DIV296 Another Super Tax

Division 296 relates to the taxation of superannuation balances exceeding $3 million in Australia. Here are key details regarding its application:

1. Tax Proportion Calculation:

   • The proportion of an individual’s super balance that exceeds $3 million is calculated as follows: Proportion = (Total super balance at end of year - 3,000,000) / Total super balance at end of year
   • For example, if Chris has $5 million in super at 30 June 2026, the calculation would be: (5,000,000 - 3,000,000) / 5,000,000 = 0.4  (or 40%)
   • The Division 296 tax owed would then be: Tax = 15% * Proportion * super earnings

2. Impact of Withdrawals:

   • If a member makes a withdrawal to fall below the $3 million threshold before the fiscal year-end, they will not pay Division 296 tax for that year. Withdrawals do not impact the calculation of tax due; the assessment is based on the balance at the end of the year.

3. Including Superannuation Components:

   • All superannuation accounts, including both pension and accumulation, contribute to the total super balance subject to Division 296.
   • Overseas pension/super schemes are excluded from the total balance unless they are complying super funds within Australia.

4. Inheritance Implications:

   • Inherited amounts treated as contributions may increase the total super balance, potentially placing an individual into the Division 296 tax category if they surpass the $3 million threshold for the first time.

5. Super Earnings Calculation:

   • Super earnings are generally calculated using the formula: Super Earnings = (Total super balance at end of year + Withdrawals during the year - Contributions during the year -Total super balance at beginning of year)
   • This means that any growth from investments is assessed for taxation purposes.

6. Current Law Status:

   • The $3 million threshold is not indexed and can only be changed through legislative updates.

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