Proposed Superannuation Changes

Currently there is draft Legislation on a new, additional 15% Tax on $3million+ Superannuation Balances.  These laws will be contained within Division 296 of the Income Tax Assessment Act (ITAA) 1997 and will be known as Div 296 tax.

Under Div 296 tax, from the 2025-26 income year onwards, the concessional tax rates on superannuation earnings are intended to be:

  • up to 15% on balances below $3 million – taxed within the fund; and
  • a further 15% on a percentage of earnings above $3 million – taxed to the member, with an ability to release via super for payment.

Similar to the current Div 293 tax, which applies an additional 15% tax on concessional contributions for high income earners, individuals have the option to pay their Div 296 tax liability by either releasing amounts from their superannuation interests or using amounts outside of the super system.

These new measures make modifications to the definition of a total superannuation balance (TSB) as well as introducing a new concept of TSB value whereby a member’s adjusted TSB is calculated using a formula that takes into account the modified closing super balance after considering the effect of withdrawals and contributions.

A universal model would apply to members of all funds regarding the Div 296 tax.  Rather than the traditional “actual earnings” we are used to seeing in Self Managed Super Funds, Div 296 tax will use a different definition of earnings – “the movement in a member’s total superannuation balance adjusted for net contributions and withdrawals”.  By definition, this includes unrealised capital gains which is a first for the ATO.  Importantly, only a portion of these earnings will be taxed.  The taxable proportion is based on how much of a member’s total superannuation balance is over the $3m threshold. This is worked out based exclusively on the member’s balance at the end of each year.

Currently this draft legislation refers to regulations that are not out yet, so as more detail is released by Treasury, we will be providing further updates to our analysis.  In the meantime, please contact a member of our Self Managed Superannuation Fund team for further discussion.