Following the route of the LNP in Saturday’s election the Labor government has won total control of the House of Representatives. The Senate will also be controlled by the Government, with the help of the Greens, so it is inevitable that Div 296 will be reintroduced and passed. Notably the Prime Minister reiterated, last week, that the cap will not be reduced to $2m, as demanded by the Greens. Presumably the new tax will become effective from 1 July 2025, even if the legislation is not passed by then.
Given the proximity to the end of the financial year, you will need to deal with concerned clients wondering how this will affect them and if they need to take some action before the end of the financial year. I would expect that, for most affected members, remaining in superannuation will continue to be the best option however any analysis must be bespoke and might take time to prepare so will be difficult to produce, and practically implement, before 30 June. In any case it is possible, though unlikely, that the legislation will differ from what was originally introduced. Fortunately, the matter isn’t as urgent as it seems.
The tax is based on the member’s year-end balance so, as the first year of operation will be the 2025/2026 year, it is the member’s adjusted total super balance on 30 June 2026 (not 2025) that is relevant. An individual with more than $3m in superannuation at the start of, or during 2025/26, who reduces their balance to $3m by 30 June 2026 will not be impacted by the tax. This means that action to equalise member balances might be considered before the end of this financial year, given contribution eligibility considerations, but probably little else.
It might also be useful to stress to clients that the new tax is based on an individual’s combined balances across all superannuation funds, not the combined balance of all members in their SMSF. That means that no tax liability would arise if each member of a 2-member SMSF had a 30 June 2026 member balance of $2.5m but would apply if one member had $3.5m while the other had $1.5m. Clearly account equalisation strategies can be effective which is why they may be all you need to focus on at the moment.
A more comprehensive assessment, including a calculator, is available on our website and will be updated as matters develop.
