Major changes announced to controversial super tax

In its original iteration, the Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023 would have imposed an additional 15% tax on superannuation earnings on balances exceeding $3 million, including taxing unrealised capital gains.

However, in response to feedback from peak bodies such as SMSFA, the Government has revised the proposed legislation and addressed key points of criticism.

The Bill is currently before the Senate.

Proposed changes

The most significant change comes to the taxation of unrealised gains.

Under the revised framework, only realised earnings such as dividends, interest or rent, will now be taxable. This addresses the primary criticism of the Bill and reduces much of the complexity and risk associated with the original proposition.

The proposed legislation would also introduce a two-tiered system in place of the original 30% flat rate. In addition to the original 30% rate for balances above $3m, earnings on balances above $10m would be hit with a 40% tax rate.

Both thresholds would be indexed annually according to the Consumer Price Index, addressing further concerns that the tax increase would gradually impact more Australian taxpayers over time.

The proposed implementation date has moved forward one year to July 1, 2026, meaning super balances would be calculated at June 30, 2027 with assessments expected in the 2027-28 financial year.

Next steps

These revisions to Division 296 have addressed criticism and provided clarity, which are expected to be welcomed by peak bodies in the superannuation and accounting industries.

However, it is important to note that this legislation has not yet passed through the Senate. The deferred implementation date allows lawmakers more time to refine the proposition, with finer details expected over the coming months.

Optima Partners will continue to follow the progress of the bill and will provide guidance to our clients as becomes necessary.