Division 296 Tax

Superannuation Advice

Division 296 Tax

Division 296 Tax is a new proposal aimed at taxing superannuation funds an additional 15% tax on its earnings where the fund’s Total Superannuation Balance (TSB) is above $3 million.

Please note the proposal is yet to be legislated, however should it pass, it would apply from 1 July 2025.

The TSB is calculated based on the individual’s member balance and not the total superannuation fund balance and so ought to only apply to those members in the fund who have a balance more than $3 million.

Earnings is not defined as income in the traditional sense, rather reflects the movement in a member’s TSB balance from one year to the next. Effectively, this means the member ought to be taxed on the unrealised gains of the superannuation fund’s investments.

Should this proposal end up being legislated this could propose a number of problems for a superannuation fund such as cash flow concerns and the ability to structure their investments in a tax effective manner for retirement. 

A recent announcement from Treasury has suggested that Defined Benefit Funds would also be exposed to this proposed legislation and so it ought to affect all individuals in all types of superannuation funds.

Waterford Accountants will continue to monitor this proposal and provide you with updated commentary as the matter develops. Should you have any immediate concerns please contact our office so we can review your personal circumstances to determine if you are affected.