Proposed Division 296 Tax Update

Division 296 is a proposed tax measure announced prior to the last Federal Election by the Labor Government that was intended to take effect from 1 July 2025.

The bill sought to impose a new Division 296 tax of up to an additional 15% on members with a $3 million or more total super balance.  Particular (negative) aspects were:

• lack of indexation on the $3 million threshold;

• the taxation of unrealised capital gains.

In a media release published on 13 October 2025, Federal Treasurer Jim Chalmers announced major changes to the tax.   Key changes are:

• instead of one unindexed threshold of super balances of $3 million, there will be two thresholds, both of which will be indexed:

• $3 million (indexed)

• $10 million (indexed)

• For both thresholds, the Div 296 tax will apply to income and realised earnings, at a rate of up to 30% (earnings on balances between $3 million and $10 million) and up to 40% (earnings on balances over $10 million)

• Start date has been pushed back to 1 July 2026.

Importantly, these changes mean the earnings calculation will only apply to future realised earnings and not unrealised gains.

The amended bill is not expected to pass until early 2026.