Div 296

Division 296 proposes an additional 15% tax on earnings attributed to an individual’s total superannuation balance (TSB) above $3 million. The original draft legislation suggested taxing unrealised gains, a highly controversial measure that drew significant criticism from the superannuation industry for being unfair and administratively complex. The proposal also set the $3 million cap as a fixed threshold, with no indexation for inflation.
Originally due to commence on 1 July 2025, the start date has now been delayed to 1 July 2026.

This measure aims to limit superannuation tax concessions for individuals with very large balances and will apply across all superannuation interests, including SMSFs and retail or industry funds.

Key Updates to Division 296

1. Unrealised gains excluded:
   The tax will now only apply to realised earnings, removing the earlier proposal to tax unrealised gains.

2. $3 million threshold indexed:
   The $3 million TSB cap will be indexed over time, helping it keep pace with inflation and account balance growth.

3. New $10 million threshold:
   A second threshold of $10 million will be introduced which will also be indexed. Earnings on balances above this level will be taxed at a higher rate of 40%.

4. Start date postponed:
   Implementation has been delayed by one year, with the tax now commencing on 1 July 2026.

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