Introduction of legislation to add an extra 15% tax on superannuation balances over $3 million
Written by Kathleen Jess
As part of the announced 2023-24 budget measures, the Federal Government has introduced legislation into Parliament to insert a new Division 296 into the Income Tax Assessment Act 1997 with the purpose of adding an extra 15 percent tax on the earnings of superannuation balances over $3 million. This measure, if enacted, is due to commence on 1 July 2025.
This measure is considered controversial, not because it imposes an additional tax burden on high superannuation account balance holders, but because it proposes to tax unrealised capital gains as the Division 296 tax will be a tax based on the account holder’s total superannuation balance, rather than a tax on the earnings from that superannuation account. In a worst case scenario, a self-managed superannuation fund may be required to sell some of its assets in order to fund a Division 296 tax liability if it does not have sufficient liquid assets to meet the liability.
Proposals have been made that the Division 296 tax should be permitted to be deferred, with interest, until the superannuation fund has the liquid assets to fund the tax payable. The Division 296 tax is not yet law and is still before Parliament, so we will continue to keep you updated on the progress of this legislation and we will let you know when and if it is enacted.
