With the Labor government securing a clear win in the May 2025 federal election, its proposed Division 296 superannuation tax is back in the spotlight. While not yet law, its chances of returning to Parliament have increased — making now the right time to understand what it could mean for you.
Current Legislative Status
• Division 296 forms part of the Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023.
• The bill passed the House of Representatives but remains stalled in the Senate.
• While Labor holds a stronger position post-election, political commentary remains mixed on whether the bill will be reintroduced.
What is Division 296?
If introduced, Division 296 would:
• Apply an additional 15% tax on earnings linked to the portion of your super balance above $3 million.
• Take effect from 1 July 2025, with the first assessments based on your balance as at 30 June 2026.
• Include unrealised gains in the tax calculation — a point of concern for many investors.
• Not index the $3 million threshold, which may draw more people into the tax net over time.
• Allow choice in how the tax is paid — either personally or from your super fund.
Important Considerations
• No need to act yet: The legislation is not law, and the first calculation isn’t due until mid-2026. Premature action could trigger unwanted tax or planning outcomes.
• LRBAs excluded: If you have a Limited Recourse Borrowing Arrangement, the borrowed amount won’t count toward the $3 million threshold.
• Super is still tax-effective: Up to $3 million, super remains one of the most favourable structures for wealth accumulation and retirement planning.
• Potential for change: Even if the bill is revived, it may be amended before passing — including changes to the threshold or calculation method.
• Estate planning matters: Withdrawals to avoid the tax could have implications, including capital gains or higher marginal tax on personal income.
Preliminary Strategic Options
While legislative clarity is still pending, here are a few strategic areas worth considering:
• Review asset allocation: Keep high-growth or volatile assets outside super where possible, and retain lower-growth, income-producing assets inside.
• Cap contributions: Avoid further non-concessional contributions once approaching the $3 million cap.
• Explore alternative vehicles: Family trusts and investment companies may offer suitable wealth-building alternatives outside the super system.
• Withdraw only if appropriate: Eligible retirees may consider reducing their super balance before 30 June 2026 — but only with proper advice to avoid adverse tax outcomes.
Next Steps
This is a rapidly evolving space. Before making any decisions, we strongly recommend speaking with us to understand how this proposal could affect your individual situation. In many cases, superannuation will still be the most tax-efficient vehicle — even with the Division 296 tax applied.
Have Questions?
Please get in contact if you have any questions. We are here for all your financial needs and are always here to support you.
The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.
