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Meg on SMSFs: Clearing up confusion on the $3 million super tax

In a monthly column to assist trustees, specialist Meg Heffron explores major issues on managing your SMSF.

My last article on this new tax didn’t actually cover the mechanics of how the tax is supposed to work. But as it happens, the majority of the comments were questions about exactly that.

So consider this a follow up – an opportunity for more considered answers to some of the questions raised. And given how many there were, this might have to be just Part 1!

If you’ve read my articles before, you’ll already know I’m not surprised the Government is seeking to lower super tax concessions for people with a lot of money in the system. But at the same time, I firmly believe this particular way of doing it is dumb. So let me say up front that this article is purely about how it works, rather than trying to defend it.

Some terms to help the explanation

This tax really is deceptively simple in how it’s worked out:

15% x a proportion x earnings

(The big bone of contention, of course, is how the earnings are worked out – but more on that shortly).

This tax is entirely separate to – and on top of – the tax paid in the super fund itself. That’s calculated as:

15% x the fund’s taxable income

The only thing the two taxes have in common is 15%.

The ‘earnings’ used for Division 296 and the ‘taxable income’ used for the fund’s own tax will have some common elements (for example, rent, dividends, interest are included in both). But there are also some big differences. Most importantly, earnings for Division 296 are basically anything that makes the member’s super balance go up which will include all growth in assets whether they’ve been sold or not. Taxable income in the fund, of course, only includes gains from assets that are actually sold.

For example, Dave’s super balance increased from $4.5 million to $5 million during 2025/26 and he didn’t take any money out during the year or add any new contributions. His earnings for Division 296 would be $500,000 ($5 million less $4.5 million).

Whether this was $500,000 in (say) rent or capital gains really matters when it comes to his fund’s tax bill but not when it comes to Division 296. For example, if it was all interest (no growth in the fund’s assets), the super fund would also pay tax that year (15% x the interest). If, on the other hand, it was all growth in investments that weren’t sold (no taxable income), the fund would pay no tax at all that year.

But for the new tax, none of this matters. All we care about is that Dave’s super is bigger than it used to be. We’ll come back to Dave shortly but let’s address some of the questions first.

Double taxation or not?

A lot of outrage about this tax is directed at the fact that it represents double taxation – super earnings are taxed first within the super fund and then again via this new tax.


But that’s entirely intentional and exactly what the Government has said right from the start. Their rhetoric about increasing the tax rate from 15% to 30% for people with large super balances tells us so. They haven’t changed the way super funds are taxed, they’ve simply added a second tax on top that only applies to some people – those with more than $3 million in super. So by definition it’s taxing income twice.

We may not like it but to say its unprecedented is actually wrong. If you’re a higher earner still receiving employer contributions (or making contributions yourself and claiming a tax deduction for them), you’ll already have felt the full force of Division 293 tax (is the very similar name a coincidence? I think not). This is an extra 15% tax on contributions known as ‘concessional contributions’. It’s paid by people who earn more than $250,000 pa. They have the normal 15% tax (same as everyone else) deducted from their super contributions in their fund and then they get another personal tax bill on these same contributions as their ‘Division 293 tax’. It probably flies under the radar because the amounts are much smaller. The cap on concessional contributions is $27,500 pa (rising to $30,000 from 1 July 2024) so in most cases, the bill is $4,125 at most. But it’s still a second tax on income that has already been taxed – just like Division 296.

When it comes to Division 296 (the new tax), of course, there are some extra factors that make the whole situation opaque, and the amounts are potentially much larger. So not surprisingly, the double tax element comes in for much more criticism than it does with Division 293. But it’s not new, it’s definitely intentional and the Government has been pretty clear about it.

It’s also worth noting that people impacted by Division 296 are not paying double tax on all their super fund earnings. They are paying double tax on just a proportion of their super fund earnings. The theory behind the proportion calculation is that the Government is quite happy for them to only pay tax once on the bit of their earnings that relates to the first $3 million of their super. It only wants to double tax the earnings on the bit of their super that is over $3 million.

But how that’s worked out is another thing that people are definitely finding confusing.

How much of the earnings will be hit with double tax?

To keep things simple, the Government has taken a short cut when it comes to working this out. It isn’t worked out by actually breaking up earnings during the year into ‘earnings on the first $3 million’ and ‘earning on the rest of the super balance’. Instead, there is a much simpler approach.

The ‘proportion’ in the formula above is simply: what proportion of the balance at the end of the year is over $3 million?

In our Dave example earlier, Dave’s balance was $5 million at the end of the year. So $2 million (or 40% of his $5 million balance) is over $3 million. That means Dave’s proportion is 40%.

It doesn’t matter if he had much more or much less during the year, all that matters for this proportion is the size of his balance at the end of the year.

So Dave’s super earnings in 2025/26 were $500,000. He will pay Division 296 tax on 40% (the proportion) of those earnings ($200,000). He pays no extra tax on the other $300,000.

His Division 296 tax bill will be $30,000:

15% x 40% x $500,000 = $30,000

That’s on top of the tax his super fund has already paid.

What about an example

Let’s make things simple and assume Dave is the only member of his SMSF. And let’s assume for a moment that his super fund bought an asset on 30 June 2025 with all of its money ($4.5 million). Of course in practice this wouldn’t work – Dave’s fund needs money to pay his accounting fees and ATO levies at the very least but for the moment we’re going to ignore that inconvenience.

Let’s also assume – really stretching the boundaries here – that this asset doesn’t earn any income, ever. It’s just growing in value. (The investment strategy for this fund would be super interesting.) It is sold on 1 July 2028. Until then, Dave’s super fund (and his balance) looks like this:

What tax would Dave’s super fund be paying during this period? Nothing – until 2028/29 when the asset was sold. At that time, the capital gain would be $1.5 million ($6 million less $4.5 million). When a super fund holds an asset for more than 12 months, it only pays tax on two-thirds of the capital gain. So Dave’s SMSF would have a tax bill of $150,000 in 2028/29:

15% x 2/3 x $1,500,000 = $150,000

Importantly, Dave’s SMSF would pay tax on this capital gain in the normal way even though Dave has already paid Division 296 tax along the way. And as we can see from the table, each year that gain built up, Dave paid Division 296 tax on 40% - 50% of it (which added up to around $100,000 over those three years). He didn’t get any one-third discount either when it came to his Division 296 tax.

Yes, it’s definitely double taxation and that’s exactly what the Government intended.

This is, of course, really oversimplified:

  • the fund isn’t earning any taxable income at all (just a capital gain when the asset is sold),
  • Dave doesn’t have a pension (whereas many people in this position do), and
  • the fund’s accountant could make provision for capital gains tax each year, effectively recognising each time the asset grows in value there will be a tax bill down the track when it’s sold. This would make Dave’s balance (and earnings) a little lower each year and reduce his Division 296 tax bill a little.

