14 Oct Division 296 Tax – Key Revisions Announced
Posted at 09:38h
in Uncategorized
The Federal Government has announced several important refinements to the proposed Division 296 tax, designed to ensure a fairer and more practical approach to taxing large super balances.
Key Changes
- Applies to realised earnings only — unrealised gains will no longer be taxed.
- $3 million threshold indexed to CPI in $150,000 increments, aligned with the Transfer Balance Cap.
- New $10 million threshold introduced, with earnings above this level taxed at 40% (compared to 30% between $3-10 million).
- Start date deferred to 1 July 2026.
- Defined benefit pensions included, ensuring consistent treatment across super structures.
Effective Tax Rates
- Up to $3 million: 15%
- $3–10 million: 30% (15% standard + 15% additional)
- Above $10 million: 40% (15% standard + 25% additional)
How the ATO Will Apply the Tax
Super funds will continue to report members’ balances to the ATO, which will:
- Identify members with balances over the thresholds.
- Request realised earnings data from their fund.
- Calculate and issue the additional tax liability.
Earnings attribution will be based on existing reporting systems and ATO guidance to ensure fairness.
Illustrative Examples
- Megan: $4.5m balance, $300k earnings → $15,000 additional tax
- Emma: $12.9m balance, $840k earnings → $115,581 additional tax
If you have any queries that you would like to discuss with us, please feel free to contact your client manager.