Breaking news! Superannuation Changes Div 296

We are pleased to advise that Treasurer Jim Chalmers has announced welcome adjustments to the Government’s proposed Division 296 measure, which seeks to tax earnings on superannuation balances above $3 million.

The revisions to Labor’s ‘Better Target Super Concessions’ policy follow extensive consultation and industry feedback , calling for a fairer, more practical design.

Some of the key components of today’s announced changes include:

1. Delayed start date

The commencement date has been deferred for one year to 1 July 2026 (focusing on a taxpayer’s TSB at 30 June 2027), allowing time for consultation and legislative drafting.

2. Two-tier thresholds introduced for higher superannuation balances

 A progressive tax model is now proposed to apply:  Balances up to the $3 million threshold: taxed at 15% on earnings Balances between $3 million and $10 million threshold: taxed at 30% on earnings Balances above $10 million: taxed at 40% on earnings

3. Indexation will apply to the new $3 million and $10 million thresholds

Both thresholds (i.e., $3 million and $10 million) will be indexed to maintain alignment with the Transfer Balance Cap and to reflect inflation over time.

4. ‘Realised earnings’ taxed under changes

The new rates will apply only to future realised earnings and not to unrealised gains.

This shift addresses strong criticism that the original design could create cash-flow issues for SMSFs or funds with illiquid assets.  Treasury will consult on how realised gains will be calculated and attributed to members.

5. Defined benefit parity

Defined benefit schemes will receive commensurate treatment to ensure equivalent tax outcomes.  Treasury will consult on the calculation method.

These changes mark a significant improvement on the original proposal.

We will continue to monitor Treasury’s consultation process and keep you informed as draft legislation is released. More information can be found here.