What SMSF Members with High Balances Need to Consider in 2025

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With the Federal Government re-elected, one of the most talked-about proposals in superannuation – the Division 296 tax on super balances above $3 million – is back in the spotlight. While the legislation is not yet final, many experts believe it could take effect from 1 July 2025, possibly with retrospective application.

So, what do SMSF members with large balances need to think about?

The Key Features of Div 296

  • Who it affects: Members with more than $3 million in super.
  • How it works: An additional 15% tax applies to earnings on balances above the $3 million threshold.
  • Unrealised gains taxed: The draft law taxes increases in asset values, even if the assets are not sold. Losses can only be carried forward – they are not refunded.
  • No indexation: The $3 million threshold is not expected to increase with inflation, meaning more members will be caught over time.
  • Paying the tax: It can be paid personally or by the fund, similar to existing Division 293 rules.

The Practical Challenges

  • Valuations: Annual valuations of SMSF assets will be critical to ensure accuracy and provide evidence in case of review.
  • Market fluctuations: Members may face tax on paper gains without relief if asset values later fall.
  • Estate planning: Reducing balances could have broader consequences, including duty, tax, or succession issues.

What Should You Do Before 1 July 2025?

If you have more than $3 million in super, you may be wondering whether to withdraw or restructure before Div 296 applies. The reality is:

  • Any decision must consider your condition of release (are you eligible to withdraw?).
  • Removing funds from super may mean higher tax elsewhere – modelling the outcomes is essential.
  • Accurate asset valuations should be arranged early.
  • Specialist advice is critical – tax, legal and financial factors all play a role.

The Bottom Line

As of today, the Div 296 tax is still only a proposal. But given the Government’s stated commitment, SMSF members with large balances should prepare for its likely introduction.

Now is the time to review your strategy, weigh up the tax and estate planning impacts, and ensure your fund is ready for a changing superannuation landscape.

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