The government’s latest revision of the Division 296 superannuation tax announced today (13 October) represents a significant reset of the policy originally outlined in early 2023.
While the measure still targets high-balance super accounts, the updated version answers two of the loudest criticisms and creates a more defensible, but still intricate, framework for advisers to manage.
Side-by-side comparison
| Feature | Original (2023 Draft) | Reworked (October 2025) | TAG Comment |
| Application date | 1 July 2025 | 1 July 2026 | Extra year for consultation and system readiness |
| Tax base | Included unrealised gains | Realised gains only | Removes distortion and volatility issues |
| Thresholds | Single $3 million cap (non-indexed) | Indexed $3 million + new $10 million tier | Addresses bracket creep and fairness |
| Rates | Flat 30% above $3 million | 30% (> $3M ≤ $10M), 40% (> $10M) | More progressive targeting of extreme balances |
| Negative earnings | Carried forward, but limited | Still expected to apply | Details still to be confirmed in bill |
What this means in practice
The reworked design eliminates the major conceptual flaw – taxing unrealised gains – while preserving the government’s aim of narrowing super concessions at the top end.
However, for practitioners, the complexity hasn’t gone away. Instead, it’s shifted:
- Indexation will make projections less straightforward, requiring dynamic modelling rather than static thresholds.
- Liquidity pressures remain for SMSFs with illiquid holdings – tax is still triggered on realised events.
- Death and loss-carry-forward rules are still unclear and may affect estate planning.
- Behavioural impacts (withdrawals, reallocation of growth assets outside super) will need careful management.
Strategic implications for advisers
- Client identification – run exposure modelling now for anyone trending toward $3 million+ over the next decade.
- Cash-flow modelling – prepare clients with illiquid portfolios for potential tax liquidity events.
- Structuring review – compare post-tax outcomes inside vs outside super.
Estate implications – ensure death-benefit planning aligns with Division 296 treatment. - Communication – translate these technical changes into clear client messaging that prevents premature or emotional restructuring.
TAGs take
The October 2025 rework is a measured and necessary recalibration of an over-engineered original design.
Removing unrealised gains restores tax integrity, while indexation ensures fairness.
Still, advisers should prepare for:
- Intensive modelling and scenario planning;
- Ongoing legislative uncertainty through 2026; and
- The possibility of further tweaks once revenue impacts are quantified.
TAG Financial will continue to provide technical breakdowns and modelling support as legislation progresses, helping you stay ahead of client conversations and compliance expectations.
Get in touch with our super experts today at super@tagfinancial.com.au or call 03 9886 0800.
Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686). Copyright 2025. Please do not reproduce without the expressed written consent of the author.