On 13 October 2025, the Federal Treasurer announced substantial changes to the proposed Division 296 Tax measure on superannuation balances over $3 million – including a delayed start date.

It seems the Government has listened to criticism of the two most controversial features of their original Division 296 Tax proposal:

1. the taxation of unrealised gains through a Total Superannuation Balance (TSB) change methodology; and 
2. the lack of indexation of the threshold that would potentially subject more superannuation account holders to the additional tax over time.

Both aspects of the proposed legislation have been amended in the revamp.

Let's unpack the details and changes in Division 296 Tax 2.0…

Delayed start date

Originally planned for a retrospective introduction on 01 July 2025, the commencement date has been deferred to 01 July 2026.

What we didn't like

In the first proposal, the additional tax was based on changes to your Total Super Balance, which could include unrealised gains (increase in asset values that haven't been sold or received as income) – equating to tax on 'paper profits'.

Also, the $3 million threshold for the additional tax was not intended to be indexed, meaning more people would be impacted over time as super balances grow.

The new rules

A two- tiered threshold for higher super balances:

• an additional 15% tax on the proportion of earnings relating to balances over $3 million and up to $10 million (effectively 30% on earnings for this component); and
• an additional 25% tax on the proportion of earnings relating to balances over $10 million (effectively 40% on earnings for this component).

Indexation will apply: both thresholds will be indexed to maintain alignment with the Transfer Balance Cap (TBC) and inflation (CPI).

Tax will only apply to realised earnings: that is, actual income your super fund has received, such as dividends, interest, rent and realised capital gains from the sale of assets.

Why Division 296 2.0 is better

This approach is considered fairer, as impacted super fund members will only be taxed on income their fund has actually earned – not on paper profits that may never be realised.

It also addresses the problem – through indexation – of more people becoming subject to the tax over time due to ‘bracket creep’.

What's next

Division 296 legislation still has to pass through Parliament before it take effect, so for now it's a case of 'wait and see' – at the earliest, the first 'trigger' date for the impact of Division 296 Tax is 30 June 2027 (focusing on an individual's Total Super Balance that exceeds $3 million or $10 million).

In summary

These latest reforms to Division 296 are very much welcomed, largely due to the efforts of the SMSF Association and the wider superannuation industry. 

However, right now ‘the devil is in the detail’ and that detail will be in a revised Bill presented to Parliament. That revised Bill is not expected to be released until 2026, after further consultation with stakeholders.

Keep an eye on more communications from The Peak Partnership on this topic as developments unfold and the revised proposal moves towards legislation. 

In the meantime, if you have any questions or concerns about the proposed Division 296 Tax on your superannuation savings, feel free to contact us at The Peak Partnership.