The Division 296 tax was first announced by the Federal Government in February 2023. It applies to individuals with super balances over $3 million per account. Under the proposal, income earned in super — including unrealised capital gains — on the portion above $3 million would be taxed an extra 15%, on top of the existing 15% super tax.
This week the government has announced proposed changes to the controversial Division 296 tax. It appears the government has listened to criticism by industry bodies regarding two unpopular components of the original proposal:
- Taxation of unrealised capital gains
- No indexation of the $3M threshold
What are the proposed changes?
- The proposed extra 15% will now apply only to realised investment earnings, not unrealised capital gains. This welcome change makes the system fairer by taxing actual profits, not just increases in value on paper.
- An additional threshold has been introduced. Under the proposal, in addition to balances over $3 million facing an extra 15% tax, balances above $10 million will now pay an additional 25% on realised investment earnings from that portion.
- Indexation of the proposed thresholds will now be applied. The $3 million threshold will increase over time with inflation, in $150,000 steps, to stay in line with the Transfer Balance Cap. The $10 million threshold will also rise with inflation, in $500,000 steps, keeping the same alignment.
- Finally, the proposed legislation is now set to take effect from the 1st July 2026 (previously 1st July 2025) which gives clients an additional year to plan
Overall, we welcome the removal of taxation of unrealised capital gains and indexation of the proposed thresholds which we believe provides a fairer tax system for those impacted by the new legislation.
Once legislated we will be reviewing all clients impacted by the proposed changes and will advise of the appropriate course of action (if any).
If you have any questions regarding the proposed changes or any impact they may have on your personal situation please don’t hesitate to contact us.
IMPORTANT NOTICE: The following relates to this document published by Stephan Independent Advisory.
SOURCES: Better Targeted Superannuation Concessions Fact Sheet – Treasury Australian Government: 12th October 2025.
GENERAL DISCLAIMER: The information contained in this update is general information only and is not intended to be a recommendation. We strongly recommend you seek advice from your financial planner as to whether this information is appropriate to your needs, financial situation and investment objectives. Whilst every care has been taken in the preparation of this update, Stephan Independent Advisory, its directors, authors, consultants, editors and any persons involved in the preparation and distribution of this newsletter, expressly disclaim all and any form of liability to any person in respect of this update and any consequences.
