If your self-managed super fund [SMSF] balance is tipping over the $3 million mark, chances are you’ve heard the whispers [or full-blown media frenzy] about the government’s proposed Division 296 tax. Before you spiral into spreadsheets or start selling out of your super assets, let’s break it down.

Watch below as MD, John Knight, and I discuss the $3 million super tax, what this means for you + why you shouldn’t panic. Or, if reading’s more your thing, scroll on to learn more.

 

 

so, what is the $3 million super tax rule?

In simple terms, if your member balance exceeds $3 million, you could be hit with an additional 15% tax on the earnings above that threshold. This applies per person, not per fund.

But here’s the twist: the tax is calculated not just on actual earnings… it includes unrealised gains too. Yep, gains you haven’t even cashed in yet. That’s where the controversy lies.

We don’t tax unrealised gains anywhere else in the Australian tax system, and it’s why this proposal is ruffling more than a few feathers, and not just in the SMSF space.

 

when does this come into play?

The good news is you’ve got time. While the government still needs to get the legislation over the line it’s looking more likely this time around. If it does pass:

  • The first year of assessment will be 2025–26, based on year-end balances.
  • The first tax payment won’t be due until May 2027.

That gives us space to breathe, plan and importantly to consider what is actually the best option for your situation.

 

what should you do before 30 June 2025?

Honestly? Not much… yet.

We’ve run the numbers for plenty of clients, and in many cases, the tax impact is relatively minor in the scheme of their overall super balance. It’s not a tax on your total super, nor is it retrospective. It’s a tax on how much your balance moves in a year – and only once it’s over $3 million.

So please, don’t go pulling everything out of your SMSF thinking you’re dodging a bullet. Super still remains one of the most tax-effective environments for most high-net-wealth individuals.

 

planning ahead: death benefits + next-gen wealth

Where it does get trickier is when you factor in death benefit taxes – especially if you’re the last member of your SMSF or nearing retirement. That’s where we start seeing higher impacts with the additional tax, which could seriously erode what gets passed down to the next generation.

We’re starting early conversations with our clients about:

  • Restructuring asset ownership
  • Reviewing entity structures
  • Deciding when and how to pass assets on

In many cases, investment companies are emerging as a smarter way to hold and grow legacy assets [like property], particularly where intergenerational planning is a focus.

 

so, where does that leave you?

Right now, we’re in watch-and-wait mode. Keep calm, stay informed, and don’t act out of fear. The final legislation could still change, and until it’s law, the best strategy is a personalised one that takes into account not just your tax position but your family and estate planning position as well.

If your balance is edging close to $3 million [or well beyond], now’s a great time to get some tailored advice. We can run the numbers, map out a plan and make sure you’re not paying more tax than you need to, now or in the future.

 

need a second opinion on your SMSF?

Reach out to me or contact the super team here at businessDEPOT. We’re here to help you stay one step ahead of the changes, with less jargon +  more clarity.

 

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