Dr Natalie Peng’s commentary, while academically sound, underplays the practical harm this policy will cause. Let me be clear: Division 296 sets a dangerous precedent, and it fundamentally misunderstands what superannuation is and what it is not.
Super is not a piggy bank for Treasury
The idea that superannuation is somehow being abused by the wealthy, that it’s a tax haven that needs reigning in, is an oversimplified narrative. Yes, super comes with tax concessions. But these were not designed as a gift. They were an incentive. A promise. A contract between individuals and government: lock your money away for decades, and in return, we’ll give you a stable, tax-effective environment to grow your retirement savings.
Now, with Division 296, the rules are being changed mid-game, and not in a small way. Taxing unrealised gains breaks the fundamental principle of fair taxation: you pay tax on income or capital gains you’ve actually received. Anything else is not just unprecedented, it’s unjust.
A tax based on fantasy numbers
Dr. Peng mentions that only a “minority” of SMSF members will struggle with liquidity under this policy. But let’s call that what it is: academic minimisation. That “minority” still represents thousands of Australians who followed the rules, planned responsibly, and now face the possibility of being taxed on paper profits they may never realise.
In the real world, not the modelling rooms of Treasury, property markets fluctuate, share prices drop, and assets are illiquid. Forcing retirees to sell property, unwind long-term investments, or scramble for external cash just to pay a theoretical tax bill is more than inefficient. It’s reckless.
Equity? Or envy?
The government frames this as a fairness issue. But fairness is not about punishing people because they’ve done well. It’s not about shifting the goalposts because you’re chasing short-term budget wins. Division 296 is not about fairness, it’s about revenue. Let’s not pretend otherwise.
The “equity” argument collapses when you consider that wealthy retirees already pay 15 per cent tax on their accumulation accounts, and the estate pays capital gains tax when those assets are eventually sold. To say that super can be used to “defer tax indefinitely” is misleading, and frankly, disingenuous.
Administrative simplicity? At what cost?
Another point raised is administrative simplicity, that it’s easier to tax unrealised gains than to track when assets are sold. Yes, it’s easier. But so is taking people’s money upfront rather than waiting for them to earn it. Simplicity should never trump justice.
Requiring annual revaluations of unlisted and illiquid assets isn’t simple. It’s complex, costly, and subject to manipulation. It will create inconsistencies, increase disputes, and force super funds, especially SMSFs, to divert resources away from investing and toward compliance.
The true purpose of super
Let’s not forget: many SMSF trustees do not see super simply as a “retirement income stream.” They see it, rightly, as an intergenerational wealth structure. Why? Because retirement is not just about the day you stop working. It’s about financial security, family support, and yes, legacy. Are we really saying that the moment someone accumulates more than an arbitrary threshold, $3 million, their financial planning becomes morally suspect?
Dr. Peng argues that super should not become a “tax-free inheritance vehicle.” But super is not tax-free. And inheritance is not a dirty word. Australia has no inheritance tax, do we now intend to backdoor one through super policy?
The slippery slope has already begun
Make no mistake: once you open the door to taxing unrealised gains, even for a small group, it will not stop there. Division 296 is the beginning of a broader shift toward pre-emptive taxation. If this precedent takes hold, who’s next? Property investors? Business owners? Everyday Australians with volatile assets?
I do not deny that reforms are needed in superannuation, transparency, caps, and reasonable limits are all part of a fair system. But taxing fantasy gains is not reform. It’s desperation disguised as progress.
Division 296 is not about fixing the super system. It’s about breaking the rules of tax fairness to plug budget holes. We should be very clear-eyed about that, and resist it with everything we’ve got.
Very well covered Naz , Division 296 taxes unrealised gains in superannuation. That’s a line Australia shouldn’t cross.
A super system works when it rewards long-term saving and reduces future pressure on the public purse.
Division 296 does the opposite by taxing paper gains at up to an extra 15% above $3m, even when nothing is sold
It creates liquidity stress (especially for SMSFs with property/private assets), penalises volatility, and risks becoming a precedent for taxing other asset classes on accrual.
Most advanced systems in the world tax pension wealth on realisation or withdrawal, not on valuation swings.
We should fix fiscal holes by lifting productivity and broadening the economic base—not by eroding retirement capital that ultimately reduces government outlays in later life.
A better path in my opinion is to index the threshold, tax realised income only, credit losses sytematically.
Good policy should encourage saving, stability and fairness—not punish success.
I know this is a financial forum rather than philosophical, but as the writer points out, Div 296 is in many ways a harbinger.
The fact is that society is being primed to accept a measurably lower standard of living.
Normally, the precipitous fall in living standards we’ve statistically seen recently would have caused a change of government.
The fact is, however, that enough of the citizenry have become accepting of a lower standard of living.
As in the UK, mass immigration from countries with a much lower standard of living than Australia has helped in the recalibration of expectations. To that group, Australias’ standard of living remains unbelievably good, especially aided with welfare.
The governments’ strategy here is to slowly but relentlessly bring everyone to the same point of gentile poverty, reliance on government and compliance.
Wealth redistribution is a key component. Top up the living standards of the masses by removing money from a group of people who find themselves democratically helpless.
Without being at all dramatic, all we’re seeing is Marxism 101.
Sadly, for those whose circumstances allow, now is the time to plan to leave Australia.
“The governments’ strategy here is to slowly but relentlessly bring everyone to the same point of gentile poverty, reliance on government and compliance”.
Totally agree.
The question is, where would you move to? Many Western countries are following the same path. That’s of no coincidence either. Look to China for the blueprint.
Thank you Naz – well articulated. This has been shambolic since it was announced over 2.5 years ago and they are still standing by it and keeping people on edge and stressed about their future. But we are only a “sliver” as Chalmers called us. Gaslighting us to his own benefit. It is disgusting. And he has aspirations of being our prime minister one day. Not really leadership materiel. Just a big bully.
There are better ways and Chalmers knows it, but he wants his hands on our life’s savings and care nothing of the grief he is casing and allowing to be protracted. He just continues to lie and says that there is no other way.