Peter Burgess, CEO of the SMSF Association, told SMSF Adviser today’s shock announcement from Treasurer Jim Chalmers significantly watering down the $3 million super tax legislation means “essentially back to the drawing board and starting again”.
“This is really the only way they could address the taxation on unrealised capital gains,” Burgess said.
At midday, Chalmers told a packed media conference that the controversial Division 296 tax will only apply to future realised earnings and the $3 million threshold will be indexed.
He also stated that the government will introduce a second threshold at $10 million, which will also be indexed, above which the earnings tax rate will be 40 per cent. The $10 million threshold will also be indexed.
Importantly, the implementation of the tax will be delayed by one year to July 2026 and the tax will also apply to defined benefit pensions to ensure commensurate treatment.
Additionally, the government will boost the low-income superannuation tax offset (LISTO) to $810 from $500 and increase the eligibility threshold from $37,000 to $45,000.
The Treasurer said the net effect on the budget of these changes is a cost of around $4.2 billion over the forward estimates, a large part of which is due to the one-year delay.
“These reforms maintain the concessional treatment of superannuation, but ensure it is provided in a more equitable and sustainable way,” Chalmers said.
Burgess continued that following last week’s debate in Senate estimates it was obvious the government had been looking at modelling of proposed amendments.
“I think [Senate estimates] perhaps forced the government’s hand to come out and say what they’ve said today,” he said.
“But we welcome this announcement. We’ve worked tirelessly since this legislation was first released pointing out all the unintended consequences for taxing unrealised capital gains, so we’re very pleased that the government has listened to those concerns and has agreed to consult with industry on how to bring this new tax in.”
Burgess said the government will now hopefully work with industry to determine how to deliver an appropriate calculation on earnings.
“We’ve got the taxing of unrealised capital gains off the table. That’s what we’ve been fighting so hard for, for over two-and-a-half years,” he said.
“That was going to have devastating implications, not just for the SMSF sector, but for the broader community, and we’re really happy that the government has finally acknowledged those concerns, and is looking to make changes.”
Chalmers and Gallagher should resign as they both said there was no alternative and there would be no changes to s296.
Well now they both have egg on their face and now is the time for them to go!
All the fear and angst they have caused does not seem to have concerned them so the humble alternative for the Labor government is to scrap the entire proposal, apologize and allow any superannuant to wind back any actions they may have taken.
This is a prime example of policy on the run and is typical of this pathetic government productive Australians have to endure every day.
I hear you Mark. Productive Australian are hit left, right and centre for anything and everything, as if we have time and money and resources to waste. No wonder that productivity is at an all time low. Who can possibly keep up with red and green tape these days and stay productive.
Also, a little whinge about AI – why is the government so determined to dumb down its people? I know young people who have given up careers because they see that their jobs will not exist in a few years. This is another policy from the same pathetic government. As if AI is going to be some sort of magic wand to fix all woes.
Australians need hope, not class warfare. This grab of life time savings was despicable and both Gallagher and Chalmers and Treasury should be held accountable for even issuing the nonsense policy in the first place.
The Div 296 M2 policy has many flaws also. Maybe the simplest is to have a hard cap (CPI linked or other) and all other assets have a given time to remove assets over the top.
Finally an inkling of common sense on this proposal from the Government. Hopefully Chalmers has learnt a lesson about the need for proper consultation with industry experts, not just ALP aligned industry funds. It is however appalling that it has taken the Government 32 months (almost a full term of Parliament), to acknowledge the bleedin’ obvious and correct this badly flawed proposal, in the meantime inflicting on elderly super fund members and their advisers a lot of cost, stress and wasted time.
As late as June 2025, after more than 2 years of Chalmers saying that there was “no alternative”, hello, hello, we have an alternative.
What a waste of so much time, money and so much stress for nothing. Thank you Chalmers. Good one!
I am sure whatever is devised will be a much fairer outcome.
Thank goodness for common sense, even if it was a long-time coming.