It’s official – we will be going to the polling booths on 3 May. From a superannuation and, more importantly, an SMSF perspective all eyes will now be on the federal government’s renewed approach to the proposed Division 296 tax.
It is now confirmed Treasurer Jim Chalmers and Financial Services Minister Stephen Jones missed their opportunity to do some successful last-minute horse-trading to get the bill for the measure over the line before both houses of parliament were dissolved. So where to now?
From a political standpoint, it will be interesting to see how the Albanese government approaches the issue. Before the last election it made a promise it would not change the superannuation laws if elected, but not long after taking office proposed the new impost. I’m still wondering myself why the move did not attract more criticism, but what probably allowed Jones to get away with it was the fact the measure would not take effect until 1 July 2025. It meant it would be in the next elected government’s term and, depending on the result, might not technically represent a broken commitment.
But it’s out there now, so the question is: Will Labor have the fortitude and transparency to make this policy an election issue, providing voters with a reminder it really did break a political promise last time around?
Further, what impact will the current political landscape and prediction for the coming election have on the nuts and bolts of the policy itself? Most insiders are predicting the best result the ALP can hope for is to retain power by way of a minority government. If this is the case, the Greens and other independents will end up being the kingmakers, but they’ll want something for their support.
If the Greens end up being the critical element to forming government, they will push for the current $3 million threshold contained in the measure to be reduced to $2 million, meaning it will end up impacting not just ‘rich’ SMSFs, particularly if indexation continues to be omitted from its operation.
In addition, the Greens will want limited recourse borrowing arrangements to be banned even though every analysis performed on this gearing strategy has given it the green light. It remains doubtful whether the ALP will have the appetite to change the policy so dramatically because it will end up impacting all super funds – not one of its desired outcomes.
If the support of the other independents, commonly referred to as the Teals, is required for Anthony Albanese to return to the Lodge, the measure may have a chance if Chalmers is not too stubborn about it. This cohort of politicians have said they will not support the proposal unless an indexation measure is included and the methodology used to calculate the liability will not tax unrealised capital gains.
This would probably be more palatable for the Treasurer and provide a better option for Australians if the Division 296 tax absolutely had to be implemented (that is, of course, if they are returned, with the seats of Goldstein, Kooyong and Wentworth in doubt). But Chalmers has spurned every opportunity afforded to make these tweaks.
On the flip side, if the coalition wins government, the measure will most likely go the way of the dodo.
Given all of these hurdles, you might be asking why Labor continues to pursue the policy. While I haven’t got the numbers at my disposal, I’m told it’s because the tax has been factored into the forward estimates and if the government confirms the demise of the measure, these figures will have to be extracted from budget forecasts and it will be on the hook to fill another fiscal hole.
So everything is up in the air right now with regard to the Division 296 tax, but we will soon start to see how it all plays out.
SMSF Professionals Day 2025 will offer practitioners the opportunity to witness the first analysis of the post-election superannuation landscape in person. Please visit here to register.