But hopefully it highlights two points:

  • The fund’s tax and Division 296 are completely divorced from each other, and
  • Dave is being double taxed but not on all the growth in his super, only some.

Would selling assets before 30 June and re-buying on 1 July help?

Not really. It would change all the numbers and result in slightly less Division 296 tax each year but would also bring forward the fund’s tax bill and make Dave a bit poorer overall.

Let’s imagine that was possible in 2026 for Dave (and let’s assume the fund held the asset for a fraction over 12 months so the discount on its capital gains still applied). The position at the end of that first year would be:

The reason the earnings amount is a little lower is that we’ve allowed for the tax that will be paid by the SMSF when it lodges its 2025/26 tax return. But see how the earnings amount is still pretty close to $500,000? (And in fact, Dave’s a little poorer because his super fund has paid tax and can only re-buy $4.95 million in assets, not $5 million.)

As mentioned above, Dave could achieve a better result by hanging on to the asset but specifically recognising in the fund’s accounts that there is a future liability building up – the capital gains tax that will eventually be paid on the asset.

Actually selling the asset doesn’t make it any better, it just means paying the ATO quicker.

What would be even worse would be selling an asset bought well before 1 July 2025.

Let’s say the $4.5 million asset in our example wasn’t actually bought in June 2025. Instead, it was bought 10 years earlier for $2 million.

Selling it in 2025/26 would make no difference at all to Dave’s Division 296 tax bill. That’s all based on growth during 2025/26, not what’s happened before. But it would make a very large difference to the SMSF’s tax bill. Instead of $50,000, the fund would part with a much larger amount:

15% x 2/3 x ($5,000,000 - $2,000,000) = $300,000


This is another big difference between fund tax and Division 296. Division 296 is focused exclusively on how much growth Dave sees in his super after 30 June 2025. Growth already factored in (as in this case) won’t get double taxed.

These are just some of the areas of confusion around Division 296 tax - it seems I might need that Part 2 after all.


Meg Heffron is the Managing Director of Heffron SMSF Solutions, a sponsor of Firstlinks. This is general information only and it does not constitute any recommendation or advice. It does not consider any personal circumstances and is based on an understanding of relevant rules and legislation at the time of writing.

For more articles and papers from Heffron, please click here.


July 14, 2024

What if your unrealised Capital Gains are say $2m but you have Carry Forward Capital Losses of say $2.5m

Nearly retired
July 03, 2024

My concern is this tax will encourage SMSFs and pension funds to invest in low volatility investments to avoid taxes on yo-yo unrealised gains of highly speculative investments. If Australia is to remain competitive globally when fossil fuels and mining go out of favour, we need to start encouraging investment in more speculative industries including AI, robotics, batteries, blockchain, big data, etc..
Government needs to stop thinking about a quick cash grab on the HNW individuals and think long term to set Australia up for the next 50-100 yrs.

George B
July 03, 2024

While the potential impact of the proposed tax on unrealized gains will clearly create unfair pressure on some taxpayers the notion of paying tax on (the recovery of) a loss is bizarre to say the least and is itself on a different level. It is not clear that this concern can get a fair hearing in the lower house given the government has an agenda and the numbers, nevertheless we can only hope that the Senate can do something sensible to prevent taxation of unrealized gains and even losses in circumstances as outlined above.

George B
June 29, 2024

Since all the numbers for our SMSF are available I did a mock calculation to see how div 296 would affect our tax liability if it were applied in FY24. The result was that an estimated tax refund of about $37K (due to franking credits) would turn into an estimated tax liability of about $26k. This turnaround is entirely due to div 296 tax and would represent a tax increase of 242%.
The liability arises because the value of some bank shares is still recovering from its post COVID slump. The kicker is that the share price is still about 35% below its pre GFC high so anyone who purchased then is still nursing a capital loss. Notwithstanding that it appears that div 296 tax will still need to be paid on what is only a partial “recovery” of a long term loss.

June 21, 2024

Hi Meg, I have had similar advice to Fortunate and have similar funds in my SMSF which grew as a result of the very hard yards of small business, whilst raising 3 daughters as a single mum. A company and discretionary trust have been set up outside super & all is ready to go . Shares held within the smsf have been sold and together with cash reserves already held there is $4.5 million of a $7.5 million TSB that is liquid and ready to transfer . I am being encouraged to transfer the majority of the $4.5 million before June 30 this year( 23/24) I'm 69 and the fund is in pension phase ( 1.8 million in pension acc). I do understand & agree with the need to come in closer to the 3m before June 26 but I'm finding it hard to press the withdraw button now . Would love some comments on advantages of early preparation Meg & co. Early Adopter?

June 18, 2024

Hi MW,.......It would be wise to wait until at least the legislation is passed and more so until after the next election...Encouraging polls released today indicate the political tide has turned and maybe the unrealised capital gains tax and the indexation issue might be reviewed.......I certainly will take Meg's advice and hasten slowly

George B
June 26, 2024

Encouraging to read the headlines today "New blow to Labor’s tax hit on super"- with a bit of luck the senate may do something sensible to prevent taxation of unrealized gains.

Meg Heffron
June 18, 2024

As Fortunate says - remember it's not law yet. Personally I'd still be a little nervous doing anything just yet. However, I'd also make one other comment about timing. That is : selling assets and then withdrawing (say) 1 July 2024 rather than 30 June 2024 (ie 1 day later and in a new financial year) or similarly, 1 July 2025 rather than 30 June 2025 can actually be BETTER. It lets you pay less CGT on any capital gains realised in the super fund to take the money out. In your case, it sounds like you've already sold the shares so the gains will be taxable in 2023/24 regardless of when you make your transfer. But for others yet to take that step, I wrote on this previously here :

Marjorie Williams
June 19, 2024

Thankyou Meg and Fortunate. I have just read your piece on timing and it has confirmed the reasons for my unease . Now I know I need advice on my individual situation . Will be in touch . Thanks again for shining a torch of reason on these changes .

Ivan Tanner
June 21, 2024

I'm incensed over the 15% tax on unrealised gains in super funds for balances over $3M. On question that has not been clearly answered is why and who came up with the concept to tax "unrealised gains " ? I have already taken action in transferring $330K (on the brought forward rule ) in undeducted contributions from my fund to my two daughter's super fund. I will pay off my $1.5M mortgage from taken a lump sum from SMSF and invest in two houses x 2M each for each of my daughters - owner occupied and no tax on capital gains (until Labor decides to have a crack at realised or unrealised gains on owner occupied real estate ). The effect will be to take $5.5M out of ASX listed companies and add more fuel on the fire in the unproductive residential real estate boom. Charmers has completely underestimated in how investors will react to this absurd tax. What is it insidious ? The holder of an asset is no longer in control of their destiny when the government says " We know you have not sold the asset but we are going to pretend you have so we can reap tax from you sooner " .

