Broadly, this option involves subtracting the member’s opening account balance from their closing account balance in respect of a financial year and making prescribed adjustments for contributions and withdrawals.

The following is extracted from page 44 of the Report:

Lead time to design and deploy systems and processes

As this would be a new tax it would represent a significant administrative undertaking for the ATO. A sufficient lead time is required to allow time for the ATO to successfully build and test a new system for administering the tax (this includes compliance, processing, reporting and correspondence activities). …

Similarly, funds required to engage in additional reporting will need sufficient lead time to understand their new reporting requirements and build and deploy systems to provide reporting before the first due date.

To mitigate the risk of these deliverables not being ready for the commencement of the measure, the implementation timeframe includes an extended period between the passage of amending legislation and commencement.

Lead time for behavioural change in response to the measure

There is a risk of criticism of the measure’s implementation if impacted individuals are not afforded sufficient opportunity to restructure their affairs (to the extent permitted by law) to avoid the application of the new tax once it commences.

High balance members above preservation age may choose to withdraw funds from the superannuation system (and potentially reinvest them outside that system) would potentially require a minimum of 12 months to transfer ownership of assets (whether divesting entirely or shifting to a non-superannuation structure) and to manage any associated costs including stamp duty, brokerage and legal costs.

This risk is again mitigated by the extended lead time for the measure’s commencement. On the proposed implementation timeframe members who are eligible to make withdrawals from superannuation would have around two years to implement these arrangements.

As detailed in Treasury’s comments above, the intention was to provide members a minimum of 12 months from the passage of the legislation to the commencement date of Division 296 for members to take corrective action, eg, to withdraw money from super to ‘avoid’ the proposed new tax.

On 31 March 2023 a consultation paper was released that contained the details on the proposed Division 296 tax that would apply to balances over $3 million. A short consultation period followed, and subsequently in April 2023 an exposure draft of the Taxation Laws Amendment (Better Targeted Superannuation Concessions) Bill 2023 (Div 296 Bill) was released. The Senate Economics Legislation Committee reviewed the legislation and took feedback, but their report ultimately provided for no changes to be made.

The Div 296 Bill was then introduced and read a first time in the House of Representatives on 30 November 2023 and after the third reading, was passed by the lower house on 9 October 2024.

The Div 296 Bill was then introduced in the Senate and read a first time on 10 October 2024 and lapsed on 21 July 2025, due to the 3 May 2025 Federal Election. Thus, there is no Division 296 legislation currently before Parliament. The Labor Government appears to be holding this legislation and prioritising other items until a future suitable time. The next opportunity for Parliament to consider the legislation is in late October (27-30 October) or November (3-6 or 24-27 November).

Where does the new Div 296 tax currently stand?

We are nearing mid-September 2025, there is no legislation before Parliament and it not yet law. It now appears there is growing uncertainty, with rumours circulating about potential changes to the proposed Division 296 measures reflected in the Div 296 Bill that may involve, among other things, the legislation being:

· amended (eg, to delete the taxation of unrealised gains and/or to index the $3 million threshold); or

· scrapped altogether.

Advisers have learnt over many years not to act on legislative changes that are proposed but not yet enacted (otherwise referred to as “ABUMs”; ie, an announced but unenacted measures).

ABUMs are often announced in Federal Budgets and face uncertainty due to the legislative process. They can remain unenacted for extended periods, and in some instances may never be enacted, creating difficulties for advisers and clients in providing advice and planning ahead. Advisers have generally become conditioned to refraining from providing advice on future legislative changes until the relevant legislation is actually passed as law. This approach minimises adverse client exposure and reduces the risk of being sued for incorrect or negligent advice. A lawyer would generally not recommend acting on proposed legislation without accepting the inherent risks; in other words, one should not jump at shadows.

Interestingly, The Tax Institute’s 24 May 2025 edition of TaxVine commented:

ABUMs are not a new feature of our tax and superannuation system. The lengthy list which we describe as ‘ABUMs’ represents measures announced by the Government that are stalled at the stage of a media release/announcement, consultation or discussion paper, exposure draft legislation or a bill. We wait for clarity on their progress and certainty that they have or will become law. The list of ABUMs swells with every passing federal budget, review and election campaign, only to shrink ever so slightly as measures are finally enacted or abandoned.

The ABUM issue is broader than the measures themselves. As a matter of system maintenance, the Government really needs to address the systemic issue of this list so the ABUMs can be better managed going forward. Clarity is needed so greater certainty can be provided to taxpayers and their advisers.

The TaxVine article listed 17 ABUMs involving proposed legislative changes and 4 Board of Taxation reviews to which the Government had not yet responded.

