The SMSF Association has told the government its revised plans for the Division 296 still need improvement to find a balance between simplicity, equity and workability, and more cost-effective and less complex alternatives should be considered.
The industry body made the call in a submission to Treasury regarding the release of a revised draft Treasury Laws Amendment (Better Targeted Superannuation Concessions) Bill 2025 late last year, leading to a short consultation period that closed on 16 January.
In the submission, the association noted the government’s headline announcement in October last year regarding structural changes to the tax was an improvement, but the operational details in the draft bill highlighted further changes that should be made.
SMSF Association chief executive Peter Burgess said: “We recognise the policy intent to reduce tax concessions for individuals with very large superannuation balances. We also acknowledge the challenge of balancing simplicity with fairness, but, right now, Treasury hasn’t got that balance right.”
He added the submission identified a number of scenarios that could lead to unintended and unfair outcomes under the draft legislation.
One of those was the plan to use the greater of the total super balance opening and closing values to assess if someone would face the new impost and this could have unintended consequences.
“For example, members suffering losses outside of their control (for example, Shield and First Guardian) would have their Division 296 tax liability calculated based on balances which have simply disappeared,” the submission noted.
“In addition, post 1 July 2027, an individual who has a temporary spike in their TSB at the ‘wrong’ time (that is, toward the end of the financial year) will potentially be penalised for that twice (that is, the year in which the spike occurs and the following year).
“The proposed approach lacks equity and fairness. The TSB measure is imperfect, but is the best available method using established tests and values.
“The method adopted should represent as close as possible a taxpayer’s true position and not create artificial elements which give rise to unintended consequences.
“In the interest of increased simplicity, and to avoid unintended consequences, we recommend that a fixed TSB test time be used.”
The submission also called for a simplification of the capital gains tax (CGT) adjustment provisions to reduce unnecessary complexity.
“While applauding the government for enabling capital gains accrued before 1 July 2026 to be excluded from the calculation of Division 296 earnings, we believe a simpler approach would be to calculate the cost base as the greater of the asset’s market value at 30 June 2026 or the asset’s CGT cost base,” the association stated.
“This approach would remove the need for an election to be made – reducing the regulatory burden on all participants across the small superannuation fund sector.”
Burgess noted while no decision impact analysis had yet been released the October 2025 changes would increase implementation and compliance costs for the superannuation industry.
“Ultimately, these costs will be borne by all super fund members, not just those captured by Division 296,” Burgess said.
“This raises serious concerns about the long-term sustainability of the policy when weighed against the expected revenue gains.”