Meg Heffron
June 24, 2024

Hi Ivan, I doubt the Govt set out with the explicit intention of taxing unrealised gains - I think they just didn't care enough about the craziness of that and so let it happen.

The argument for applying the tax this way is that it's easy to calculate. And particularly for large funds (industry, retail etc) it won't require a lot of expensive system development. They will simply report opening and closing total super balances (like they already do) and a few extra bits (many of which they already do) and the ATO will do the rest. Whatever else we might say about this measure, it's true that it will be genuinely simple to implement.

Of course, the reality is that simplicity and equity rarely go together. If you want something to be fair, you almost always have to compromise on some of the simplicity. And equally, the very simple things often impact people in ways that can be perceived as unfair.

On this measure, the Govt has prioritised simplicity and downgraded equity, fairness, reasonableness etc. The "own goal" here is that they have invited this reaction to the taxation of unrealised gains. They are hitting a section of the population with extra tax and those people might well have just rolled over and paid it IF they felt the tax had been applied fairly. But here we are.

In an SMSF, a solution that would have felt fair would be easy enough. Simply tell SMSF trustees they now have to report each member's "share" of the actual taxable income of the fund and apply the tax to that, including some grandfathering of existing treatment for capital gains already built up. I've suggested ways this could be done in other articles.

But unfortunately my methods would impose complex system changes on large funds and so they're not attractive to the Govt. It's a shame. I feel they've missed a trick here.

George B
June 20, 2024

I seem to recall that the debate around introducing this new tax started with outrage by various stooges that there were people that had accumulated north of $100m in their super accounts (outrage that people had north of 3m or even 5m would not have been nearly outrageous enough to get traction). Once the outrage got traction it was easy to set the threshold to any arbitrary level. Our best hope to get rid of this outrageous tax on what are relatively modest balances (relative to 100m or more) is to hope that interest rates go thru the roof ahead of the coming elections so that we can get rid of this outrageous government once and for all.

June 20, 2024

So much outrage (6x); what is far more concerning is that no one from the sheep generation of millennials has yet realised that thanks to inflation and not being indexed, their super will get absolutely slaughtered if and when they ever get to retirement.

Taxed when you earn it, taxed when it goes in (so they get you, whether it's concessional or not), taxed inside there and taxed when it comes out if you're under 60, then this, but they don't care because they don't think super is important.

June 20, 2024

The current tax is unfair, punitive and unmanageable. And it should have been grandfathered just as Capital Gains Tax was when introduced by Keating in 1985.
People invested in Super under the laws of the time. Many people paid tax to get their money into Super by realising assets outside Super and paying Capital Gains Tax. These laws are now being changed retrospectively and punitively.
The new tax will damage Super by encouraging younger people to rely on the Pension so as not to have to deal with all these constantly changing Super taxs and arrangements in older more infirm age as their parents have had to do. It will discourage investment in private equity and seed capital etc. which creates the tax paying and employing businesses of the future and allows superannuants to use their expertise to assist these businesses to grow. It will take us all back to the bad old days of tax planning with Companies, Trusts etc. (a dead weight loss for the economy but good for Financial Planners, Accountants etc.). It will encourage more spending on the tax free Principal Place of Residence (dead-weight loss to the economy). It will encourage more negative gearing in existing homes outside Super keeping young people out of house ownership. It will eliminate the Government's collection of the death tax on Super which my Accountant estimates 40% of his clients pay (as most people don't know when they're going to die and don't know about the tax on Super on death).

And the attack on Defined Benefits Pensions needs to start in earnest starting with removal of indexation for all Defined Benefits Pensions (DBP) over a certain figure so as to match this new Super tax, removal of the ability for DBPensioners to have a Super fund in addition to a DBP (it's a double dip), elimination of the right of people who marry a DBPensioner post their service years to a significant portion of their DBP etc. etc.. And a firm cap put on the amount a DBPensioner can get to rid the tax payer of these ludicrous $300,000 +pa indexed twice a year DBPs. Some are already $1m pa and increasing every 6 months! No investment risk, no considerable management time involved, a higher DBP than they ever received in salary when they were working!! And it increases each year as they age whilst their expenditures decline!!!
DBPs is where the Government needs to legitimately focus to eradicate the many unaffordable tax payer funded absurdities and extravagances.

June 19, 2024

Hi Meg in very large superfunds can the proportion of 296 tax ever be applied at greater than 100% ?

Geoff R
June 19, 2024

Sue if I am understanding your question properly then the answer is NO.

Say you had 100 million in your super. The proportion of earnings above $3 million would be 97%.

If you "only" had ten million then it would be 70%.

Meg Heffron
June 20, 2024

Sue - Geoff is absolutely right, it will never be more than 100% of earnings.

June 18, 2024

How will this be calculated for public service and parliamentary pensions ?

ruth from brisbane
June 17, 2024

Meg's great but I've had enough. Wouldn't it be better if we just got rid of the government so we can enjoy maybe one year of peace from this relentless attack on our savings?

June 18, 2024

naah, n' fun inni' 'n stir fox 'n evryfin, mebbe lookin', keepem toey inni' ?

Respectfully agree Ruth & Meg's great, she ought stand as MP & romp home. Long replies on top of a job, how she do it? Big shout, Meg.

Meg Heffron
June 17, 2024

Hi John, there are draft regulations that have been released to set out the calculations for people with defined benefits (like public servants and parliamentarians).

Essentially they will be the same rules used to value these benefits when people get divorced - a set of factors that reflect things like... how old they are, and (in the case of pensions) whether it continues to someone else on their death, whether it increases over time etc.

Some of these people will get the ability to defer their tax because their funds won't actually facilitate paying it, and others are exempt entirely (eg politicians, parliamentarians and judges at the STATE (not Commonwealth) level) because the constitution doesn't allow the Commonwealth to impose it on them.

June 23, 2024

Great question John

One of the major targets but no details either way.

Is growth the CPI or ? Is there a market liking metric ? How is the unrealised gain going to be calculated, for this cohort?

Pension $ x fam law value x ??

Taxing unrealised capital gains is like a magic show, the lack of detail is the price of the ticket.

June 17, 2024

Hi Meg,
I also have a very large super fund in pension mode. I enjoy giving large donations to worthwhile charitable organisations. Under this new super tax, my accountant indicates that my tax will be at least $250,000 pa. I will refuse to pay this tax to the government. If I am going to have to pay a lot more tax, I will take a large chunk of money out of super into my own name, and pay even larger amounts as tax-deductible donations to worthy causes rather than pay a cent to the government. Otherwise, if i need to pay lots of tax to the government under the new tax, i can't offset this tax by giving donations. The issue of giving donations has not featured in any of these discussions to date.

