A leading SMSF professional has recommended trustees begin having conversations with their accountants and advisers to determine how the proposed impost on total super balances over $3 million, or Division 296 tax, will impact them in light of May’s federal election result.
SMSF Alliance principal David Busoli acknowledged the Albanese government is now likely to control the Senate with the support of the Greens and this development sheds new light on the new superannuation measure.
“[Given this situation] it is inevitable [the Division 296 tax] will be reintroduced and passed,” Busoli noted.
However, he pointed out at this stage the original demands the Greens made in order for them to support the bill for this policy will not be an issue and suggested the implementation date will not change either.
“Notably, the Prime Minister reiterated recently that the cap will not be reduced to $2 million 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,” he said.
According to Busoli, it has now become important for conversations about the measure to be recommenced.
“Given the proximity to the end of the financial year, [practioners] 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,” he suggestsed.
“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.”
To this end, he highlighted the actual timeframe SMSF trustees face in determining how they go about dealing with their predicament.
“The tax is based on the member’s year-end balance so, as the first year of operation will be the 2025/26 year, it is the member’s adjusted total super balance on 30 June 2026, not 2025, that is relevant,” he pointed out.
“An individual with more than $3 million in superannuation at the start of or during 2025/26 who reduces their balance to $3 million 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.”
Further, he reiterated how the application of the threshold works with regard to the entire fund and the individual members.
“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,” he said.
“That means that no tax liability would arise if each member of a two-member SMSF had a 30 June 2026 member balance of $2.5 million, but would apply if one member had $3.5 million while the other had $1.5 million.
“Clearly account equalisation strategies can be effective, which is [what SMSFs members should probably] focus on at the moment.”
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