Div 296 may be less than personal tax

Superannuation fund members, particularly those in retirement phase, should not overreact to the incoming Division 296 impost, with an administration provider noting taxes outside super are most likely to be higher in many circumstances.

SuperConcepts quality and technical services general manager Craig Stone said while the new impost would impact superannuants in accumulation phase, they would still pay less on any earnings than if they were taxed personally under marginal tax rates.

“For accumulation balances, these are the tax rates that are going to apply. It’s 15 per cent all the way up, so you can have millions in your fund and that’s the tax rate, which means it’s still a good place to hold investments,” Stone said during a presentation at the Australian Shareholders’ Association 2026 Investor Conference in Melbourne yesterday.

“If you then build into the fact that Division 296 for those balances up to $3 million pay zero tax, nothing’s changed. From $3 million to $10 million, the tax is on the proportion of income and you’re going to pay 15 per cent, and above $10 million, an extra 10 per cent.

“So the maximum tax you’re going to pay in superannuation on a portion of your income or capital gains is 40 per cent.

“If you have more than $135,000 of personal taxable income, you’re paying 37 per cent, and above $190,000 it’s 47 per cent, so [with Division 296] you’re not paying anywhere near that.”

He added the scenario improved for those in pension phase as no tax also applied to them for any transaction made, franking credits received or pensions withdrawn from super, and the impost only applied once they exceeded the $3 million threshold.

“What if I’ve got a fund with $5 million, so a little bit of tax on the Division 296 portion from $3 million to $5 million?” he said.

“[In that case] I have 40 per cent of my income over that limit, which is going to get charged a 15 per cent tax, which is a per cent times a per cent times a per cent.

“If this is your situation, all the franking credits you receive will probably outweigh your Division 296 tax by many times.

“Yes, it’s more tax than you paid last year, but it’s not worth worrying about, especially if your assets are up there [in the millions] and you’ve got assets outside super where you’re probably already paying more than 15 per cent times by 40 per cent.”