Division 296 now a ‘waiting game’, tax expert says

From the range of tax announcements to have surfaced during the election period, Division 296 is the most significant and will remain front of mind for tax experts and those captured by the legislation.

Lee-Ann Hayes, head of tax education at Accurium and co-host of the Under the Hood podcast, said there had been talk of the legislation being on and off, yet this was potentially “wishful thinking”.

“From our perspective, I’m not sure it had really dropped from the government’s agenda. It’s certainly in the budget, so it would leave a black hole if they just decided to scrap it,” she said.

“But certainly, it will have renewed focus, because it is now easier for the government to get that through parliament. The problem previously, and the reason we don’t have it now, is it couldn’t get through the Senate.”

Hayes noted the government also needed backing from the Greens, who had previously supported the legislation, with the amendment that the threshold sit at $2 million, rather than $3 million.

Based on the re-election of the Labor government, Hayes backed the sentiment that Division 296, set to come into play from 1 July 2025, was definitely a matter of “when, not if”.

Hayes said it was a factor that needed to be taken into account by the industry; however, it was important to note the reality that it wouldn’t have to be accounted for until 30 June 2026, as this was when the adjusted total super balances would be relevant for the imposition of the tax.

“I am personally in the camp of just waiting and seeing what it looks like, because it’s really hard to make decisions based on legislation. You don’t know what it looks like just yet,” Hayes said.

“It’s lapsed. They may just push that back in, or they may do something different with it before we see the final version.”

From her professional perspective and experience, Hayes did note that most people were generally very concerned about the idea of taxing unrealised gains in a large super fund.

Hayes attributed this to the fact that accountants and advisers were worried about the future of the bill and how the $3 million threshold would erode over time to impact more and more people.

The concern reflected from the industry also came into play for taxpayers who had been told super was a good place to hold their businesses, property and other assets to be tax free, as the introduction of Div 296 would impact these assets.

This was reason for genuine concern, as young members of a super fund with these assets would have no liquidity to pay the required tax, according to Hayes.

“I certainly am out and about doing a few conferences and those sorts of things, talking about strategies outside super, where to hold some of these assets, and working out what other ways we can get the tax benefits,” Hayes said.

“They’ll never be as good as super at the moment, but there are other places that we can hold these assets or other concessions that we can look at to try and minimise the tax liabilities in the future.”

Other areas suggested by Hayes included anything that could give taxpayers a CGT exemption and the main residency exemption.

“With Division 296, right now it’s in the unknown. We don’t know what exactly is happening yet, but we know that it is coming.”