Yesterday the Treasurer, Dr Jim Chalmers, announced revisions to the proposed Division 296 tax on earnings linked to very large superannuation balances. The revised settings are intended to be fairer and simpler, and the start date has been pushed back by a year.
Key Changes:
- The additional earnings tax will begin from 1 July 2026 (instead of 1 July 2025).
- The tax will apply only to future realised earnings rather than unrealised gains.
- The three million dollar threshold will be indexed.
- A second threshold will be introduced at ten million dollars and it will also be indexed. Earnings on the portion above three million dollars will be taxed at an additional fifteen per cent, and earnings on the portion above ten million dollars will be taxed at an additional twenty-five per cent.
- Defined benefit pensions will be brought into the rules to ensure consistent treatment.
- The Low Income Superannuation Tax Offset will rise to eight hundred and ten dollars (from five hundred dollars) and the income eligibility threshold will lift to forty-five thousand dollars (from thirty-seven thousand dollars).
What this could mean for you:
Most Australians will not be affected by the higher-tier taxes. If your total super balance is under three million dollars there is no change to the way your fund’s earnings are taxed. If your balance is above three million dollars, only the earnings attributable to the portion above the thresholds are subject to the additional rates. Moving to realised gains only reduces the cash-flow risk that came with taxing paper gains.
Low-income workers are set to benefit from the higher Low Income Superannuation Tax Offset, which reduces or refunds the fifteen per cent contributions tax on compulsory employer contributions up to the cap.
Next steps:
If your super balance is approaching or above three million dollars, consider booking a review to discuss contribution and pension planning ahead of the 1 July 2026 start. If your income is below forty-five thousand dollars, check your eligibility for the higher Low Income Superannuation Tax Offset once the law is in place. If you need further clarification or assistance, contact Michael Wang on (08) 8299 8888.
