Treasurer announces changes to proposed Division 296 tax
The Treasurer Dr Jim Chalmers has announced major changes to the proposed Division 296 tax which was originally intended to tax both realised and unrealised gains on the proportion of superannuation balances above $3 million.
With the labor government re-elected earlier this year, it was expected that it would continue with its plans to introduce Division 296. However, given the intense criticism of the proposed measures, it was also expected that the government may need to make some significant tweaks to ensure the legislation could pass through parliament.
Announced Changes
- The threshold at which the new tax will apply will be indexed to inflation, removing bracket creep as an issue (although also reducing the amount of tax that will be raised in the future).
- Two different thresholds will now apply, $3 million and $10 million. The new tax rate applying to earnings on balances exceeding $3 million will be 30%, with a 40% tax rate applying to superannuation funds with balances more than $10 million.
- The tax will no longer apply to unrealised gains, a major change in policy, and one which will make the tax much easier to apply, removing liquidity concerns and the need for valuations of assets.
- The superannuation tax offset for low income earners will also increase from $500 to $810 with the cutoff for eligibility increasing from $37,000 to $45,000.
The new tax will apply from 1 July 2026, a one year delay from the original proposal.
Draft legislation has not yet been released. We will provide a further update once further information is available.
If you have any questions regarding the announced changes, please contact your MGIDC advisor.
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