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29th Aug, 2025
Since February 2023, the Australian government has been planning to introduce a new tax of 15% on a portion of “earnings” relating to total superannuation balances over $3 million. The idea was to inject some equity in a system with generous tax concessions weighted in favour of the wealthy. The tax change was proposed to kick in on 1 July 2025.
Debate over issues concerning the non-indexed
$3 million threshold and the taxation of unrealised capital gains then put the proposal on ice. The Bill containing the change is expected to be reintroduced now that Parliament has resumed. The Bill proposes to insert a new Division 296 into the Income Tax Assessment Act 1997, which is why you might hear the change called the “Division 296 tax”.
Currently, your entire super balance earnings in accumulation are taxed at 15%.
If your “total superannuation balance” (TSB – meaning all of your super, in all accounts, in accumulation and in pension phase) is under $3 million, the new additional tax would not apply.
The Division 296 measure would apply another 15% tax on a portion of estimated “earnings” relating to your TSB that’s over $3 million. This tax would be charged to you personally, rather than to the super fund. The “earnings” calculation is quite complicated, and doesn’t
reflect the actual earnings in your fund (which is why we’re using quotation marks for “earnings”).
For example, if you start the year with a $3 million property in your super fund, and it’s worth $3.5 million by the end of the year, a portion of the $500,000 unrealised capital gain would be taxed to you personally. If this was the only asset in all of your super, and you made no contributions or withdrawals during the year, and received no actual investment earnings, the Division 296 tax calculation could look something like this:
TSB minus $3 million threshold: $3,500,000 – $3,000,000 = $500,000
Percentage of TSB that the excess represents: $500,000 / $3,500,000 = 14.29%
Proportional calculation to get Division 296 taxable earnings: $500,000 × 14.29% = $71,450
Division 296 tax payable: $71,450 × 15% = $10,717.50
So, $71,450 in earnings would be taxed at the additional 15%, for an additional tax liability of $10,717.50.
Further, if your property didn’t earn any real income in your fund, then you’d need to be able to fund the tax payment from an alternative source if you didn’t want to sell the property. The calculation of “earnings” is complex and adds back any withdrawals and subtracts any contributions, to ensure people don’t make last- minute withdrawals specifically to reduce their “earnings”.
This is a very simplified example – transactions like receiving insurance payouts, withdrawing amounts under the First Home Super Saver Scheme and other factors could affect your “earnings” and therefore the calculated tax amount.
The ATO will advise about your liability for 2025–2026 year during the following year. You’ll be able to pay out of pocket or directly from your super fund. If you have more than one fund, you can nominate from which fund you’d prefer to pay.
Before the new policy’s set in stone, if you think you may be affected it would be wise to seek advice before making any hasty decisions.
17th Jan, 2025
As retirement approaches, couples often discover a significant imbalance in their superannuation accounts. This disparity can become crucial when planning for retirement, and addressing it proactively can be beneficial for various retirement strategies.
Your individual total super balance as of 30 June each year impacts your ability to implement various super strategies in the following financial year. Key strategies where your total superannuation balance (TSB) is a condition of eligibility include:
When planning for retirement, the Age Pension is a consideration for many. The asset test only includes superannuation for individuals of pension age. If there’s a significant age difference between spouses, directing more super to the younger spouse could potentially maximise Age Pension entitlement at retirement.
Spouse contribution splitting allows you to transfer up to 85% of your annual concessional contributions to your spouse’s super account.
Key points:
Check if your fund offers spouse contribution splitting, as it’s not mandatory for all funds.
Apply for contribution splitting after the end of the financial year in which the contribution was made. If you roll over or withdraw your entire super balance before the financial year’s end, you can apply to split the contributions within that same year.
Spouse contribution splitting can help couples equalise their superannuation balances and optimise retirement outcomes. Consider your unique circumstances and seek professional advice to ensure this approach aligns with your long-term financial goals.