June 16, 2024

"a very large super fund in pension mode. I enjoy giving large donations to worthwhile charitable organisations. Under this new super tax, my accountant indicates that my tax will be at least $250,000 pa.":

. Withdraw to under $3M.
. Plunk lump sum in home improvement.
. Use that remaining in Disbursement Account to maintain home and hearth.
. Bequeath home to "worthwhile charitable organisations".

Less fuss: 'Charity starts at home'.

Philip - Perth
June 17, 2024

well! You clearly don't want to get between some elderly Australians and a bag of money, do you? Avoiding tax is a national pastime and the cries of "we'll all be doomed" from the privileged few who have more than enough in their super, their homes and stashed in family trusts is deafening when governments simply attempt to squeeze a little more out of us to finance welfare, health, energy transition, etc etc. Where are all the cries to abandon the ridiculous AUKUS spend on subs, the stupidity of the Climate Change that we Boomers have presided over, the housing crisis that sees many 30-50 year-olds without homes, and the horrific carnage in the Middle East and Northern Africa? No wonder the next generations hate us. Paying tax ina country like ours is a privilege and paying more is an even greater one. Get your heads out from your backsides and look around at the real world!

June 17, 2024

Exactly mate.I want to make a lot of money but I don't want to pay any tax on it.Nothing more than greed.

The joy of paying tax ,I still wish I was paying $1 million a year in tax.That will never happen but I had a good crack at it.

The wonderful problem of what the hell do we spend all this money on

Geoff R
June 18, 2024

"You clearly don't want to get between some elderly Australians and a bag of money, do you?"

I think this would have been better phrased "You clearly don't want to get between a wasteful government and some elderly Australians who worked hard and saved a bag of their own money, do you?"

Government spending is out of control and if it wasn't for the fact that we have natural resources that the world needs, we would be a complete basket case.

Many folk affected would not mind the new tax so much if it were fairer, indexed, not on unrealised gains and if tax on subsequent losses was refunded. Most people are happy to pay their fair share of tax, but the problem is the system is anything but fair - as exemplified by this latest tax - made despite pre-election promises.

Having more self-funded retirees with more super who don't draw a government pension is a good thing to help reduce government spending. A dollar saved on pensions is actually worth more than a dollar taken in extra taxes (due to the government overheads in wealth redistribution).

I agree that we are very lucky to live in a stable county - away from the shocking, heart-breaking carnage we see on our TV news each night - but that doesn't mean our systems cannot be so much better and fairer than they currently are.

June 17, 2024

Philip, agree but for subs, few to protect huge coast & time Allies need to help, what if Navy far on Exercises, 2nd- hand sub/ships would help pre 2030's and start building new now. Doubtful? Have look numbers Navy w/site. If 1 or 7 coast capitals hit from water, communication lost. 1 person slashed underground cables in 1 city in 1980's, country on communication knees 1 wk, almost 2. Nightstaff & in -street cabs sent wake & collect staff & State Mgr to prioritise chaos, eerie whatiffs and no phone. Today add mobile towers and net chaos. Canberra distant land til a line was repaired fast, national decisions if PM off-air back then? Often wonder how Ukraine copes despite lesser K's. Off-piste re new tax, relevance how used. Put that way, a forfeit to help protect. Add low interest loans to Emergency workers, nurses, hosp cleaners etc. Like war- service loans were. Who'd object if new tax helped as they touch all. They don't care if treating the rich or poor. You're right about privilege.

June 17, 2024

Kerry Packer summed it up in a nutshell: “I am not evading tax in any way, shape or form. Now of course I am minimising my tax and if anybody in this country doesn't minimise their tax, they want their heads read because as a government I can tell you you're not spending it that well that we should be donating extra.”

Now if governments actually made a real effort to minimise waste perhaps we'd all feel happier to contribute more! Over to them, and until then the "games" continue!

Self-funded retiree
June 17, 2024

Missing the point of most of the discussion. Sure some people object to higher taxes but most who have over $3mn in super accept that a higher tax rate on the excess is required. It's what this tax calculates and how it hits unrealised gains that most people object to. Throwing s**t at people willy nilly doesn't contribute to a healthy discussion of an important topic. I'd argue it's about as low as the more spurious arguments against the tax.
(FYI I'm what you might call "elderly" and I do have more than $3mn in my super. I accept a higher tax rate on the amount above $3mn. But levy it on income and realised gains would be much better policy and wouldn't have triggered crap debates like this one.)

June 18, 2024

"It's what this tax calculates and how it hits unrealised gains that most people object to", "But levy it on income and realised gains":

Politicians, hindered by being profoundly innumerate, lacking original thought, ask Treasury to propose means to tax larger super for the political end of responding to cries of "Kill their Concessions".

Treasury awoken from a nightmare, respond with - "Tax unrealised gains".

The political aims met for the current term, politicians did not bother to consider how "Brave" they were.

Déjà vu: "Make franking credits non-refundable".

Numeracy would have allowed testing the politics of Treasury's advice to the Brave.

Not Law yet.

June 16, 2024

Seems like a good idea for those of us over 75 would be to take funds from the greater than 3m category if significant and give sufficient to adult children strictly to go into their super to ensure they reach 3m at retirement if they are unlikely to get there by themselves. After all it is much harder now than when we boomers benefited from the initial very generous super legislation. Better than landing them with a large amount when we die with tax consequences and their sudden need to find suitable investments. The "warm hand" principle.
May I thank Meg and all contributors for an exceedingly helpful discussion.

Geoff R
June 19, 2024

"take funds from the greater than 3m category if significant and give sufficient to adult children strictly to go into their super to ensure they reach 3m at retirement if they are unlikely to get there by themselves."

I have been wondering about this myself. But granted that Super is becoming less and less attactive I wonder what it will be like in 30 or 35 years time when my kids are getting around retirement age? On the other hand by "locking it away" in Super (as opposed to just giving it to them as an early inheritance today) does stop them possibly wasting it on living an excessive lifestyle. Then again they might have more legitimate use for it when younger as opposed to when they retire and are hopefully financially comfortable. But they could lose half of it in a future divorce.... so back and forth we go.

Perhaps take an each way bet and give them half now to do with as they please, and put half in their Super to be locked away for three or four decades.

June 20, 2024

"give sufficient to adult children":

They'll likely get after their parent's death whatever is not dissipated before - one way or another.

A possibility is a family compound purchased and owned by the parents with portions rented at less than commercial rates to the children. Often adult children and / or spouses don't like living under the 'rule' of the parents - even a self contained flat being too close.

