What Are the Changes?
The Australian Government’s Better Targeted Superannuation Concessions (BTSC) is set to start from 1 July 2025. Individuals whose total superannuation balance (TSB) exceeds AU$3 million at the end of each financial year will have earnings above that threshold taxed at 30% overall. This tax consists of a **15% concessional rate by the fund, plus an additional 15% known as Division 296 tax charged to the individual. (ato.gov.au)
Who’s Affected?
- Less than 0.5% of super account holders, namely those with balances over AU$3 million. (ato.gov.au)
- Applies across all fund types, including APRA-regulated funds, SMSFs, and defined benefit interests in accumulation phase. Individuals with funds in accumulation phase receive a Notice of Assessment from the ATO. (ato.gov.au)
Important Dates
| Item | Date / Period |
|---|---|
| Measure effective | 1 July 2025 |
| First income year of tax application | 2025-26 financial year |
| Balance measurement for any excess | TSB as at 30 June 2025 for threshold comparison |
How Does Division 296 Work?
- Earnings over threshold: Only portion of earnings (interest, dividends, capital gains) related to balance exceeding AU$3 million is impacted.
- Separate tax liability: The Division 296 tax is payable by the individual 84 days after their Notice of Assessment. Funds may release money via a release authority if you don’t pay. (ato.gov.au)
- Special treatment for defined benefit interests: If earnings relate to defined benefit interest, the tax may be deferred until after the first benefit payment, depending on event. (ato.gov.au)
Real-World Example
Suppose Jane has a super fund with AU$3.5 million at 30 June 2025. During the 2025-26 year, her fund earns 8% overall, but only the earnings attributable to the excess AU$500,000 (i.e. approximately AU$40,000) will face the added tax. She’ll receive an ATO Notice of Assessment, and must pay the Division 296 portion unless she elects to use her fund’s release authority.
Actionable Insights: What to Do Now
- Check your super balance before 30 June 2025. If near AU$3 million, consider strategies to manage earnings or distributions.
- Engage your fund or financial advisor to ensure your fund can deliver accurate data for TSB, including for defined benefit schemes.
- Prepare for payment of the tax: understand whether you'll pay directly or via release authority. Know the deadlines (84 days).
- Explore relief options: If you have negative earnings or underperforming years, these may offset earnings for future years.
Bottom Line
While BTSC will only impact a small portion of Australians, for those with high balances it's a material change. Start early, verify balances and earnings, and ensure your super fund's reporting systems are ready. With correct planning, compliance won’t be painful — but waiting till the last minute could cost you.