The revised Division 296 measure will introduce a three tier, multi-tax environment to superannuation if it is implemented, but still represents a major shift from what was initially proposed by the government in early 2023, the Institute of Financial Professionals Australia (IFPA) has noted.
The industry body told its members that following the government’s announcement yesterday, the proposed impost would only apply to realised earnings but be applied twice – when a super fund member has a total super balance of more than $3 million and again if they have a TSB of more than $10 million.
“The effective cumulative tax rates within super are tiered to the extent they are attributable to balances exceeding $3 million or $10 million,” IPFA stated.
For members with a TSB up to $3 million, a standard tax rate of 15 per cent will apply to earnings, while for those with a TSB between $3 million and $10 million, the standard rate of 15 per cent plus the additional Division 296 rate of 15 per cent will apply to earnings.
With the introduction of a new threshold of $10 million, superannuants with a TSB above that number will be charged the standard 15 per cent tax, the additional 15 per cent tax under Division 296 and a further 10 per cent tax, for a total rate on earnings of 40 per cent.
“The ATO will continue to administer and calculate the Division 296 tax liability, however, super funds will be responsible for calculating the realised earnings for each member based on taxable income concepts and report this information back to the ATO,” the institute added.
IFPA head of technical services Natasha Panagis said the change was “a win for common sense” and “the idea of taxing unrealised gains was unfair, complex and inconsistent with basic tax principles”.
“These amendments align the policy with sound tax principles – you pay tax on income you’ve actually earned. This will give Australians greater certainty and confidence in managing their super investments,” Panagis said.
She noted IFPA had consistently been opposed to the tax in its original form and had maintained its view it should not proceed, and thanked members for their efforts in advocating for change.
“Through this united advocacy – from members engaging directly with policymakers to IFPA’s ongoing work with government and Treasury – we’ve achieved meaningful improvements to the proposed tax,” she said.
“The result is a fairer and more practical framework for both professionals and the broader community, demonstrating the strength of our profession when we act together.”
IFPA’s views were also reflected by the SMSF Association and the major accounting bodies, which have also welcomed the revisions to the proposed super tax.
