You’re probably sick of hearing and reading about the proposed Division 296 tax to be levied on total super balances over $3 million, but Treasurer Jim Chalmers certainly isn’t providing us with any information to allay our worst fears about the measure.
Unfortunately, we seem to be seeing the exact opposite. As more scrutiny is applied to the Better Targeted Superannuation Concessions and Other Amendments Bill, the legal instrument under which the new tax will be introduced, more concerning elements are being uncovered.
A case in point is the power the bill grants to the Treasurer under section 296-60, being referred to as a Henry VIII clause, whereby he can make changes to the measure without parliamentary approval once it has been given royal assent.
Since the election result of 3 May, we have been worried about the deal that might be done in the Senate with the Greens to ensure this measure is passed into law. As a reminder, the concern is the government will acquiesce to the Greens’ demand to have the threshold for the tax lowered to $2 million, albeit with an indexation measure added.
But these concerns could pale into insignificance in the wake of section 296-60. Given its nature, what could stop Canberra from making several downward adjustments to the balance at which the tax kicks in once the Division 296 policy has become law?
This part of the bill has also raised questions as to whether or not it is unconstitutional, but I’ll stick to discussing the principle rather than the validity of the specific legal details.
It really makes me wonder what it will take before Chalmers at least concedes there should be a review of the proposed legislation.
Remember, on top of this Henry VIII clause, there still remains the anomaly whereby if you die on 30 June of a particular year, you will be caught by this tax. If you die on any other day, the impost will not apply.
When finding out about these details, the obvious questions are why this has happened in the drafting of the bill and why the government won’t fix it?
It is certainly not helpful in allowing superannuants to figure out how to manage this new tax if they are caught by it as everything seems to be as clear as mud.
To this point, we know confusion exists among trustees and accountants and advisers as to who will be hit by the measure and how the liability will be calculated. Here people are still unclear as to whether a drawdown made before 30 June 2026 pushing their total super balance below $3 million will be added back, resulting in them qualifying for the new tax.
This is not the case and basically if an individual is able to lower their total super balance to under $3 million, they are home free for Division 296 tax purposes, that is, as the proposed legislation stands now.
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