Super Tax Shake-Up
Removing unrealised gains from the tax calculation eliminates valuation headaches and liquidity pressures for SMSFs -- particularly those holding property or unlisted assets.
Super Tax Shake-Up
Big Balances Beware
The Government has reworked theproposed Division 296 tax, part of the Better Targeting SuperannuationConcessions (BTSC) policy. The revised version simplifies the system, removingthe controversial inclusion of unrealised gains and introducing a fairer tieredapproach.
What's changing -- and why it's simpler
The original 2023 proposal taxedunrealised gains -- paper profits on assets that had not yet been sold. Thereworked model now taxes only realised earnings, aligning it with standard taxprinciples and avoiding liquidity problems for those with illiquid assets suchas property or unlisted investments.
A fairer, tiered approach
- Tier 1 ($3m to $10m): An extra 15% tax on earnings fromthis portion -- bringing the total to 30%.
- Tier 2 (over $10m): An extra 25% tax on earnings above$10 million -- bringing the total to 40%.
Both thresholds will be indexedannually to inflation. The start date has been pushed back to 1 July 2026, withfirst assessments expected in the 2027-28 financial year.
Why it's still good news for most
Removing unrealised gainseliminates valuation headaches and liquidity pressures for self-managed superfunds (SMSFs), particularly those holding property or unlisted assets. However,members with balances above $10 million will face higher overall tax rates andshould be reviewing their strategies now.
Low Income Superannuation Tax Offset
On the other side of the ledger,the Government will increase the Low Income Superannuation Tax Offset (LISTO)threshold from $37,000 to $45,000 from 1 July 2027, with the maximum paymentrising to $810. Treasury estimates this will deliver an average increase of$410 for affected workers.
What to do now
- Check your total super balance and project where it maybe by 2026.
- Seek advice early -- managing liquidity and timingasset sales could make a real difference.
- Stay informed -- draft legislation is expected in 2026.
If you would like to discuss howthese changes may affect your superannuation strategy, please contact our team.
