Division 296 – the proposed new tax on super balances over $3m – read our explainer

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The Division 296 super tax is now on hold

  • 16 September 2025
  • by BG Private
  • 5-minute read

We recently wrote about Division 296 — the proposed new tax on superannuation balances over $3 million. There is now an important update: The Federal Government has put the proposed tax on hold amid criticism and requests for amendments to the proposed law.

Background: What is Division 296?

  • Division 296 is a proposed tax targeting superannuation balances above $3 million. It entails applying an extra 15% tax on earnings on the portion above this $3 million threshold, effectively increasing the tax rate on that portion to 30%.
  • Earnings include unrealised gains. In other words, the tax would apply to increases in asset value which have not yet been sold, raising concerns particularly among individuals holding illiquid assets like property or business interests.

Initial timeline and legislative progress

  • Initially, the tax was meant to commence on 1 July 2025, with first assessments based on balances as of 30 June 2026.
  • The House of Representatives passed the legislation in 2024, but it stalled in the Senate amid substantial opposition.
  • Critics highlighted the difficulty of taxing “paper gains” as well as the risk of investors being forced to sell illiquid assets to meet tax liabilities.

Why the finalisation of the legislation has been deferred

  • Recent reports indicate the federal government has paused implementation of Division 296 in its current form, citing both timing challenges and growing opposition, even within the Labor Party.
  • The original plan for Division 296 to commence from 1 July 2025 using the current 2025–26 financial year as a basis for revenue collection is now seen as unrealistic, especially as Parliament did not debate the bill during the scheduled sitting.
  • Lobby groups like the SMSF Association and opposition figures have raised concerns over negative impacts on aspiration, fairness, and long-term confidence in the super system.
  • Even Treasurer Jim Chalmers, while officially supporting the policy, has been unable to advance the legislation as originally planned.

What now?

  • Stakeholders are pushing for at least a 12-month deferral, which would provide time to reconsider key design features, such as indexing the $3 million threshold, replacing the unrealised-gains model, or introducing a hard balance cap or deeming rates.
  • If reintroduced, the bill will almost certainly undergo major revisions.
  • We recommend taxpayers avoid reacting hastily. Instead maintain dialogue with their financial advisors.

            Contact us

            Contact your usual BG Private Advisor or our office on +61 3 9810 0700 to discuss how Division 296 might affect you and what your best options are.

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