June 16, 2024

What really irks me about massive legislative changes is that we were promised by Albanese that no changes would be made to super in the lead up to the last election. This is clearly an attack on accumulated wealth through hard work and, as in my case by running a SMSF, hundreds of hours of research trying, occasionally successfully, to make good investment decisions. It is a shining example of legislation drafted by the politics of envy.
Nowadays, $3M is no King's ransom and it is a figure plucked out of the air by dumb beaurocrats and then to tax unrealised gains above that figure is something I'd expect from North Korea rather than here. Anyway comrades, you get the government you deserve. We never really learn the lesson of voting in the Socialists but are great at complaining about it after the fact.
So I'll be shifting funds, balancing gains and losses, and will deny these greedy, out of touch people any more than scraps. It's the principle. They clearly have a surfeit of principles.
And as for dying broke, I can see the point. However, it's MY money and my decision. And if we let them get away with this, I can guarantee, good people, this will be just the start of the transition of funds from the conservative and frugal to the do nothings. It's in their DNA you see.

June 17, 2024

$3M may not be a Kings ransom but it is certainly enough to meet the purposes of what Superannuation was designed for, to fund or part fund ones retirement.

It wasn't meant to be a wealth creation tool. If you have more than $3M, that extra does not need nor should be in Superannuation.

They should have capped Super at $3M (indexed)

June 16, 2024

At the end of the day it is simple - the tax is coming, it is not 15% it is something less, work out your exposure under different scenarios and then consider your options to minimise overall family tax. Head in the sand will not work!

The really tough bit is taxing unrealised gains - consider a 3c speccy that goes to 30c and back to 3c..

George B
June 17, 2024

"work out your exposure under different scenarios and then consider your options to minimize overall family tax"
Good advice Rob-no point jumping out of the frying pan and into the fire.
"consider a 3c speccy that goes to 30c and back to 3c"
Highly speculative investments may be a no no for SMSFs with balances over 3m.

June 16, 2024

I have a defined benefit pension, currently around $97,000 per annum, along with a SMSF and an APRA regulated accumulation scheme. Can you advise how a value is determined for the defined benefit pension that will count towards the $3M threshold. Thank you.

Meg Heffron
June 17, 2024

Hi Alan, there are draft regulations that lay out the approach for defined benefit pensions like yours. As a general rule, the value will be based on the same approach used for family law (ie, when people get divorced). Broadly speaking it's like this :

a factor x annual pension amount.

The factor depends on lots of things - your age, whether the pension reverts to a spouse on death, the rate of indexation (if any) of the pension etc.

June 15, 2024

Thanks for another clear and concise explanation of this confusing, ill-conceived, "dumb" (your word - I would add "unfair, vindictive and deceptive") proposed new tax. If only just one relevant Minister in Canberra could think about these issues with your clarity.

A comment to those with both pension accumulation accounts - you must always take out the applicable minimum annual pension, but anything else you take out of super in any year should generally always come from your accumulation account.

In my own situation, where both my wife and I have super balances between $3.2 and $3.4 million, if this new tax had been drafted fairly - $3 million threshold indexed, no tax on unrealised gains, equal treatment of SMSF's and industry funds, we would have just (admittedly unhappily) accepted it. But if it is legislated as currently before Parliament, we have resolved not to pay one cent of this flawed and unfair tax. In June 2026, we will each withdraw any excess over $3 million in our super accounts and contribute the money back into super as non-concessional contributions for our two adult children. This will cover up to $720,000 of excess super at that time, and will ensure our children have adequate super on retirement in 35 to 40 years time (especially our daughter, who is unlikely to have the financial resources or employment income to contribute much to super for herself). Any extra withdrawal required to get us below a $3 million super balance as at 30 June 2026 will go towards (much needed) house renovations. As the $3 million is not indexed, we would then expect to have to make more modest annual withdrawals in most years after that. We call this our "Up Yours JAC" (Jones, Albo and Chalmers) strategy. Cop that, Canberra.

June 15, 2024

Seems a lot of effort (and angst) to not pay an extra 8k on year in tax (say your $3.2m fund increases by 10%pa) and then lock up $720k in the super system for your children (paying off mortgages would seem a better an idea).

June 16, 2024


Each to his own. On principle, my wife and I will not pay this tax. Neither of my children have the financial resources to buy a home or service a mortgage at this time (or in 2026), and my daughter probably never will have. The advantage of putting the money into super for 40 years is the long term compounding. Our SFSF has earnt over 10%pa, after costs and tax, since establishment 23 years ago. 9%pa over 40 years will grow the $360,000 for each child to $11.5 million in 40 years time. Seems unbelievable, but do the maths. A 9%pa return will double the amount invested every 8 years (Rule of 72). Even if you allow for 3.6%pa inflation (it's only been 2.7%pa in the last 23 years) that equates to $2.9 million for each child in present day terms, which should support them through retirement without further savings on their part.

As an aside ,it also demonstrates the ludicrousness of not indexing the $3 million Division 296 threshold. Just $360,000 indexed at a reasonable growth rate over 40 years will almost breach that threshold even if the threshold is indexed at CPI, and will exceed that threshold within 25 years if it is not indexed.

Of course, we should all know that the politicians will adjust the $3 million periodically and call it a tax cut for self funded retirees, just like they have done with the income tax brackets over the past many decades. Devious bastards!

June 17, 2024

The problem seems to be that public funds' systems cannot allocate an additional tax on taxable income to members with greater than $3m aggregate balances. Every SMSF can do so. Surely the obvious solution is for funds to be able to opt into an alternative additional tax on taxable income: 15% x a proportion x taxable income for each member. If all your funds do not opt in then the proposed tax on unrealised gains applies on all that members' balances in all funds

June 15, 2024

Is there anyway to add to the voices of dissent. Eg is there a lobby group, petition or otherwise to object to this ill-considered brain snap?

June 15, 2024

Great article Meg. This is an outrageous tax that will adversely affect investment behaviours. It steers people to income and away from gains, encourages people to maximise primary residence, manipulate assets at year end, changes risk appetite etc.
Double taxation, tax on unrealised gains, no indexation, retrospective - abhorrent.
Most examples are people who can access super to pay the Div 296 tax. Where do I find the money until I retire. The only answer seems to be to retire and go SKIING.

June 14, 2024

this tax seems to be cunningly designed to be quite progressive, which is arguably fair enough considering how fortunate the people wealthy enough to be affected are. the actual tax levied for the smallest funds is actually quite modest! Supposing the fund earns 10%:

$ Fund Size Increase Proportion $ Tax Tax rate
3,000,000 300,000 9.1% 4,091 1.4%
6,000,000 600,000 54.5% 49,091 8.2%
9,000,000 900,000 69.7% 94,091 10.5%

Let's not forget that super is supposed to be about providing retirement income.

