The BT technical team has revealed financial advisers and their clients continue to be concerned about the still unlegislated Division 296 tax based on the number of queries it is continuing to field in the most recent financial quarters.
“The potential operation of the Division 296 tax is of interest and concern. While a client may not be above the $3 million threshold today, it is the potential impact of a death benefit pension from a spouse, together with insurance proceeds inside super, that has many considering what options exist,” BT head of financial literacy and advocacy Bryan Ashenden noted.
“We’ve been dealing with high volumes of queries from advisers trying to understand what changes will be made by the government and when so advisers can give greater clarity to their clients and implement appropriate plans.”
Ashenden pointed out the delay in the introduction of legislation to enact the Division 296 impost has created uncertainty among advisers and their clients.
“We would urge caution in withdrawing any excess amounts above $3 million at this time in the absence of the legislation as clients would not be eligible to recontribute that amount if they changed their mind or if there were changes to the proposal itself,” he said.
Death benefit nominations is another issue garnering interest from practitioners given recent scrutiny by regulators that has prompted a review of the effectiveness delivered by current strategies.
“It is necessary for a beneficiary to meet the definition of a superannuation dependant at the time of death that is crucial, not at the time of making the nomination,” Ashenden stipulated.
The increase in the general transfer balance cap from $1.9 million to $2 million on 1 July 2025 has also prompted adviser questions around the level of non-concessional contributions that could now be included in the current financial year.
“The answer is obviously dependent on each client’s situation, but many advisers weren’t factoring in the potential increased availability of non-concessional contributions from 1 July 2025 following total super balance indexation. This could mean a greater benefit for clients who thought they no longer had the opportunity to contribute,” Ashenden suggested.