Proposed commencement date 1 July 2025

Broadly, the commencement date in section 2 of the Div 296 Bill is specified to be the date from which the legislation receives Royal Assent. Indeed, some parts of this Div 296 Bill only take effect on 1 January, 1 April, 1 July or 1 October to occur after the day of Royal Assent. The Div 296 Bill needs to be passed by both houses of Parliament before it can receive Royal Assent; when legislation is passed and becomes law. As the next sitting days in Parliament are in late October and November, we will be anxiously awaiting the outcome regarding timing and the nature of any changes to the Div 296 Bill.

Generally, legislation is set to apply prospectively, meaning the legislation only applies after the law is passed. The principle against retrospectivity is a cornerstone of the rule of law and is considered fundamental to our legal system so people can know the law at the time they act.

However, retrospective legislation is used for anti- tax avoidance purposes to counter tax schemes that exploit loopholes in the law. Retrospective tax legislation is also used when a tax announcement is made in a Federal Budget or via a press release, referred to as 'legislation by press release'.

While there has been some notice to the Australian community that the expected start date of Division 296 will be 1 July 2025, there is increasing uncertainty about whether this will be the case given that superannuation funds (especially large Australian Prudential Regulation Authority (APRA) superannuation funds) will need to make considerable changes to their systems and communications. Typically, the lead time required for computer systems, communications and training of personnel to be updated, tested and deployed is at least 12 months from the point at which the commencement date of the legislation is confirmed.

Impacts of delay and uncertainty

From a forward planning perspective, the delay and uncertainty experienced so far on Division 296 undermines the confidence in the proposed measures taking effect from 1 July 2025. Thus, resulting in hesitancy from advisers and clients to take any action until the legislation is actually passed as law. In particular, the proposed commencement date of 1 July 2025 is now seeming somewhat doubtful.

Indeed, the one certainty is that advisers and clients are reluctant to act on an announcement until it is law. As noted above, ABUMs are often announced in Federal Budgets and face uncertainty due to the legislative process. They can remain unenacted for extended periods and many ‘fall by the wayside’ and may never be enacted. The fact that there has now been over 2.5 years since the initial announcement of Division 296 on 28 February 2023, does not means that members have had time to arrange their affairs for the proposed 1 July 2025 commencement date.

As noted, advisers are generally reluctant to advise clients to act on an ABUM as many over the years have been deferred or remain unenacted. Further, a number of large APRA superannuation funds have delayed making any commitment to updating their systems and communications for Division 296 and are taking a ‘wait and see’ approach.

Interestingly, page 1 of the Report, states:

… At its commencement date, this [Division 296] measure is expected to apply to around 80,000 people or 0.5 per cent of Australians with a superannuation account.

Despite this, it would appear the costs of implementing systems to comply with the Division 296 measures will be imposed on most APRA superannuation funds, even though some may have few or no members likely to be affected.

Moreover, many self-managed superannuation fund trustees and members may not make changes based on proposed measures given significant transaction costs can be incurred. Numerous professional bodies representing SMSFs including the SMSF Association are still seeking various changes to Division 296 including, among other things, to remove the taxing of unrealised gains and apply indexation to the $3 million threshold.

Also, advisers are constrained on providing appropriate advice unless they have an appropriate Australian financial services licence (AFSL). Such advice is becoming more difficult to obtain especially as the number of advisers, and those that have limited SMSF authority in respect of their AFSL, have declined sizeably in number in recent years. Moreover, obtaining advice has become considerably more expensive, with increasing in costs and complexity.

Broadly, an adviser who does not have an AFSL is prohibited from providing financial advice, including advice in respect of an SMSF, which is considered a financial product under the Corporations Act 2001 (Cth). Advisers who have a licence will also be concerned about the risks of providing any advice given the growing uncertainty on the status and commencement of the Division 296 measures.

Advisers such as accountants and lawyers without an AFSL have to be careful and are generally precluded from recommending that a member contribute or withdraw from superannuation. These advisers are also reluctant to advise on proposed measures that are not yet law.

Thus, will Division 296 become another ABUM?

Certainly the final form and commencement date of the Division 296 remains uncertain. Rumours are spreading that changes to Division 296 may be forthcoming and advisers are reluctant to provide advice given the uncertainty that exists and the fact that there is no law enacted yet. Moreover, as time ticks by, the commencement date may be more likely to be deferred, to provide members the opportunity to restructure their affairs, if relevant, prior to any Division 296 tax being passed as law in accordance with the intent reflected in the Report to provide at least 12 months notice ‘to transfer ownership of assets’.

Naturally, certainty in the superannuation system is vital given the importance of the $4+ trillion in Australian superannuation savings.