Here’s a summary of the latest developments (as of October/November 2025) concerning the proposed Division 296 of the Income Tax Assessment Act 1997 (“Div 296”) superannuation-tax measure in Australia, including key changes, status and next steps.
What is Div 296?
- Originally introduced under the proposed Better Targeted Superannuation Concessions Bill 2023, Div 296 is a tax measure aimed at reducing tax concessions for individuals whose total superannuation balances exceed a given threshold (initially $3 million).
- The basic design was: an additional tax (initially 15 %) on the “earnings” of a super fund attributable to the portion of a member’s total superannuation balance that exceeds the threshold.
“Total Superannuation Balance (TSB)” means the combined value of all a person’s super interests.
Key Changes Announced 13-14 October 2025
On 13 October 2025 the Treasury of Australia and the government announced material changes in response to stakeholder feedback. Some of the major changes include:
- Deferral of commencement date
- The start date has been pushed back from 1 July 2025 to 1 July 2026.
- This means the first year the tax could apply is the 2026-27 financial year.
- Change in the definition of “earnings”
- The revised design would exclude unrealised capital gains from the calculation of “earnings” for the purpose of the additional tax. Only realised earnings (taxable income of the fund) will be included.
- This is a major relief for many, as earlier drafts included unrealised gains which raised significant structural concerns.
- Tiered thresholds introduced
- The $3 million threshold remains, but a second higher threshold of $10 million has been introduced.
- The effect is a tiered tax rate: the proportion of earnings attributed to the portion of a member’s TSB above $3 m up to $10 m gets one rate; above $10 m gets a higher rate.
| Tier | Superannuation Balance (TSB) | Additional tax rate on earnings attributable to the excess |
| Tier 0 | ≤ $3 m | 0% additional (i.e., standard concessional tax) |
| Tier 1 | > $3 m to ≤ $10 m | ~15% additional tax on that portion (i.e., earnings above $3 m) |
| Tier 2 | > $10 m | ~25% additional tax on the portion above $10 m (i.e., combined extra rate) |
- Indexation of thresholds
- Both the $3 m and $10 m thresholds will now be indexed to inflation (CPI) in fixed increments:
- ~$3 m threshold: increments of around $150,000.
- ~$10 m threshold: increments of about $500,000.
- Both the $3 m and $10 m thresholds will now be indexed to inflation (CPI) in fixed increments:
- Operational design and reporting changes
- Under the new design, calculation of the tax will happen at the fund level on realised earnings and then attributed to individuals, rather than a broad deeming of whole portfolio/TSB.
- The legislation has not yet been introduced; consultation remains.
Current Status
- The Bill to enact Div 296 (or its revised version) has not yet been passed.
- Government fact sheet: the measure is part of the Better Targeted Superannuation Concessions (BTSC) policy.
- Because the start date is 1 July 2026 (if passed as announced), individuals and advisers have some time to prepare.
- Advisory bodies and tax practitioners are still reviewing the detailed design, especially how “realised earnings” will be defined, how attribution to individuals will work, how super funds will report etc.
Key Implications
- If your TSB (across all funds) is near or above the $3 m (and especially the $10 m) threshold, you’ll want to model the additional tax exposure in light of the new design.
- The removal of unrealised gains taxation means timing of realisations and investment strategy may matter less in respect of this tax, but still relevant: earnings must be “realised” and attributed to your fund.
- Since the design is yet to be finalised, structural decisions now (re investment, contributions, fund choice) should factor in the announced direction but allow for tweaks.
- Indexed thresholds are helpful, but you should monitor the CPI/path of the increments ($150k/$500k) over time because inflation could push you past the thresholds if your balance grows.
- If you have defined‐benefit super interests (or other complex super structures) you’ll need to consider how the tax will apply (e.g., special valuation rules) — earlier drafts had specific mechanics for defined-benefit schemes.
- Your broader retirement/investment plan may need to incorporate this tax layer for super accumulation phase.
Outstanding Issues / Areas to Watch
- The exact legislative wording is still to come; therefore, some design details (what counts as earnings, how the fund reports, how individual attribution works) could change.
- Super funds with illiquid assets (including properties and farms) or unusual structures may still face complexity in determining “realised earnings” attributable to members.
- Timing issues: when is the TSB measured (end of year?), how is the attribution done, when is the tax payable? Earlier draft said TSB is measured at 30 June each year.
- For the inheritance/estate planning dimension, there may be “double tax” issues if tax credits cannot be transferred on death.
- Compliance/reporting burdens on super funds will increase; you’ll want to maintain clarity on how your funds are structuring, reporting, and preparing for Div 296.
What You Might Consider Doing Now
- Estimate your current TSB across all super interests (including accumulation + pension phase) to see where you stand relative to thresholds.
- Model potential tax under Div 296 using different scenarios: e.g., if TSB = $4 m, $8 m, $12 m; with realisable earnings of various amounts; apply tiered tax.
- Review investment strategy in super: given the tax is on “realised earnings”, timing of realisations may become more relevant; you might consider when/how earnings are realised, how fund income is generated.
- Assess whether to adjust contributions or the structure of accumulation (e.g., splitting between funds, managing growth outside super) to optimise for the new tax regime—though any strategy must also consider existing super rules and your broader goals.
- Stay engaged on legislative updates: because final design may change, tracking Treasury consultation papers, draft legislation, and commentary from super funds/advisers is wise.
- Consult specialist tax & super adviser (particularly one versed in high-balance super strategies) to integrate Div 296 with your overall wealth and retirement planning.
Should you wish to discuss these matters please contact us.
