On 13 October 2025 the Federal Treasurer announced substantial changes to the proposed Division 296 measure. The Government has moved from a total superannuation balance change methodology to a fund level realised earnings approach, introduced a second (higher) threshold at $10 million, indexed both thresholds, and deferred commencement to 1 July 2026 to allow consultation and implementation work.
Government announces changes to Div 296
On 13 October 2025, the Federal Treasurer announced significant changes to the proposed Division 296 (Better Targeted Superannuation Concessions, or BTSC) measure. This measure imposes an additional 15% tax on superannuation earnings applicable to total superannuation balances in excess of $3m. The announcement revises the earlier BTSC design and makes several practical changes that materially affect SMSF trustees and their advisers. Most importantly, the Government has moved from a total superannuation balance change methodology to a fund‑level realised‑earnings approach, introduced a second (higher) threshold at $10 million, indexed both thresholds, and deferred commencement to 1 July 2026 to allow consultation and implementation work.
Under the revised design, as outlined in the Treasury Fact Sheet published the same day, the ATO will still identify in-scope members (individuals that exceed the relevant threshold) by aggregating total superannuation balances (TSB) across all interests, but the fund, including SMSFs, will be responsible for calculating the fund’s realised (taxable) earnings for the year and attributing an appropriate share of those earnings to each in‑scope member. This shifts the compliance burden: rather than the ATO reconstructing member earnings from balance movements, trustees must produce auditable working papers that show how realised earnings were calculated and how those earnings were allocated to members.
Tax outcomes are now tiered. The revised measure applies an additional 15 per cent charge on the portion of attributable earnings corresponding to the TSB between $3 million and $10 million, and a higher effective charge on the portion of TSB above $10 million so that the combined concessional tax reaches a higher top‑end rate for ultra‑high balances. The Treasury summary sets out the two proportions and the liability calculation; in formula form the approach is expressed as:
This delivers an effective 30 per cent rate on the $3m–$10m component (15% fund rate + 15% additional) and up to 40 per cent on earnings attributable to balances above $10m once the combined effects are applied. Both thresholds will be indexed to the Consumer Price index (the lower threshold in $150,000 increments and the higher in $500,000 increments).
For SMSF trustees, accountants, administrators and advisers the potential consequences may be immediate and operational. Trustees will need a documented, ‘fair and reasonable’ method for attributing realised earnings We would expect that the ATO will themselves expect reconciliations showing how the fund’s taxable/realised earnings were derived, what adjustments were applied (pension‑phase amounts, non‑assessable components, contributions), and how the member’s Div 296 attributable amount was calculated. Because the ATO aggregates TSB across all funds, advisers will need to obtain reliable information from members about any APRA fund interests to ensure accurate TSB calculation.
Treasury’s worked examples are instructive, albeit simple:
Megan – both APRA-regulated fund and SMSF interests
- Megan is 58 and she is both a member of an APRA-regulated fund and a member of an SMSF and has a total super balance of $4.5 million, of which $2.3 million is in an APRA fund and the remaining $2.2 million is in an SMSF.
- In the 2026-27 financial year, Megan had $100,000 in realised earnings from her APRA fund and $200,000 in realised earnings from her SMSF (a total of $300,000).
- The proportion of her $4.5 million balance above the $3 million threshold is 33.33%. The proportion above $10 million is nil.
- Megan’s BTSC tax liability is therefore $15,000 (0.15 x 0.3333 x $300,000).
Emma – SMSF member with over $10 million
- Emma is 55 and a member of an SMSF and has a total super balance of $12.9 million at the end of the 2026-27 income year. That year she was attributed $840,000 of the fund’s realised earnings for the purposes of this tax.
- The proportion of her balance above the $3 million threshold is 76.74% and the proportion of her balance above the $10 million threshold is 22.48%.
- Emma’s BTSC tax liability is therefore $115,581 (0.15 x 0.7674 x $840,000 + 0.10 x 0.2248 x $840,000). Note the combined BTSC tax rate on earnings over $10 million is 25%.
These examples illustrate how aggregated balances, fund‑level earnings and allocation rules combine to determine member outcomes. Whilst the examples do not address how the realised earnings of the fund have been calculated and attributed to the member; it is noted that the Treasurer’s states in his Press Release:
‘As part of these changes we will also:
- Adjust the earnings calculation so the concessional tax rates on large balances only apply to future realised earnings. Treasury will consult on implementation details including the best approach to the calculation of future realised gains and attribution to individual fund members.’
Hopefully this means that they are aware of the potential inclusion of realised gains that can be attributed to a period prior to the commencement of the Div 296 measure. For example, an SMSF acquired a property in the 2017-18 financial year for $1.5 million. At the start of the Div 296 measure, 1 July 2026, this property has a market value of $2.3 million and it is sold in the 2026-27 income year for $2.45 million.
Under the previous movement in TSB approach to calculating Div 296 superannuation earnings the amount included would be $150k. However, using the proposed realised approach, the gain is $950k and even allowing for the application of CGT discounting it’s still a much higher figure of around $633k.
That’s another question, will CGT discounting be adopted for the purpose of calculating realised gains for the revised Div 296 approach? Also, how will an SMSF’s claim for exempt current pension income (ECPI) affect the calculation? Will ECPI be effectively removed (added back)?
And one last question, at least for now, what level of detail and documentation will an SMSF trustee (and by inference their accountant or administrator) need to go to substantiate to the ATO the Div 296 earnings attributable to the member?
As the saying goes, ‘the devil is in the detail’ and that detail will be in a revised Bill. A revised Bill is not expected to be released until 2026, after Christmas and after undertaking further consultation.
These reforms to the Div 296 measure are very much welcomed, the removal of taxing unrealised gains and indexation of the threshold, albeit two of them now, are sensible and logical changes, due by no short measurement to the efforts of the SMSF Association and the wider industry. However, I take a cautious optimistic view and await the detail that a revised Bill will provide. No doubt this announcement has given way to the clearing of agendas for future webinars, articles, conferences and blogs on this topic for the next few months or more.
Keep an eye on future communications from Accurium on this topic as developments occur and the revised proposed measure progresses towards being legislation (hopefully) prior to the 1 July 2026 start date. We will be conducting webinars and providing resources on this topic to keep you informed to enable you to educate your clients on how this will affect them and what options they will have.
