances over $3 million.
- 40% for balances over $10 million.
- These thresholds will be indexed over time:
- $3M threshold increases in $150,000 increments.
- $10M threshold increases in $500,000 increments.
When Does It Start?
- The new rules will take effect from 1 July 2026.
- The first Division 296 tax assessments will be issued in FY 2028.
What Should You Do?
It’s still early days, and the legislation is evolving. For now, we recommend:
- Avoid making any major changes to your superannuation structure or investment strategy until the final rules are confirmed.
How Supervision Group Can Help
We’re closely monitoring these changes and will continue to provide updates as legislation is finalised. Our team is here to:
- Help you understand how Division 296 may affect your future retirement planning.
- Keep you informed with regular updates.
