Since February 2023, the Australian government has been planning to introduce a new tax of 15% on a portion of \u201cearnings\u201d 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.<\/p>\n
Debate over issues concerning the non-indexed $3\u00a0million 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<\/i>, which is why you might hear the change called the \u201cDivision 296 tax\u201d.<\/p>\nWhat will apply and when?<\/h3>\n
Currently, your entire super balance earnings in accumulation are taxed at 15%.<\/p>\n
If your \u201ctotal superannuation balance\u201d (TSB \u2013 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.<\/p>\n
The Division 296 measure would apply another 15% tax on a portion of estimated \u201cearnings\u201d relating to your TSB that\u2019s over $3 million. This tax would be charged to you personally, rather than to the super fund. The \u201cearnings\u201d calculation is quite complicated, and doesn\u2019t reflect the actual earnings in your fund (which is why we\u2019re using quotation marks for \u201cearnings\u201d).<\/p>\n
For example, if you start the year with a $3 million property in your super fund, and it\u2019s 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:<\/p>\n
TSB minus $3 million threshold: $3,500,000 \u2013 $3,000,000 = $500,000<\/p>\n
Percentage of TSB that the excess represents: $500,000 \/ $3,500,000 = 14.29%<\/p>\n
Proportional calculation to get Division 296 taxable earnings: $500,000 \u00d7 14.29% = $71,450<\/p>\n
Division 296 tax payable: $71,450 \u00d7 15% = $10,717.50<\/p>\n
So, $71,450 in earnings would be taxed at the additional 15%, for an additional tax liability of $10,717.50.<\/p>\n
Further, if your property didn\u2019t earn any real income in your fund, then you\u2019d need to be able to fund the tax payment from an alternative source if you didn\u2019t want to sell the property. The calculation of \u201cearnings\u201d is complex and adds back any withdrawals and subtracts any contributions, to ensure people don\u2019t make last-minute withdrawals specifically to reduce their \u201cearnings\u201d.<\/p>\n
This is a very simplified example \u2013 transactions like receiving insurance payouts, withdrawing amounts under the First Home Super Saver Scheme and other factors could affect your \u201cearnings\u201d and therefore the calculated tax amount.<\/p>\n
The ATO will advise about your liability for 2025\u20132026 year during the following year. You\u2019ll 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\u2019d prefer to pay.<\/p>\n
Before the new policy\u2019s set in stone, if you think you may be affected it would be wise to seek advice before making any hasty decisions.<\/p>\n","protected":false},"excerpt":{"rendered":"
Since February 2023, the Australian government has been planning to introduce a new tax of 15% on a portion of \u201cearnings\u201d 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…<\/p>\n","protected":false},"author":1,"featured_media":16747,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[41,6,43],"tags":[],"class_list":["post-16746","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-accounting","category-news","category-tax"],"yoast_head":"\n