No $3m Division 296 tax this year

The Labor government’s Division 296 tax, which proposes to increase tax on superannuation balances exceeding $3 million, has recently failed to pass and has been abandoned for 2024. It could be reintroduced in February 2025 at the next Senate sitting which would provide another opportunity for the government to reintroduce the legislation, however given the widespread opposition, even this remains uncertain. Should the bill pass, implementation by 1 July 2025 seems unlikely, with a 1 July 2026 start date appearing more realistic to allow affected members to restructure their funds.

Where to now? 

While the proposed tax remains Labor policy, passing it without Greens or Coalition support seems increasingly unlikely. Shadow Assistant Treasurer Luke Howarth reaffirmed the Coalition’s opposition at an FSC event in August, stating: “We don’t want additional taxes and people picked out because [the government] wants to spend an additional $3.15 billion a year. The Division 296 [tax] would be one thing that we would reverse.”

Key criticisms of the proposed tax included: 

• No indexation: As super balances grow more Australians would become subject to this tax over time.
• Tax on unrealised gains: If passed, this would make Australia one of the only OECD countries to tax unrealised gains within a retirement system.

So, at least for now, Australian’s with more than $3m in superannuation can rest easy, but it might pay to start thinking now about how funds can be restructured if the tax is passed in 2025.  To speak to an advisor please contact 03 8508 7800.

 

This information is general in nature and is provided by Partners Wealth Group. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.