“Miracles of miracles, look what the night dragged in.” That’s the opening line of the Eurythmics song “Don’t Ask Me Why” and it sprung to mind immediately when the government announced the changes it has made to the Division 296 tax on 13 October.
The other thing I wanted to point out to Treasurer Jim Chalmers is the feeling he has right now is not egg on his face, it’s an entire omelette.
On a positive note, short of scrapping the whole policy, the changes indicate a more common-sense approach has now been adopted for the measure. In particular, the most egregious elements contained in the original bill, that is, the taxing of unrealised capital gains and the omission of an indexation mechanism for the triggering threshold, have both been corrected. Further, the implementation date has been pushed back to 1 July 2026.
But I really would like to ask the Treasurer what prompted the epiphany to make these changes, particularly when only recently he stood in front of the press corps and declared Canberra had not received any alternative suggestions as to how the Division 296 tax could be calculated without using unrealised capital gains as the base factor.
I said at the recent SMSF Trustee Empowerment Day 2025 that was a bald-faced lie because just about every submission from key stakeholders had an alternative calculation method for the impost included in it.
So what then prompted the change? I think it was pure politics and pretty fitting seeing that has been the pervading influencing factor from day one of the announcement of the measure. No doubt we’d all like to think Chalmers had a change of heart after revisiting some of those submissions, but I don’t think that was the case.
We all know former prime minister Paul Keating and former Australian Council of Trade Unions secretary Bill Kelty were completely opposed to the policy and had expressed this sentiment, and I think their influence on Prime Minister Anthony Albanese made the difference in the end.
With the government conceding on the issue of taxing unrealised capital gains, it stands to reason Capital Hill would have to make some effort to ensure the projected budget revenue forecast over the coming four years and that probably explains why a second threshold of $10 million will be introduced, whereby revenue over this limit will attract a further 10 per cent tax imposed proportionately.
I’m not going to go into the nuts and bolts of how the new tax will now be calculated, and naturally we are still awaiting the critical details, but the whole discussion about the effect of capital gains is set to continue. It has been confirmed capital values of assets will only count from 1 July 2026 onwards for Division 296 purposes, but unfortunately that suggests two sets of bookkeeping records will now have to be maintained – one reflecting asset values from the original purchase date of an asset and one reflecting values from 1 July 2026.
All this means is additional administration tasks and expense for SMSF.
But overall it can be considered a good result and clears the air for further superannuation tax policy discussion without the pollution of calculation methodology.
Also, there is a consultation process still to come for Division 296 tax 2.0, but I severely doubt it will have much impact on the amended measure.
And while earlier I cynically suggested the submissions made to Treasury on the policy did not have a direct impact on Chalmers’ decision-making, I think it is irrefutable they had an indirect effect on some backbenchers and former ALP heavyweights.
To this end, all of the key industry stakeholders deserve a note of thanks, but in particular the efforts of the SMSF Association and chief executive Peter Burgess require special mention for leading the charge against the policy from its inception.
So the ball is back in the Treasurer’s court now to make sure the policy is legislated and implemented in the most palatable way possible, otherwise a different lyric from that same Eurythmics song may ring true for him, particularly with respect to the SMSF sector: “Now you think that you’re forgiven, but you can’t be born again.”
