The 2025 Federal Budget has reignited discussions around Division 296, a controversial tax measure targeting high superannuation balances. According to a recent AccountantsDaily article, the government is pushing forward with this reform, which could have significant implications for business owners, high-income earners, and financial planners.
But what exactly is Division 296, and how will it impact Australian businesses? Let’s break it down.
Understanding Division 296: The 15% Tax on Large Super Balances
Division 296 introduces an additional 15% tax on earnings from superannuation balances exceeding $3 million. This means:
- Individuals with super balances above this threshold will face a total tax rate of 30% on earnings (up from the usual 15%).
- The tax applies to unrealised gains, meaning even paper profits (like increases in share or property values) could trigger a tax liability.
- The policy is designed to limit tax concessions for wealthy Australians, ensuring superannuation remains focused on retirement savings rather than wealth accumulation.
How Will This Affect Australian Businesses?
1. Business Owners with Large Super Balances
Many entrepreneurs and SME owners use superannuation as a tax-efficient wealth-building tool. With Division 296:
- Retirement planning strategies may need revising – those nearing the $3M threshold may reduce contributions or withdraw funds to avoid the extra tax.
- Asset allocation changes – Some may shift investments outside super (e.g., family trusts, direct property, or company structures) to minimise exposure.
- Impact on business succession plans – If super was part of an exit strategy, alternatives may now be needed.
2. Executive & Employee Remuneration
Businesses offering superannuation-heavy compensation packages (common for executives) may need to rethink incentives:
- Shift to non-super benefits – More companies could turn to bonuses, share schemes, or other tax-effective remuneration models.
- Greater demand for financial advice – Employers may need to guide senior staff on optimising their super under the new rules.
3. Financial & Accounting Services Demand
- Tax advisors and accountants will see increased demand for restructuring advice.
- Super funds may need to adjust reporting to help clients track unrealised gains.
4. Potential Economic Ripple Effects
- Reduced super fund inflows – If high-net-worth individuals pull back contributions, super funds may have less capital for investments.
- More investment outside super – Could drive activity in property, private equity, or other asset classes.
What Should Businesses Do Now?
- Review superannuation strategies – Assess whether current contributions or balances will be affected.
- Consult a tax specialist – Determine if restructuring is needed to minimise tax exposure.
- Explore alternative investment structures – Family trusts, companies, or direct holdings may become more attractive.
- Update employee compensation plans – If super was a key benefit, consider alternative incentives.
Final Thoughts
The reintroduction of Division 296 marks a significant shift in Australia’s superannuation tax landscape. While aimed at high-wealth individuals, its effects will ripple through businesses—particularly those with owner-operators, high-earning executives, and sophisticated financial planning needs.
Proactive planning will be key. Businesses that adapt early can minimise tax liabilities, optimise compensation structures, and ensure compliance in a changing regulatory environment.
Need help navigating these changes? Speak to your Roger Boghani or financial advisor to assess how Division 296 impacts your business.
