I was having a conversation with a friend of mine who is a financial planner and surprisingly he told me he didn’t have a strong objection to the proposed tax on total super balances over $3 million because he didn’t think people with a large sum of retirement savings should benefit from tax concessions. So I asked him whether he thought taxing unrealised capital gains was a good idea and he told me it was not.
To me that exchange summed up what is potentially wrong with the debate over the Division 296 measure, that is, two completely different issues conflated to confuse any discussions over the new tax – one being the idea of making individuals with high retirement savings pay more tax and the other being the method by which it is done.
Wilson Asset Management chair and chief investment officer Geoff Wilson acknowledged the same thing last week at the SMSF Association Technical Summit 2025 in Sydney when he said: “An increased tax on larger [superannuation] balances is one thing and taxing unrealised [capital] gains is a totally different thing and the government has successfully meshed them together rather than have [each discussed separately].”
To his last point, Treasurer Jim Chalmers seems to be very happy to let this confusion reign as it allows him more cover to dodge prosecuting a proper case for the new impost and how it will be implemented.
And speaking of confusion, a lack of clarity seems to be continuing as far as whether the proposal will actually go forward and if it does, when it will come into play.
To the first point, some government sources in Canberra have expressed their curiosity as to why to date there have been no discussions about Division 296 between the Labor Party and the Greens, the party whose support it will need to have the measure passed through the Senate. This, and the fact some factions within the government oppose the measure, has led the sources to conclude the tax may well be scrapped.
But then if we do assume the new tax is a given, questions have been raised whether it is actually possible to stick to the original, and now retrospective, implementation date of 1 July 2025. SMSF Association chief executive Peter Burgess last week pointed out the parliamentary sitting day schedule for the coming months means realistically the earliest the bill for the tax will be passed is October and that passage of time would make it too problematic for a retrospective start from the beginning of the 2026 financial year.
And then to top it all off, Wilson relayed a conversation he’d had with Richard Marles at the British Lions test match where the Deputy Prime Minister indicated everything about the Division 296 tax will be sorted out at the upcoming Economic Reform Roundtable.
So as we get further down the track, there still seems to be no clarity as to what is happening with this measure. Instead, we seem to be living in an even more intense land of confusion.
The Division 296 tax will be discussed in more detail at SMSF Trustee Empowerment Day 2025 to be co-hosted by smstrusteenews and the SMSF Association. Please follow this link to register.