Super Alert: Div 296 tax on super

Super Alert: Div 296 tax on superannuation balances over $3 million

With the results from the weekend’s election delivering a majority government for the Labor Party, the superannuation industry now expects that the legislation to implement a tax on superannuation balances above $3 million is likely to be passed through the House of Representatives with no issues. It is important to note, however, that the government requires the support of the Greens in order to pass this successfully through the Senate, and that the Greens have their own demands regarding this proposed tax, such as imposing the tax on superannuation balances over $2 million.

Based on the previous bills presented, the Division 296 tax will be implemented for the 2025/2026 financial year. This means that while the start date of the tax will be 1 July 2025, the first date that individual member balances over $3 million will be taxed is 30 June 2026. If a member’s balance is over $3 million on 1 July 2025, but under $3 million on 30 June 2026, they will not be subject to Division 296 tax.

While the proposed start date of this tax is imminent, it is important to keep in mind that the final details are still uncertain. Should they require support from the Greens to ensure passage through both Houses of Parliament, it is very possible that the government may make amendments to the original proposal. As such, although preparation is encouraged, acting prematurely could lead to unnecessary or ineffective changes.

BDO comment

For clients with larger total superannuation balances, the advice from our superannuation team has always been to wait and see how and when the tax would be imposed before rushing to take any action. This continues to be the case, given that we still do not have the final legislation yet.

However, it does not hurt to commence planning for the implementation of the legislation. This includes ensuring that you have up-to-date valuations for all SMSF investments, reviewing any contributions or withdrawals you plan to make, and ensuring you have details for all superannuation accounts (not just your self-managed superannuation fund).

If you would like to discuss this in the context of your personal situation, please contact your BDO adviser.

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