ASFA backs passage of Govt’s super tax package
The Association of Superannuation Funds of Australia (ASFA) is urging the passage of the Government’s Better Targeted Superannuation Concessions legislation while providing case studies explaining how the controversial Division 296 tax will work.
The Division 296 case studies range across a range of professionals from a dermatologist with $3.2 million super balance to a partner in a boutique law firm with $12.9 million in a self-managed fund.
In urging the passage of the legislation, ASFA chief executive, Mary Delahunty, said that the legislative changes “make super settings fairer and more sustainable”.
“I encourage the Parliament to pass the legislation without delay. Aussie workers on low incomes cannot wait another day for the fairness that this package delivers to them,” she said.
The following represents ASFA’s case studies for the application of the Division 296 tax.
How the Division 296 tax will work
Currently, earnings on superannuation investments are taxed at a flat rate of 15%, regardless of whether an account holds $10,000 or $10 million.
The Division 296 tax introduces a tiered system for earnings on the high-balance portions of super accounts. Specifically, the tax rate on earnings will increase:
- By an additional 15% (effectively 30%) for the portion of an account balance exceeding $3 million, below $10 million.
- By an additional 25% (effectively 40%) for the proportion of an account balance exceeding $10 million.
The tax will only apply to realised earnings. That is, earnings in cash after an investment asset has been sold, rather than “paper gains” on assets that have not been sold.
The ATO will calculate the liability for the affected 90,000 Australians, who will have the option to pay the tax directly from their super funds rather than out-of-pocket.
Case study: account balance greater than $3 million in an institutional super fund
Joan is a 50-year-old dermatologist with a $3.2 million balance in a large, institutional super fund. In 2026-27, her fund reports $250,000 in investment earnings on her account, of which only $125,000 is realised from the sale of investment assets.
The ATO will calculate Joan’s Division 296 tax liability as follows:
- Portion above $3 million: $3.2m minus $3.0m = $200,000, which is 6.25 per cent of Joan’s balance.
- Realised earnings attributable to the amount above $3 million: 6.25 per cent of $125,000 realised earnings = $7,812.50.
- Additional Division 296 tax (15 per cent of attributable earnings): 15 per cent of $7,812.50 = $1,171.88 (about $1,172).
Case study: account balance greater than $3 million in an SMSF
Fred is a 62-year-old man who retired from farming last year. His two daughters continue to run the farming business with their own families. They pay rent for the land they farm to Fred’s SMSF, which holds the farm as an investment asset.
The farm is valued at $3 million on 30 June 2026. In 2026-27, the SMSF receives rent, interest and dividends, and sells some shares.
Fred’s Division 296 tax liability in FY27 will be calculated by the ATO as follows.
Work out realised earnings for Division 296 purposes:
- Rent received: $120,00
- Interest and dividends: $60,000
- Taxable capital gain included in the fund’s income: $20,000 (after the one-third CGT discount)
- Deductible expenses: $10,000
- Net realised earnings: $120,000 + $60,000 + $20,000 – $10,000 = $190,000
Work out the portion of Fred’s balance above $3 million:
- At 30 June 2027, the farm is valued at $3.3 million and the value of his remaining investments has increased.
- The SMSF balance is now $4.0 million, so Fred is $1.0 million above the $3.0 million threshold. That is 25 per cent of his total balance.
Calculate the Division 296 amount (the extra tax)
- Earnings attributable to the amount above $3 million: 25 per cent of $190,000 = $47,500.
- Additional Division 296 tax (15 per cent): 15% of $47,500 = $7,125.
Case study: account balance greater than $10 million
Emily (55) is a partner at a boutique law firm she founded and has $12.9 million in her SMSF as at 30 June 2027. In 2026-27 she sells a business property held in the SMSF and realises $840,000 in taxable capital gains. She sells no other assets.
Emily’s Division 296 tax liability in FY27 will be calculated by the ATO as follows.
Work out the portions of Emily’s balance above $3 million and above $10 million:
- Total super balance = $12.9 million.
- Amount between $3 million and $10 million = $7 million ($10m – $3m).
- Amount above $10 million = $2.9 million ($12.9m – $10m).
- Between $3m and $10m: $7m / $12.9m = 54.26% share of total balance.
- Above $10m: $2.9m / $12.9m = 22.48% share of total balance.
Apply those proportions to Emily’s realised earnings:
- Earnings attributable to the $3m to $10m portion: 54.26% × $840,000 = $455,814.
- Earnings attributable to the above $10m portion: 22.48% × $840,000 = $188,837.
Calculate the Division 296 amount (the extra tax):
- For the $3m to $10m portion, Division 296 applies an additional 15 per cent tax: 15% × $455,814 = $68,372.
- For the above $10m portion, Division 296 applies an additional 25 per cent tax: 25% × $188,837 = $47,209.
- Total Division 296 assessment: $68,372 + $47,209 = $115,581.
Seems reasonable.
It might not be perfect but those big Super balances have had massive tax concessions from 2007 – 2017 they should never have had. (RBLs gone)
And still too generous from 2017 – 2026.
It makes no sense to continue excessive tax concessions for these very well to do Super asset people, they should pay more taxes.