June 19, 2024

Thank you… your numbers make it very easy to understand… and in year 2 the fund has a 10% fall???

Meg Heffron
June 20, 2024

Hi Keith if the fund has a fall the next year the members total super balance will drop. That will create a loss for this tax and the member can carry the loss forward. They can use it to offset “earnings” in a future year for this tax. So even if their asset values never recover, this loss could be used to ensure they don’t pay this tax on other earnings (eg normal income like rent, dividends etc).

June 14, 2024

This is another example of a retrospective tax. Many of us baby boomers for decades accumulated savings in superannuation to be self-funded in retirement. Government policy encouraged us to save for our retirement at the 'expense' of alternatives. It was tax effective! The goal being to be independent of the federal government funded aged pension. Like the $1.6 mill cap introduced in July 2017 by the LNP government, a second change of course, this time by Labour both clearly retrospective. Looks like lump sum withdrawals from Superannuation Fund accumulation accounts to go to the next generation to fund their superannuation, enter the housing market, and or pay off their home loans.

Tim Farrelly
June 15, 2024

It depends what we mean by retrospective. If we mean changing the tax rate we pay going ahead then, yes, it’s retrospective. Under that definition, any tax change, good or bad, is retrospective.
A more widely held view of retrospectivity is where a change applies to previous years income. The proposed change is clearly not retrospective under that definition. A pretty awful piece of policy but not retrospective.

June 14, 2024

Impacted and my personal conclusions are that you need to model:
1. Your "do nothing" exposure
2. Your "what if you move it" exposure - Trusts/Investment Company/Personal/Kids etc

Objective is to minimise the overall total tax take. For many if not most, people, "do nothing" will be the answer as the alternatives will all incur more tax

Critically, while the headline number is "15% extra", nobody will actually pay an extra 15%!!! The formula as Meg points out, depends on the "proportion over $3m" - that can never be 100%, therefore the tax can never be 15%. When you model it, even with the stupidity of unrealised gains, if the extra tax is say 5%, versus an investment company at 30%, do nothing is a sensible decision. Modelling future changes ex Canberra, vastly more difficult to model as trust is blown!

June 13, 2024

One thing i haven't seen discussed is how/from where the new tax is paid?

i do not have an SMSF but 3 public super funds. how would that work?
- do i have to pay the tax myself?
- can i choose to pay it myself?
- is it deducted pro-rata amongst the funds?
- ?

June 13, 2024

Assuming you mean 3 public offer accumulation funds: Div 296 tax will be levied on the member (not the fund) but the member will have the option to elect for the tax to be released from super. The below example from the explanatory memorandum shows how it will work where someone has multiple super funds:

"Sally is 62 and has multiple superannuation interests with the following balances on 30 June 2026:
• A pension interest in her SMSF with $1.8 million
• An accumulation interest in her SMSF with $2.0 million
• An accumulation interest in an APRA-regulated fund with $3.0 million.

Sally receives a notice from the ATO outlining calculated superannuation earnings of $550,000 for the 2025-26 income year resulting in Division 296 tax payable of $46,101.00.

Sally has the choice to pay the tax using amounts held outside superannuation or to release money from one or more of her superannuation interests. Sally elects to pay the amount from her accumulation interest in the APRA-regulated fund by completing the election form. The ATO requests the release of $46,101.00 from the superannuation fund where Sally’s accumulation interest is held in an APRA-regulated fund.

Jon Kalkman
June 14, 2024

My understanding is that this tax was an idea proposed by industry super funds (for reason that remain unclear) but they refuse to upgrade their accounting systems to collect this tax. In any case, this taxable super over $3million could be spread over more than one super fund. That is why the calculation of this tax will be done by the ATO and the tax will be levied on INDIVIDUAL TRUSTEES.

Since an individual and a super fund are separate tax entities, that is like charging my wife for the tax of my plumbing business. Just another strange development.

john flynne
June 14, 2024

Question .
Meg you do not seem to address those in pension stage with balances over the $ 3 million.How are payments treated in this situation? Do you have any views on the amounts one is supposed to draw down?

Meg Heffron
June 14, 2024

Hi John
Yes - most people with balances above $3m will have a pension. Let's say Dave (in my example above) had one and withdrew $100,000 during the year. His balance therefore wouldn't be $5m at the end, it would only be $4.9m. That would make his proportion lower (just under 39%) but his earnings would be exactly the same ($500k). With these simple numbers that feels intuitively obvious ("If Dave had $4.9m after withdrawing $100k, his balance would have been $5m without the withdrawal. So his earnings must have been enough to get his balance from $4.5m to $5m, or $500k"). That thinking is really all the Govt is doing when they say they'll add back withdrawals. But the lower proportion would mean a slightly lower tax bill under Div 296. This is simply because Dave has less money in super at the end of the year.

I don't have views on how much people should take out of super - obviously they need to take at least the minimum and a super pension remains just... the best tax arrangement ever. But some people in Dave's position will choose to take higher amounts out (to get his proportion down) and others won't.

June 14, 2024

Adam, I agree and when I retire at 60 will give some money to my children then, they can use it now and have more benefit from it better than waiting maybe 30 years for it when I pass.

June 14, 2024

Best way to get rid of this insidious new tax is to get rid of Albo and Grim Jim at the next election.

June 14, 2024

If/when it is legislated it will remain, regardless.

June 15, 2024

It won't change and the others will just blame...

June 14, 2024

If impacted you need to model the outcomes or have it modelled, as the outcomes are not simple or straightforward. Tax on "unrealised" gains are unprecedented other than "land tax" - it is a "wealth tax" wearing a wig. For the vast majority of funds it will not be 15%, indeed it can't be mathematically, however the clear target is to get rid of "super sized" SMSF's and it will. The task therefore is to model all alternatives - Trusts/Investment Companies/Personal Portfolios/Gifts to kids/Investment in your Principal Place of Residence and the list goes on....Remember it is not indexed so it will not be too long before the max in Pension mode of $1.9m collides with the $3m cap.

The clear concern and greatest risk, are small caps that soar and then drop - in this new world of unrealised gains being taxed it could all get quite ugly and may even dry up Capital for new ventures - an unintended and stupid consequence as would be money coming out of Super, into Principal Places of Residence as it will - just what this country needs! Knee jerk reactions would not be wise, it is not 15%, it is something less. If vulnerable you best have the impact modelled - 30th June 2026 is the drop dead date!

June 14, 2024

Thanks ?Rob. You nailed it.

I had already spoken with the family and am making tentative plans if the legislation passes to take a big chunk out of super to upgrade our residence as the first, most logical step to counteract this insidious tax.

