Super Alert: Div 296 tax to take effect from 1 July 2025

Super Alert: Div 296 tax to take effect from 1 July 2025

On Friday, 10 May 2024, the Senate Economics Legislation Committee recommended the Bill containing the measure to impose an additional tax on balances above $3 million (Div 296 tax, proposed new s 296‑35(1)(a) of the Income Tax Assessment Act 1997 (Cth) (ITAA)) proceed with no changes.

The key features of the Div 296 tax

  • The tax will be levied at a rate of 15 per cent on a proportion of an individual's “superannuation earnings” (including unrealised capital gains)
  • The proportion is determined as that part of their total superannuation balance above $3 million (at the end of each financial year)
  • The tax will be levied directly on individuals and imposed separately to personal income tax and superannuation fund tax (similar to the current Division 293 contribution tax, the individual may elect to pay this tax personally, or elect to pay the tax from their superannuation account balances)
  • The $3 million cap will not be indexed
  • The tax will first apply for the 2025/26 financial year (subject to the Bill making its passage through both houses before 30 June 2024).

BDO’s approach

Our superannuation advisers can assist clients to conduct detailed financial modelling to determine the potential impact of this new tax based on their unique circumstances and provide decision-making support.

Our strong recommendation is that clients should not act hastily. Rather, they should take the time to ensure they are in a position to make an informed decision closer to the first half of the 2025 calendar year.

The information contained in this publication is purely factual in nature and does not take into account your personal objectives, financial situation or needs. It is provided as an information service only and does not constitute financial product or other professional advice and should not be relied upon as such. Before making any investment or financial decisions you should consider your particular objectives, and financial circumstance or needs. Where information relates to a particular financial product you should obtain and consider the relevant Product Disclosure Statement and obtain advice from a financial adviser before making any decision. If you do require financial advice, please contact the relevant BDO member firms in Australia who will be able to assist you in their capacity as an Australian Financial Services licensee. BDO Australia Ltd and each BDO member firm in Australia, their partners and/or directors, employees and agents do not give any warranty as to the accuracy, reliability or completeness of information contained in this publication nor do they accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it, except in so far as any liability under statute cannot be excluded.

BDO refers to one or more members of a national association of separate entities who are all members of BDO Australia Limited, an Australian company limited by Guarantee. BDO Australia Ltd and its members are independent member firms of BDO International Ltd, a UK company limited by guarantee. Each BDO member firm in Australia is a separate legal entity and has no liability for another entity’s acts and omissions. Liability limited by a scheme approved under Professional Standards Legislation. 

BDO is the brand name for the BDO network and for each of the BDO member firms. 

© 2024 BDO Australia Ltd. All rights reserved.