Unrealised Capital Gains Tax
The Australian government plans to implement a taxation of unrealised capital gains for SMSF’s where Member’s have balances over $3 million in superannuation. This suggested implementation for this new tax is 1 July 2025.
New Div 296 Tax implications
The new controversial Div 296 tax will affect the proportion of a Member’s balance that exceeds $3 million.
- For example, if a Member’s balance is $4 million then the amount that is subjected to the Div 296 tax is 25%, meaning 25% of income earned within the Financial Year will be taxed at an additional 15%.
Impacts of Div 296
- If this new tax is legislated, it may discourage Australians from proactively making more contributions to their super and reaching the goal of $3 million as this cap is not indexed.
- Additionally, if the value of the investment asset drops in the following Financial Year a refund will not be given but rather an offset for future earnings (tax payables) will apply. This means if the SMSF continues to make losses, the Member’s will not receive any benefit.
- Furthermore, SMSF’s with assets that cannot be liquidated face the hardship of being unable to pay the large tax payables due to the unrealised capital gains tax as there is no income in the SMSF but only the possibility of income.
Concerns regarding this new tax
The main components of this tax are:
- 30% tax for balances over $3 million is a disincentive for younger people to contribute bigger balances into Super
- Taxing unrealised gains is, in effect, a tax on the inflationary increase of assets that a Super Fund must pay in cash to the Tax Office
- While the 3 million cap currently affects a small percentage of SMSF Members due to it not being indexed it will affect a higher percentage of Members over time.
For more information on tax please see here.