It seems the Libs are not challenging the Division 296 element of the proposed legislation, so even getting rid of Albo and team wont get this changed. I agree that the real, unstated objective is to get rid of high-balance SMSFs and the Libs seem to support it as Dutton hasn’t even mentioned gettingn rid of Division 296 as part of their platform for the next election.

June 17, 2024

GJ, the liberal party have opposed the introduction of the Div 296 tax, you can read their comments in the senate committee dissenting report, here.[Provisions]andSuperannuation(BetterTargetedSuperannuationConcessions)ImpositionBill2023[Provisions].pdf

Recommendation 1
1.87 That the Superannuation (Better Targeted Superannuation Concessions)
Imposition Bill 2023 not be passed; and that Schedules 1 to 3 of Treasury Laws
Amendment (Better Targeted Superannuation Concessions and Other
Measures) Bill 2023 not be passed.

June 13, 2024

Hi Meg,
Thank your for your very informative explanations. What I am still unclear about is what happens when say, many of the investments in that $5m SMSF consist of highly volatile shares, such as junior resource companies, whose values can experience a 50-60% capital appreciation one year, then a big loss the next year?

Is there a high-water mark, where the fund will only pay Division 296 tax again once the fund's balance exceeds the original amount on which the Division 296 tax was last paid? Or does the lower asset value after the loss, become the new base for the Division 296 tax, and any capital appreciation from that point would attract Division 296 tax for the second time? If so this is very alarming would in essence constitute not double taxation, but triple taxation!

Meg Heffron
June 14, 2024

Hi GJ - if the fund has a big loss, the member may end up with a Div 296 loss to carry forward. That can be offset against Div 296 earnings in the future. However, when it comes to Div 296 earnings, capital gains / losses aren't treated separately from "all other earnings". So you may find the loss is useful even if the asset never recovers. Let's say we had a slightly different version of Dave's fund where the asset DOES generate income. His fund goes from $4.5m up to $5.2m because he gets $500k capital growth AND income (after tax in the fund) of $200k. He'd pay Div 296 tax in the usual way (and he'd pay a bit more than in my earlier example because his balance and earnings are both higher). Let's say the growth completely disappears next year - but the asset still generates $200k in earnings (after tax in the fund). That would mean his balance drops to $4.9m ($5.2m less $500k plus $200k). He'd pay no Div 296 tax that year because he'd actually have a loss of $300k ($5.2m less $4.9m). He'd carry that forward. Notice how we didn't keep (unrealised) capital losses separate from the income? In effect, he could use the capital loss to reduce (remove) the Div 296 that would otherwise have been paid on the income of $200k? That's one feature of Div 296 tax - "earnings are earnings no matter where they come from". This also makes it possible to use up that loss even if the asset never recovers - even in this simple example, you can see that $200k of the loss will be used up next year if the asset continues generating income. Of course, that doesn't help in extreme cases where the loss is so large it will never be used up by income. But it does highlight that we almost need to toss out everything we know about capital gains tax when we're thinking of Div 296 - because it is not specifically taxing capital gains, it's taxing anything other than contributions that makes the member's balance go up, and there will be a loss to carry forward as a result of anything other than withdrawals that makes a member's balance go down.

June 16, 2024

Where things get interesting is if you were “lucky” to have bought a stock like Afterpay which happens to jump 10x across a tax period only to collapse soon afterward. If you hadn’t sold across that period you might be in a situation where your tax payable is greater than the value remaining of your entire super fund. What’s the plan if it goes negative and there are no funds to cover the tax even after selling all the assets?

June 13, 2024

An aspect of the way they’ve designed this is that Div 296 credits can be trapped in the system.

For example, market goes up, and Div 296 tax is paid on the unrealised gain.

Market then goes down. As I understand it Div 296 tax previously paid is not refunded - a credit is created.

But if the fund balance falls below $3m, there is no way to access the credit even if the asset(s) that created the unrealised gains are sold.

Have I misunderstood - has this been addressed?

Meg Heffron
June 14, 2024

This is true K and is in fact one of the big weaknesses of the whole system of credits rather than refunds. (If we're going to tax unrealised gains, surely the Govt could have sprung for a refund on losses??). But I digress.
Yes - if you have a loss, you can only use it on Div 296 - so if you never have Div 296 again you will just get no benefit out of your loss, DESPITE THE FACT that you might have paid tax on the growth in the first place. It will impact people who die, withdraw a lot of their super, naturally have their balance never rise above $3m etc etc. What's even worse is that there are scenarios where you can be using up your losses even at times when you weren't going to pay Div 296 anyway. Don't get me started. The key planning tip here would be : if you have a loss, think carefully about when you strip a lot out of your super. You might as well use up the loss before you do it.

June 13, 2024

Congratulations, you will now be taxed on your tax refund. Pretty sure that is unprecedented.

June 13, 2024

My SMSF is putting its rates up. Compliance costs are cited as a reason.

Barbara Smith
June 13, 2024

Excellent explanation Meg, thank you

June 13, 2024

Thank you Meg, you have answered my question as to the future tax treatment of my Fund. I did not realize Div 296 is a separate tax on top of the current tax treatment. I can handle the extra 15% but not on unrealized capital gains.
Thanks again.

June 13, 2024

“ I can handle the extra 15% but not on unrealized capital gains.”
My sentiments exactly

June 14, 2024

Daniel, Us too OK extra tax due on something real and bankable, but this is taxing rainbows.

June 13, 2024

Can someone work out the div 296 liability for this example
July 1 2024 $3.5m
$2000 growth no income. Withdrew 503k on 2 July so ending balance is 2,999,000.

Second example same except starting date is 1 July 2025

IE I am asking what impact withdrawals have and whether keeping the ending balance under $3m each year is a strategy

June 13, 2024

Alternatively, if Dave had $4m in fixed interest (no capital gain) and his fund earnt $200k/year, can I assume that if Dave withdraws $200k/year from his fund that he will not pay any Div 296 tax? Are withdrawals added to the funds balance when calculating Div 296 tax?

June 13, 2024

Withdrawals are added "back in" so that does not solve the problem. If you want to pull back under $3m or adjust in any other way the key date is actually June 26. Rough Calcs, in retirement, starting with $3.5m, earning 7.5%, withdrawing 5% - extra tax circa $6500

Example TSB of individual $3.5m
TSB Curr FY 3587500
TSB Prev FY 3500000
Withdrawals at 5% 175000

"Earnings" 262500

Proportion of Earnings 0.163763066

Additional Tax "Liability" per account 6448
Tax Rate on "Earnings" 2.5%
Overall tax rate on Fund 0.18%

June 13, 2024

Hi Rob
june 26 which year?

