DIVISION 29 THE END OF SUPER AS WE KNOW IT?

With the government set to pass Division 296.high-net-worth Australians are looking to take assets out of super to avoid the tax while fresh money is looking for a home outside of the super system. Lachlan Colquhoun writes.

- Lachlan Colquhoun

T here was a time when too much superannuation was never considered enough, but if the federal government passes its proposed tax changes then a total balance of over $3 million could become too much.

There was also a time when taxation was applied differently to the accumulation and pension phases of super, but if someone has a total superannuation balance exceeding $3 million for an income year then the fund will be paying tax on the excess balance, and at a doubled 30%.

And there was also a time when tax was applied on realised gains when assets were sold, but perhaps the most controversial aspect of the changes championed by Treasurer Jing Chalmers is that those with balances of more than $3 million would have to value their unrealised gains and pay tax on them.

In 2024, the Senate passed legislation to protect the purpose of superannuation with the objective of delivering a "dignified" retirement," but the government's tax changes are sending a clear signal: $3 million is sufficient for a dignified retirement and if you have any more than that you have the option of being taxed on it, or moving it out of super and into other investments.

With the Albanese government returned in a landslide and likely to only need the support of Greens Senators to get the legislation through the upper house, the controversial changes known as Division 296 could become law this year.

The industry is lobbying hard agains Division 296, but Chalmers has been resolute, sticking to his line that only 80,000 high-networth Australians will be impacted and that they can afford to pay more.

With the budget bottom line under pressure and deficits forecast for the next five years the Treasurer is looking for additional revenue and has baked $40 billion revenue from the new tax into budget forecasts over the next 10 years.

"This is a modest change which impacts a tiny sliver of the population," Chalmers has said.