Aaron Dunn, CEO of Smarter SMSF, said in a recent update that although there were fact sheets explaining the revisions to the proposed Division 296 tax, they were lacking detailed information regarding how CGT will apply and whether there may be a reset.
“We are still awaiting formal guidance around that,” Dunn said.
Tim Miller, head of education and technical for Smarter SMSF, said the sector is in a “different position” now as the tax on unrealised capital gains has been taken off the table and there will be more realistic earnings based on taxable income or taxable earnings.
“That is appreciating that that is going to be [things such as] dividends, rental incomes, and other elements, as well as the pluses and minuses of pensions and contributions,” Miller said.
“One of the things that has been addressed is what do you look at with regards to capital gains tax. And we were looking at this concept of only applying Div 296 to gains realised post 1 July 2026.
“Effectively, there is going to be a CGT reset situation for determining what those earnings will be and then there’ll be a future point when the assets are sold, where, for the purposes of this tax on the individual, we’ll be looking at the growth from 1 July to the date of sale.”
Dunn added that there is now a need to understand how the disposal of an asset will impact the fund’s taxation.
“Those standard principles, in essence, that we know and apply at the moment, whether something’s eligible for discount, or is eligible for any sort of earnings tax exemption will stay one and the same,” he said.
“But what we will be ultimately looking at now is, as these are new laws, that members in a fund shouldn’t be impacted by the realised result of gains or profits, unrealised profits that have been incurred or derived up and until this legislation commences.”
For example, Dunn said, if an asset was purchased within a fund in 2004 and hasn’t yet been sold, why should that change in value from what it was originally to what it is at 1 July 2026 be subject to the tax?
“Ultimately, the Treasurer has said that won’t be the case, so for Div 296 tax purposes, we will get that uplift,” he said.
“However, it does create some challenges in terms of how we will look to deal with this, because we’re going to have to factor in what that reset looks like, noting that it’s not going to be used for the purposes of disposal at a fund level. Equally, when we look at the disposal for Div 296 tax purposes, we’re not applying ECPI so it does become quite messy to understand.”
We still have a huge mess, a financial planning nightmare, increased uncertainly and confidence in the superannuation system, an accounting nightmare, a compliance nightmare. More red tape, infinitely more stress.
Why will some have to pay more in superannuation than they pay outside of super? The top end is very much still discriminated against with this policy.
It is all a logistical nightmare.
The simplest solution is a forced removal from super once a certain hard cap is reached. One cannot predict the fortunes or otherwise of what their ultimate position will be and sometimes, we will overshoot our aspirations. Instead of being punished, why not allow an early release of funds over a legislated hard cap on inception, with no penalties for moving funds upon reaching that goal (except of course for the usual CGT on withdrawal, stamp duties etc as would happen if you were retiring and accessing retirement funds), with from then on, no more funds allowed to enter the system except for the natural growth of the fund (with future employer contributions paid to the employee instead as wages, etc etc).
Would this be less complicated?
The result:
Less diddling by the government, less fiddling around the edges, and more productivity as we can all move on to bigger and better things, being far more productive than where we presently are. We have already wasted 2.5 years of mental and financial capacity on this for naught. Thank you Treasury. The conversation that Chalmers wanted has so far been a complete waste of resources.