If you’ve been anywhere near the headlines lately, chances are you’ve heard a bit of noise about the proposed Division 296 tax.

Cue the dramatic music.

But let’s take a breath—because while it might sound ominous, the reality is far more grounded. At SMSFAI, we believe in arming our trustees with facts, not fear.

So, what’s all the fuss about?

What is Division 296?

Division 296 is a proposed law that would impose an additional 15% tax on earnings linked to superannuation balances above $3 million. It’s slated to start from 1 July 2025, if passed.

That means if your super balance is under $3 million, you won’t be impacted at all. Not one cent.

Let’s Talk Numbers

According to Treasury data, only around 80,000 Australians—roughly 0.5% of all superannuation members—would be impacted by this change in the first year.

In other words, 99.5% of Australians won’t be affected.

Yet the headlines make it feel like every Aussie with an SMSF needs to panic. That’s simply not the case.

Okay, But What If I Am Over the $3M Threshold?

Then yes—there may be an extra 15% tax on earnings above that threshold. But let’s put that into perspective.

Currently, super earnings are taxed at 15%. Under Division 296, earnings on the portion over $3 million would be taxed at 30%. While higher, it’s not outrageous—especially when compared to family trusts, where income is often taxed at marginal tax rates of up to 47% (including Medicare levy).

So even at 30%, super remains one of the most tax-effective structures available in Australia. That doesn’t change.

A Few Realities Worth Noting

1. It includes unrealised gains
   Yes, the proposed tax includes earnings that you haven’t actually realised—like paper profits on property or shares. That’s the trickiest part and a fair concern. But again, this only applies if your super balance exceeds $3 million.

2. There’s no indexation
   The $3 million cap isn’t indexed to inflation, which means more people could be caught over time. But we’re not there yet. And legislative changes often evolve.

3. It doesn’t apply to everyone in an SMSF
   This is an individual threshold, not a fund-wide one. So if you’re in a six-member SMSF and only one member has a balance over $3 million, only they may be affected.

Bottom Line?

If you’re well under $3 million, this tax doesn’t apply to you. If you’re hovering close to the cap, it’s worth chatting to your adviser about long-term strategy. And if you’re well over, you still have one of the most powerful wealth-building vehicles in the country—even at 30% tax.

At SMSFAI, we help trustees make informed decisions—based on data, not drama.

If you’d like to talk through how this might affect you, or whether an SMSF is right for your situation, head to smsfai.com.au or send us a message. We’re here to make super simple.