Proposed Changes to Division 296 Tax

The government has announced changes to the proposed Div 296 tax which is intended to apply to increases in a member’s superannuation balance above $3 million. The original proposal was subject to significant pressure for many reasons. However, its overall design remains intact but there are changes to the calculation of the amount to be taxed, the introduction of a new threshold and tax rates.

Important Reminder:
The government’s announcement on 13 October is not law. There may be further changes as the legislation goes through the parliament which is expected early in the new year. If Div 296 does become law, it will not commence until 1 July 2026. So, don’t jump at shadows and make ad hoc decisions until the exact wording of the legislation is known and passed into law.

Main Changes to Div 296 Announced

• There are two thresholds – one applying on balances above $3 million and the other for balances above $10 million.
• The tax rate on the ‘earnings’ for balances above $3 million will be an extra 15%, and a further tax of 10% applies if the member’s balance is greater than $10 million.
• The two thresholds will be indexed in line with changes in CPI. The $3 million cap is indexed in increments of $150,000 and the $10 million threshold indexed in increments of $500,000.
• The calculation of the member’s total superannuation balance for Div 296 purposes is adjusted for contributions, pension payments and other amounts. The changes will also exclude unrealised capital gains, which was a controversial feature of the original proposal.
• If a member has a total amount in super greater than a threshold, the ATO contacts the relevant fund or funds to get further information so the adjustments can be made.
• The ‘earnings’ adjustment that is calculated will be based on the fund’s taxable income.
• The commencement date of the new tax is now 1 July 2026. This means that Div 296 assessments will not be sent out until sometime in the 2027–28 financial year at the earliest.

Further information on the government’s changes can be located on the Treasurer’s website and the Treasury website.