I read with concern this week of accounts in the financial press of superannuation trustees affecting sales of their assets to avoid the Div296 superannuation changes the Treasurer will soon enact.

While the measure is not law, it will become so with a commencement date of 1 July 2025 with the aim to impose additional taxes on members with large super balances.

Firstly, superannuation remains the most tax-effective structure for members with $3 million or less. Each person has a $3 million cap, and the Div296 tax will only apply to members with more than that. Conceivably, you could have a couple with balances of $2.5 million each – 5 million as a couple, and they will not be affected in the shorter term.

There will be individuals who will have more than $3 million and may have a better tax outcome by reducing their balance, but you should not do this in haste as it will be on a case-by-case basis. And many of our clients will not be affected at all.

Let’s take the case of Clair, who now has $4 million in superannuation. Let’s assume that Clair’s member account increases by 7% for the 2025/2026 financial year to $4,280,000. Does it mean Clair’s super fund will have an additional tax bill of $280,000 x 15% = $42,000?

The answer is no, as only a portion of the earnings are taxable. Total Super Balance calculates the proportion of the earnings at the end of the Financial Year – large balance threshold ($3 million) / Total Superannuation Balance at the end of the Financial Year. In this case: ($4,280,000 – $3,000,000)/$4,280,000 = 29.90%.

The tax would be 29.90% of $280,000 at 15% = $12,558.

Therefore, there is no need for haste or panic.

There is a bigger issue, however. The threshold of $3 million is not indexed, meaning the net will become larger over time. Secondly, taxing unrealised gains is a first for the Tax Act. It’s a slippery slope to then apply the same legislation to assets held by Trusts and Companies. This strategy may become especially relevant if the public debt position continues to deteriorate.

Superannuation rules and regulations in Australia can be complex and ever-changing. At Future Gen Solutions, we’re here to help you navigate this landscape by developing a tailored investment strategy designed to grow your superannuation fund. We work with you to assess your risk tolerance, diversify your investment portfolio, and make informed decisions aligned with your financial goals and retirement timeline.

If you’re curious to learn more, feel free to call us directly on (07) 3391 1624.