The revised Division 296 legislation introduced into parliament on 12 January contains some small technical amendments, but does not address concerns about unintended consequences that could arise and that were brought to the government’s attention, the SMSF Association has stated.
Association chief executive Peter Burgess noted the professional body was “very disappointed that other more substantive issues raised in our submission appear to have fallen on deaf ears”.
“Of particular concern are scenarios where due to market movements, and other unforeseen circumstances, a member’s superannuation balance significantly declines during the income year,” Burgess said.
“For Division 296 purposes, their tax liability will be calculated on their balance at the start of the income year, meaning they could pay Division 296 tax on amounts that no longer exist.
“Conversely, a temporary spike in an individual’s superannuation balance at the end of a financial year [could] potentially result in a Division 296 tax liability arising in two consecutive years.”
He recognised the details around the operation of the impost will be included in regulations that have yet to be released, hampering parliament’s ability to examine the changes.
“With the bill now tabled in parliament, and in the interest of due process through the normal parliamentary process, we encourage the government to release the draft regulations as soon as possible,” he added.
“It is difficult to see how the legislation can be properly scrutinised and debated without these key details.”
According to Burgess the government had moved very quickly from announcing its revised position in October then releasing draft legislation on 19 December and then introducing it into parliament this month.
“The timeline has been driven by the need to get the legislation into parliament and passed well before 30 June 2026 to give people enough time to put their plans in place,” he told selfmanagedsuper.
“That necessitated a compressed consultation period straddling Christmas and insufficient time for Treasury to fully address the myriad of issues raised during the consultation phase.
“They were also going to be up against it. The super system was never designed for a tax on earnings down at the member level. So, trying to fit a square peg in a round hole in just over three months was always going to be a tall ask.”
He welcomed the changes that had been made since the consultation period on a draft of the legislation closed on 16 January, pointing out a number of recommendations put forward in the association’s submission were now present in the bill.
These included changes to the treatment of legacy capital gains and the calculation of a fund’s superannuation earnings that are attributable to in-scope members, and improvements in the earnings calculation for funds in pension phase by adopting a definition that uses a wider range of deductions and does not limit the ability to use associated losses.