The total super balance (TSB) ‘integrity measure’ adopted within the proposed Division 296 tax means it is unlikely superannuants will be able to avoid the new impost even where a change in balance was outside their control, a technical manager has stated.
Heffron head of education and content Lyn Formica said the plan to levy Division 296 based on the higher figure of a member’s start of financial year or end of financial year TSB meant losses due to fraud or failure would not alter a tax assessment.
Speaking during an online briefing today she noted during the transitional year for the planned impost, 2026/27, only the end of year TSB would be used but in subsequent years the higher of the two figures would be used.
“We will have to look at both the start and the end of year balances, and our proportion is going to be based on the higher of the two,” Formica explained.
“So Division 296 tax is going to be payable if your balance is over $3 million at either the start or the end of the year.
“Essentially, it’s an integrity measure to make sure we’re not avoiding Division 296 tax by withdrawing balances just prior to the end of the year.
“Is that going to lead to any unintended consequences? I don’t think there are unintended consequences. I think there are intended consequences that perhaps seem a little bit unfair for some people.
“Think of the Shield [Master Fund] and First Guardian [Master Fund], I’m hoping they didn’t have more than $3 million but people who have lost a lot of money, their balances have disappeared through no fault of their own, and they are then subject to Division 296 on money they no longer have.”
Formica added the aim of the government to capture more people who might have passed the Division 296 thresholds in a financial year was also evident in that it was unlikely to adopt some aspects of the original Division 296 proposal such as adding back withdrawals.
“I wouldn’t hold your breath [for that change] in the sense that we’ve moved to a mechanism that is based on taxable incomes,” she indicated.
“They want to make sure they are capturing the tax that’s payable when we sell assets inside a superannuation fund.
“They don’t want the situation where people can have big asset sales and make big capital gains but as long as they get themselves down below $3 million they don’t have any Division 296 tax to pay.
“That’s what the government will be absolutely trying to avoid. I’m not hopeful that integrity measure would change.”
