It’s Time to Take Control: The Real Cost of Waiting on Super

There’s been a wave of media attention and, understandably, some strong emotional reactions. Words like “double taxing” and “raiding your super” trigger fear, frustration, and even outrage. The best response isn’t to panic; it’s to plan.

In this article, we break down what’s really proposed under Division 296, why it matters to investors, and how you can respond with confidence. With the government scrambling for cash and their eye on the country’s super, your best path forward is one built on real insight from experienced experts and a strategy tailored to your financial goals.

It’s time to take control of your future. Let’s unpack what the proposed changes mean and how you can make smart, strategic moves now to protect and grow your wealth.

What is Division 296?

Division 296 is a proposed new tax targeting Australians with super balances above $3 million. If passed into law:

• It applies from 1 July 2025.
• The first assessment will be based on balances as of 30 June 2026.
• It introduces an extra 15% tax on earnings related to the portion of an individual’s Total Super Balance (TSB) above $3 million.
• Earnings include both realised and unrealised gains, meaning you could pay tax on increases in asset value, even if those assets haven’t been sold.
• It is a personal tax (not paid by your super fund). You can either pay it yourself or have it deducted from your super account.

A Simple Example – Meet Mavis.

Mavis is a retiree with a Total Super Balance (TSB) of $3.2 million as at 30 June 2026. One year earlier, on 30 June 2025, her balance was $3.0 million. During the financial year, she made a contribution of $30,000, of which $25,500 remained after the standard 15% contributions tax. She didn’t make any withdrawals during the year.

To determine how Division 296 would affect her, we calculate her earnings by taking the increase in her balance and subtracting her net contributions. That gives $174,500 in earnings. However, since only 6.25% of her super balance is above the $3 million threshold, only that proportion of her earnings is subject to the new tax. That means $10,906.25 of her earnings would be taxed under Division 296.

At 15%, this results in a tax bill of $1,635.94, payable by Mavis personally or from her super account. The critical point? This tax applies even though Mavis hasn’t touched the money, and a portion of that gain may not even be realised.

Why This Has Investors Concerned

Here are the biggest red flags and why they matter:

❌ Non-Indexed Threshold

The $3 million cap isn’t adjusted for inflation. Over time, more Australians, especially those in growth-focused SMSFs, will be captured by this tax despite not being “wealthy” by today’s standards.

❌ Taxing Unrealised Gains

Paying tax on “paper” profits that haven’t been realised poses major cash flow risks. For rural landholders, this could force premature asset sales just to meet tax obligations.

❌ Valuation Uncertainty

How are assets going to be valued? Who decides? And what happens if values fall the next year? Currently, it looks like you may carry forward a loss, but not receive a tax refund. That’s hardly equitable treatment.

❌ No Opt-Out

If you’re under preservation age (60 or 65, depending on your circumstances), you can’t just withdraw funds to get below the $3 million threshold. You’re locked in.

❌ Politicians’ Funds Exempt

Perhaps most controversial of all, defined benefit schemes (like those for public servants and politicians) are excluded. The same rules don’t apply to everyone.

It’s a layered hit, and one that requires expert guidance to manage effectively.

What Can You Do?

1. Understand Your Balance: Know if you’re close to the $3m cap, and how future growth could push you over.
2. Review Your Strategy: Structures like SMSFs still offer strategic benefits. Now is the time to assess them with fresh eyes.
3. Plan Proactively: Work with professionals, including financial advisers, accountants, and property strategists, to get a plan that works for your unique circumstances.

The Optiwise Investor Property Approach

We don’t do cookie-cutter solutions. We bring together a team of specialists to help you navigate:

• SMSF structure and compliance
• Tax minimisation
• Property strategy tailored to your retirement goals

Investor Property and Optiwise Wealth Advisory are both part of the Optiwise Property Group family. Together, our teams collaborate across strategy, finance, and property to deliver tailored, forward-thinking outcomes for our clients, ensuring every piece of your financial future fits together seamlessly.

If the rules are going to change, and they likely will, you want to understand the game and play it well, not sit on the sidelines waiting for the next blow.

Let’s build a strategy that works for you, not against you.

Get in touch today to talk about your SMSF and property strategy. We’re here to help you make the right move, before the government makes it for you.

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