The Treasurer announced yesterday the following six key changes to the proposed Div 296 tax;
- Div 296 tax will only apply to future realised earnings (the original proposal taxed unrealised capital gains).
- Div 296 tax $3.0m threshold will be indexed (the original proposal had no indexation of the threshold)
- Div 296 tax will now have a two-tiered structure ;
- Member’s account balance (per member) ≥ $3.0m to < $10.0m = earnings on this component to be taxed at 30% (15% base tax rate + 15% Div 296 tax)
- Member’s account balance (per member) ≥$10.0m = earnings on this component to be taxed at 40% (15% base tax rate + 25% Div 296 tax)
- The $10.0m threshold will also be indexed
- Div 296 implementation date will be delayed by one year to 1 July 2026
- Div 296 tax will also apply to Defined Benefit Pensions to ensure same treatment as Account Based Pensions
- Low-income Superannuation tax offset (LISTO) will increase from $500 to $810 and the eligibility threshold will increase from $37,000 to $45,000.
Under this new regime above, from the 1 July 2026 (FY2027) Superannuation Fund earnings will be taxed as follows
- Member’s balance (per member) <$3.0m = earnings on this component tax rate = 15% (Capital gains on assets held >12mths = 10%)
- Member’s balance (per member) ≥ $3.0m to < $10.0m = earnings on this component taxed = 30% (15% base tax + 15% Div 296 tax)
- Member’s balance (per member) ≥$10.0m = earnings on this component taxed at 40% (15% standard tax rate + 25% Div 296 tax)
As the proposed new Div 296 tax start date has been moved to 1 July 2026 (first year = FY2027) there is nothing to do now.
We will wait to see the draft legislation and will keep you updated as further announcements are made.
The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.
