Division 296: Superannuation at a Crossroads
23/5/25, 6:26 am
By Ark
From 1 July 2025, Australia’s superannuation system will introduce a structural shift with the implementation of Division 296: a policy that imposes an additional 15% tax on earnings attributed to the portion of super balances exceeding $3 million.
This is not a simple fiscal adjustment. It reflects a more fundamental question the Australian tax architecture is beginning to ask:
What is the role of superannuation in the context of intergenerational wealth?
Beyond the Threshold: Understanding the Policy Signal
While public discourse has focused on the $3 million threshold, this number is less important than what it represents:
A reframing of the ‘concessional’ nature of superannuation for high-balance individuals
A shift from taxing income to taxing growth regardless of liquidity
A growing philosophical divergence between retirement planning and wealth accumulation
The ATO will not tax actual earnings, but a formulaic, mark-to-market style calculation of notional earnings. This is conceptually closer to capital gains tax yet applied annually and irrespective of asset realization.
What Strategic Thinkers Should Be Asking
Executives, trustees, and founders navigating this new terrain would do well to ask:
Are we prepared for tax on paper gains especially for illiquid or revalued assets in an SMSF?
How do asset concentration risks within super portfolios amplify the exposure under Division 296?
What are the unintended behavioural consequences of disincentivising super contributions among younger, fast-accumulating professionals?
Could this be the first step toward a tiered or globally harmonised retirement tax regime?
These are not compliance questions. These are capital stewardship decisions.
The Broader Context: Superannuation as a Policy Lever
Division 296 should be read not in isolation, but alongside other signals:
Ongoing reviews of non-arm’s-length income (NALI) provisions
Increased scrutiny of SMSF valuation practices
Political discourse surrounding tax expenditure caps on super concessions
Australia is entering a period where tax concessions will no longer be permanent features, but conditional privileges and the conditions are changing.
Where From Here?
At this juncture, the most prudent approach may not be action, but perspective. Division 296 invites wealth holders to reconsider:
How much capital belongs inside versus outside super?
What role should superannuation play when it’s no longer the most advantaged structure?
And how do we build resilience in capital architecture amidst regulatory volatility?
If you'd like to explore these questions further, book a quite review session.