Additional 15% tax on superannuation balances over $3 million: What you need to know
Following the results of the general election and recent comments from Treasurer Jim Chalmers, the proposed Division 296 tax a new 15% tax on superannuation balances over $3 million is expected to return to the legislative agenda when Parliament resumes.
What is division 296 tax?
The Division 296 tax is a proposed measure targeting individuals with total superannuation balances exceeding $3 million. Under the draft legislation:
- An additional 15% tax will apply to the annual growth of the portion of your super that exceeds the $3 million threshold.
- Tax is based on the increase in value of your super from 1 July to 30 June each year.
- The calculation excludes net contributions and withdrawals, but includes net income, realised capital gains and unrealised gains.
When will it start?
Although the bill was passed by the House of Representatives prior to the election, it lapsed before becoming law. This means the legislation will need to be reintroduced and passed again. As a result, there is a possibility the start date may change and other amendments may be introduced.
If passed without change, your total super balance won’t be measured until 30 June 2026. Importantly, if your balance is $3 million or less on that date, you will not be subject to Division 296 tax, even if your balance was above the threshold in prior years.
What should you do now?
While it may be tempting to act now, it’s important to remember that:
- The legislation is not yet final.
- Acting too soon may result in ineffective or unnecessary changes to your super strategy.
If you’d like to review the calculation methodology, please refer to our article “Labor’s Proposal to Increase Tax Rates for Super Balances Above $3 million”.
Let’s discuss your super strategy
We’d welcome the opportunity to discuss the impact of this proposed tax with you, whether you’re affected now or believe you might be in the future. It’s important to take a proactive approach and ensure your retirement planning remains on track.
Please contact us to discuss your situation or to arrange a time to meet. Our team is here to provide tailored advice and help you navigate the proposed changes with clarity and confidence.
