SMSF sector cautiously optimistic Div 296 battle has been won

Although the bill remains on the list of legislation still to be debated by the Senate after a motion to dismiss it failed on Thursday (13 February), the industry is declaring victory.

The SMSF Association said the bill remains firmly stalled in the Senate and, with the federal election looming, appears destined to lapse when the election is called.

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Meg Heffron, director of Heffron, said she was “very glad” to hear there was enough opposition in the Senate for the government to give up on it – for now.

“It does seem curious to me that they should be so wedded to this specific approach when so many people are telling them it’s not the idea of taxing people more that’s the problem, it’s the idea of taxing them on unrealised gains,” she said.

“Surely any government that really sees this as a fairness measure, or one designed to rebalance tax concessions, would be open to new ideas about how to do it. “

Tony Greco, general manager of technical policy at the Institute of Public Accountants, said while any government in power has the right to propose changes to the concessional treatment of superannuation savings, any changes should abide by the three principles of a good tax system – fairness, simplicity and efficiency.

“In this case, they focused only on simplicity and the rationale was that it impacted only a few although over time lack of indexing will capture more. It is great that some senators have recognised the flawed design in not allowing this to become law and we should compliment those.”

Greco added the majority of submissions the government received regarding the legislation highlighted the design faults and the lack of consultation further exacerbated the industry’s frustration.

“The legislation was quite skewed and most people recognised the flawed design nature of the taxing mechanism and that it does not abide by good tax principles,” he said.

“We applaud those senators who are brave enough [to stand against it] when the government is trying to do deals and they have stuck to their role as senators in not allowing this flawed design to become law.”

He said there is no lack of choice in reducing super concession tax benefits and most Australians would be willing to pay more tax if the government followed the three principles of fairness, equity and efficiency.

“We are more likely to pay tax if we think it’s fair but it was the unfairness of this legislation that irks people,” he said.

Natasha Panagis, head of superannuation and financial services for the Institute of Financial Professionals Australia, said the government’s struggle to pass the Division 296 tax bill through the Senate is becoming increasingly apparent.

“The repeated delays and rescheduling of the bill for debate make it clear that the government lacks the necessary crossbench support to secure its passage,” Panagis said.

“This roadblock is a testament to the strength of industry advocacy, with many Australians also voicing their concerns to MPs and senators about why this tax is unfair, unprecedented, and unnecessary.”

Panagis said that with parliament’s last sitting day before the 25 March budget now concluded, time is running out for the government to pass the bill before the next federal election.

“While it seems unlikely the legislation will be debated in the Senate before voters go to the polls, one thing is certain: the government remains determined to implement this tax, keeping it firmly on its policy agenda,” she said.

“If, against the odds, the bill is passed and takes effect from 1 July 2025, individuals will have limited time to assess their options. Ideally, a delayed start date would allow time for financial restructuring, but for now, the key message is that this remains a proposal, not law. Given the lack of Senate support, the likelihood of it being legislated is slim. If the government insists on pressing ahead, it will need to take the policy to the election, leaving its fate in the hands of voters.”

Ainslie van Onselen, chief executive of Chartered Accountants Australia and New Zealand, said she welcomed the bill’s legislative delay.

“This bill sets a dangerous precedent that should have been shut down by the Senate. What’s next? A tax on the unrealised value of the family home above $3 million?” she said.

“CA ANZ has not supported this policy since it was announced by the government in February 2023, and used its 2025-26 federal budget submission to advocate for the legislation to be voted down in the Senate. We are calling on the crossbench to not support the legislation if parliament returns in March.”

Nicholas Ali, head of SMSF technical services for Neo Super, said with both houses of parliament due to sit for three days only (25-27 March), it is unlikely Division 296 will “rear its ugly head”.

“A federal election must be called by no later than 17 May 2025, and there must be at least 33 days from the date the election is called until polling day. That means the last date to call the election is Monday, 14 April 2025. Once the Prime Minister calls an election, The House of Representatives is dissolved and bills before the Senate and House of Representatives expire. This means any remaining sitting days for parliament are terminated,” he said.

“The only other sitting days before the election are seven days in May (6-15 May) that will terminate given election campaigning. So, in all likelihood, Div 296 will not be put to the senate this parliamentary session and will be a policy initiative taken to the election by the Albanese government.”

However, Ali warned that this does not mean the Div 296 bill is dead.

“No part of the proposal is about good policy. It is all about revenue generation for the government. They need ever more money to spend, and so if it does not come from higher taxes on superannuation, revenue will have to come from other sources. The government wants and likes this tax, as they think it has minimal electoral damage for them,” Ali said.

“What is the likelihood it passes into law? This is more nuanced. All reputable pollsters point to a very tight election, with a minority government of some description being seen as a likely outcome. This presents real problems for the government, as parliament will possibly be more divided than it is currently. Even if Labor scrapes home, passing an unpopular and inequitable tax on super may become a bridge too far, even for the left.”

Naz Randeria, managing director of Reliance Auditing, said it is a positive thing that there is now some education and opposition to the legislation and “good people are speaking up about it”.

“It’s very clear that Labor and the Greens, from the commentary coming from Canberra, that they do not understand economics. The Greens are talking about their fair share because they don’t understand how superannuation works. People are actually paying tax and this equalisation nonsense gets to me. Do we hold hands and run at the Olympics?” Randeria said.

“These people with these large superannuation balances are in the later stages of life and the way the superannuation legislation works is that once they pass away the money will leave super. It’s a matter of 5-10 years on someone’s life expectancy. The government does not understand simple economics. Equalisation is not the right way to go. It’s telling the younger generation you are no good rather than saying ‘Go for it, buddy’.”