A leading SMSF professional has recommended practitioners begin to have conversations with their clients to determine how the Division 296 tax will impact them in light of the federal election result on Saturday.
SMSF Alliance principal David Busoli acknowledged the Albanese government is now likely to control the Senate with the support of the Greens and this development sheds new light on the new superannuation measure.
“[Given this situation] it is inevitable [the Division 296 tax] will be reintroduced and passed,” Busoli noted.
However, he pointed out at this stage the original demands the Greens made in order for them to support the bill for this policy will not be an issue and suggested the implementation date will not change either.
“Notably, the Prime Minister reiterated last week that the cap will not be reduced to $2 million as demanded by the Greens. Presumably the new tax will become effective from 1 July 2025 even if the legislation is not passed by then,” he said.
According to Busoli, it has now become important for advisers and accountants to initiate client conversations on the subject.
“Given the proximity to the end of the financial year, you will need to deal with concerned clients wondering how this will affect them and if they need to take some action before the end of the financial year,” he explained.
“I would expect that, for most affected members, remaining in superannuation will continue to be the best option, however, any analysis must be bespoke and might take time to prepare so will be difficult to produce and practically implement before 30 June.
“In any case, it is possible, though unlikely, that the legislation will differ from what was originally introduced. Fortunately, the matter isn’t as urgent as it seems.”
To this end, he highlighted the actual timeframe SMSF trustees face in determining how they go about dealing with their predicament.
“The tax is based on the member’s year-end balance so, as the first year of operation will be the 2025/26 year, it is the member’s adjusted total super balance on 30 June 2026, not 2025, that is relevant,” he pointed out.
“An individual with more than $3 million in superannuation at the start of or during 2025/26 who reduces their balance to $3 million by 30 June 2026 will not be impacted by the tax. This means that action to equalise member balances might be considered before the end of this financial year, given contribution eligibility considerations, but probably little else.”
Further, he reiterated how the application of the threshold works with regard to the entire fund and the individual members.
“It might also be useful to stress to clients that the new tax is based on an individual’s combined balances across all superannuation funds, not the combined balance of all members in their SMSF,” he said.
“That means that no tax liability would arise if each member of a two-member SMSF had a 30 June 2026 member balance of $2.5 million, but would apply if one member had $3.5 million while the other had $1.5 million.
“Clearly account equalisation strategies can be effective, which is why they may be all you need to focus on at the moment.”
Secure a seat at the SMSF Professionals Day 2025 to find out in person how the federal election will impact the sector. Please visit www.accurium.com.au/smsf-professionals-day/ to register.
