After an uninspiring Federal Election that has produced a Labour majority in the House of Representatives, we can be sure that the Division 296 tax is back on the Agenda. Of more importance is the composition of the Senate. As a simple majority is required to pass legislation, 39 votes are all that is required in the 76-seat senate. The latest results show it is likely that the Senate will be controlled by the Labour party (28) with support from the Greens (11).

If passed, the proposed Better Targeted Super Concessions legislation may come into effect from 1 July 2025. So, what does this mean? Based on the proposed legislation, the tax calculates the difference in your adjusted total super balance at 30 June 2026 (year end) for members with more than $3M at 1 July 2025. This means that we should have the 2025/2026 year to consider the ramifications for your individual circumstances.

I have written extensively about the Division 296 tax over the last 2 years and my advice is not to make any hard decisions until we have final legislation.

For now, you need to understand how the tax works and then consider its application for you and your family. Here are some fast facts (based on the current proposal):

•  The $3M is your member balance, not the combined value of your SMSF
• The Division 296 tax applies to all types of super funds
• It is a tax on unrealised gains – the basic formula will be 15% X a proportion (based on how far over $3M you are) X super earnings (includes anything that increased your super balance (ex contributions) less anything that reduced your balance (ex withdrawals))
• For Defined Benefit Pensions the value of your interest will be calculated based on the Family Law Act which has a different calculation to the Total Super Balance used for other calculations.

If you are interested in how this may impact you, please get in contact with our Ulton Wealth Management team to discuss your individual circumstances and plan with confidence.