Division 296- Super balances over $3 million will see tax rate double to 30% by 2025

Division 296 is a proposed tax measure that would impact individuals with a Total Superannuation Balance (TSB) over $3 million at the end of a financial year.

Following the recent federal election, it’s expected that legislation to implement Division 296 will be reintroduced and likely passed when Parliament resumes in July 2025.

When Will the Tax Commence?

If enacted, Division 296 is proposed to take effect from 1 July 2025. The first assessment under the proposed rules would apply to individuals with a TSB exceeding $3 million as of 30 June 2026.

How Will the Tax Work?

Under the current proposal: 

• A 15% additional tax will apply to the earnings attributed to the portion of an individual’s TSB exceeding $3 million.

• Earnings for Division 296 purposes will be calculated using a formula based on the movements in your TSB during the financial year, including unrealised gains. 

This means the additional tax may apply even if you haven’t sold assets or withdrawn funds from your superannuation account.

What Should You Be Doing Now?

At this stage, we recommend a cautious and considered approach. No significant changes should be made to your superannuation strategy until the legislation is finalised.

Premature action could have negative consequences such as:

• Withdrawals made before the law passes may not be able to be re-contributed due to caps and eligibility limits

• The final version of the legislation may still change

Considerations Before Making Any Changes

It’s critical to undertake appropriate modelling and seek professional advice from a licensed Financial Advisor. Several factors that need to be considered include: 

• Tax implications outside superannuation 

• Capital Gains Tax (CGT) implications of any realised superannuation assets 

• Estate planning and death benefit tax considerations 

• Personal circumstances and objectives 

Despite the introduction of Division 296, superannuation may continue to be the most tax-effective structure for retirement savings. Without appropriate modelling and planning, you may not have the correct information to make the right decision for your personal circumstances. 

Watch Our Information Session

If you’re wondering how this affects you or what to do next, we’re here to help. Please watch a recording of our information session, where we walk you through Division 296, discuss key considerations, and provide guidance on planning with confidence.

During this session, we’ll cover:

• • • A practical breakdown of the proposed legislation
    • Tax, CGT and estate planning implications
    • Real scenarios and frequently asked questions

How Can We Help You? Register Your Interest

To learn more and watch the video, please complete the form below to let us know how we can help.