June 14, 2024

June 30th 2026

Meg Heffron
June 14, 2024

Agree with your calcs Rob - one other point I'd add. It's tempting to convert this to an effective rate of tax on earnings of 2.5% as you have. I think that is an extremely useful number when it comes to giving yourself a feel for scale (eg "this tax is 15% but not on my entire $262k earnings, what will it "feel like" relative to that amount). But it's not a useful number when it comes to the decision about "so should I take that extra $587,500 out of super" - at that point, the full 15% is highly relevant. I'd liken it to thinking about average vs marginal rates in your personal income tax. In 2024/25, if you earn $200,000 you'll be in the top marginal tax bracket (45% + Medicare). But your average rate, of course, is much lower (it's less than 30%) - simply because all the income you've earned under $190k will be taxed at much lower rates than 45%. Again, knowing that your average rate is around 30% (so your total tax is going to be around $60k) is good for giving you a feel for scale. But if you were thinking about taking a $10k tax deduction, you would be very focussed on your marginal rate of 45% rather than 30%. In the same vein, an average overall rate for this tax is useful for scale but tells you nothing about whether or not you should take the money out. I realise this wasn't really the point you were making but this seemed like a good spot to highlight it - I've had a number of discussions with clients who have taken comfort that it's a low overall rate without realising that doesn't actually help them decide whether to take it out of super.

Meg Heffron
June 14, 2024

John - in answer to your question about withdrawing enough to keep your balance just below $3m every year : that WILL avoid Div 296 because the proportion will be $nil. So it won't matter how big the earnings are the tax will be $nil every year anyway. Whether this is a good strategy depends a lot on what you're taking out - see my comments below on modelling I've done around taking out vs leaving in

June 13, 2024

Hi Meg, Your articles offer great explanation as to the rules......May I ask for your advice on my own situation....I am 70yo retired with a TSB of $8m and a pension account of $2.1m.......I also have $3m outside of Super (fortunate I agree)...My wife is 10 years younger and has similar funds.......As we live comfortably we have ample money to grow for the ultimate benefit for our children.......I have been advised to to transfer all funds above our $3m super caps and put them in to a company structure as whilst profits are also taxed at 30% the unrealised capital gains are allowed to compound until realised.........Is there any impediment to doing so and is this sound advice ?

June 13, 2024

Hi Fortunate
the best advice is read Bill Perkins "Die with Zero"

James Gruber
June 13, 2024

Fyi, we did an article on Perkins book here:

June 14, 2024

I am an advisor and given 60+ copies away...people (many) hang on to their $ way too long.

June 13, 2024

Thanks Adam,...I am familiar with Bill Perkins book and understand the concept but have never been comfortable with spending for spending sake (maybe a legacy of running a small business) ...What is important to me now is to ensure the future financial wellbeing of my family after I am gone....Funny thing as one grows old expensive things like world travel or extra gadgets appeals less than home comforts friends and family....does for me anyway.

June 13, 2024

self employed for 35 years so understand.....if not spending it then "give with warm hands"...a dollar given to any of your beneficiaries, charities, friends, people in need is worth multiples more now than later. I cant give you advice but if you said you had 1/8th of what you have now I would possibly still suggest you read his book!!

June 14, 2024

reached the same conclusion. Just do it.
Profits in co. are taxed at 30% but kept as franking credits.
When paid as dividends, your beneficiaries will get the franking credits.
make the owner of your investment company a disc. family trust - then you have full discretion on who to pay it to and when.
spending for the sake of it isn't that much fun after all.

Meg Heffron
June 14, 2024

Hi Fortunate, I can't give you advice on your specific situation but I can share the general conclusions I've drawn from a heck of a lot of excel modelling (with the caveat of course that this was not based on your specific circumstances):
- this tax makes super and the structure you describe much closer to being "about the same" than ever before for the bit of super that's over $3m (for most people, the first $3m is still generally better off in super)
- leaving high super balances in super will typically result in more tax than other structures as assets grow (thanks to Division 296 taxing unrealised gains) but MUCH LESS tax when assets are actually sold. It's so much less, in fact, that in many of my models it completely cancelled out the benefits of moving money out of super in the first place (hence my "about the same" comment).
- and moving money out of super has a cost - if you have to realise assets to do so, your super fund will pay capital gains tax on the gains it's already built up (possibly over many years).
- where taking money out of super really comes into its own is if you die - depending on the make up of your super it could get taxed harshly if it's received by (say) an adult, financially independent child. Obviously that’s not the case for other structures.
So my overall conclusion is that for many people - and I don't know if you're one - the balances position could probably be expressed like this : "Div 296 means super isn't massively more tax effective for me than other structures (it used to be). So now I’m going to focus on the taxes my children might pay and take money out of super before I die. But I'm not in a hurry and I don’t want to suddenly get hit with a whole lot of CGT in my SMSF so I will do that over time as I sell assets"

June 14, 2024

Thanks Meg,..Very sound advice...Because of past rules and being allowed the larger non-concessional contributions the death taxes will only apply to about 40% of my TSB.......If it was not for the "unrealised capital gains" issue I think most of us would accept the reality that the changes are indeed fair .As things now stand community resentment to Boomers and large balances continues to grow (unfairly) adding another reason (not financial) to be done with it.........You are doing good work here thanks again

Manoj Abichandani
June 17, 2024


Not all SMSF are the same.

Many have commercial property paying rental income of 15% or more “on cost” as they were purchased years back

As values rise over the years - the proportion above $3M gets higher as you have also shown in an example and you get closer to 15% tax each year

Please note most commercial leases have a yearly growth, hence “earnings” will be always be higher each subsequent year

Due to higher spending (due to reading a book or due to inflation) even if all rent is withdrawn, for Div 296 it is added back

There are some solutions - such as contributing for kids / son in laws $120 K each year or 3X of this figure - so that anything above $1.9 M ( but less than $3 M) stays inside super for them and not for you - you withdraw all the income without selling the underlying asset.

Perhaps this is the cheapest solution as investment assets will always pay tax when sold by next generation - in super, they won’t when kids sell in pension phase (unless Albo’s kid ends up in politics and thinks of another crazy tax for rich people)

I started in this country by washing dishes in a restaurant - I am sure many of 80 K of us who are affected by Div 296 tax have similar stories - we all wanted and deserve a luxurious retirement and in my mind $1 extra tax should be saved

Lastly, as we draw close to the financial year, I am concerned about people nearing $3 M. I think in the next two years there will be countless arguments between SMSF auditors and trustees on allocation of income of the fund and property valuations which directly affect TSB and Div 296

SMSF Trustees, please read SISR 5.03 and 8.02B


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The Coalition's plan to build seven nuclear power stations in 15 years faces scrutiny due to high costs and slow construction. And it is unlikely the investment would yield cheaper energy for Australian households and industry.


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