Division 296 tax update
The Division 296 legislation proposes an additional 15 per cent tax on superannuation balances exceeding $3m, set to take effect from 1 July 2025. The Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023 passed the House of Representatives in early October 2024, with the proposed amendments for indexation of the $3m threshold and the exclusion of unrealised capital gains from the tax calculation rejected. The bill now faces scrutiny in the Senate and there is ongoing opposition to its provisions.
Additionally, with a federal election looming before 30 June 2025, a change in government could lead to the repeal of this measure.
Draft regulations released for legacy pensions
The draft regulations released in September provide a framework for unwinding legacy pensions, including market-linked pensions, complying lifetime pensions, and complying life expectancy pensions.
These pensions currently face strict restrictions, such as prohibiting commutation, cash-out options, or conversion to account-based pensions. The proposed regulations offer greater flexibility for legacy pension holders.
This will be significant for affected members to decide if they would like to unwind their current pension accounts as it presents an important opportunity for individuals seeking more flexibility or those concerned about the estate planning implications of remaining tied to their legacy pensions.
For individuals potentially affected by the proposed $3m cap, ceasing their complying lifetime or life expectancy pension after 1 July 2025 could lead to adverse tax consequences, making it critical that the draft regulations are finalised promptly to allow for timely advice and action.
Australia’s payday super reform
Earlier in the year, the Australian Government announced, effective 1 July 2026, employers will be mandated to pay Superannuation Guarantee (SG) contributions concurrently with employees' salary and wages. This change will require employers to pay SG contributions with each pay cycle, rather than on a quarterly basis. The objective of this reform is to reduce unpaid superannuation and enhance retirement outcomes by ensuring employees receive their contributions more frequently.
It is important to note this measure has not yet been enacted into law. Treasury and the ATO will engage with industry stakeholders to discuss the implications of these changes.
We’re here to help
If you have any questions about the changes to superannuation, our national Superannuation team are here to help. Please contact your relationship partner to discuss how the proposed changes could impact your Superannuation planning and what strategies are available to you.
Learn more about how our Superannuation and SMSF services can help you
The above information is provided as an information service only and, therefore, does not constitute financial product advice and should not be relied upon as financial product advice. None of the information provided takes into account your personal objectives, financial situation or needs. You must determine whether the information is appropriate in terms of your particular circumstances. For financial product advice that takes account of your particular objectives, financial situation or needs, you should consider seeking financial advice from an Australian Financial Services licensee before making a financial decision in relation to any of the matters discussed.
