The Australian Government’s proposed Division 296 tax is set to reshape how high superannuation balances are taxed—and it’s particularly relevant for mining and resources professionals who have diligently built substantial retirement savings.
While the legislation has not yet passed, it is expected to apply from 1 July 2025, meaning now is the time to assess your exposure and plan accordingly.
What is Division 296?
In short, Division 296 is a new 15% tax on “super earnings” that relate to the portion of your Total Super Balance (TSB) above $3 million.
Importantly, this 15% is in addition to the standard 15% tax already levied within super funds. The result? A 30% effective tax rate on earnings that relate to the proportion of superannuation savings above the $3 million threshold.
Even more controversially:
- The tax applies to unrealised gains—meaning you could be taxed on the notional increase in your super fund’s value, even if the underlying assets haven’t been sold.
- The $3m threshold is not expected to be subject indexation – meaning that even if you are not currently subject to these provisions, they may affect you in future if your superannuation savings exceed the $3m threshold in a later year.
Who Could Be Impacted?
You don’t need to be well above the $3 million threshold to be affected. If your TSB hits $3.1 million, the tax still applies—but only to earnings proportionate to the amount above the cap. That said, those with significantly higher balances or fast-growing assets are most exposed.
You are particularly at risk if:
- You hold direct property in your SMSF (common in the resources sector), especially if it is illiquid or generates low levels of income
- You have legacy pensions calculated using actuarial assumptions (which may artificially inflate your TSB)
- You expect your balance to exceed $3 million in the next few years through growth or contributions
- You are under age 60 and can’t yet withdraw funds, limiting your ability to restructure
What Actions Should You Consider?
1. Understand Your Exposure
Review your 30 June 2025 super balance carefully. Remember, the threshold applies per individual, not per fund or couple. Further, the threshold applies to the total of all of your superannuation accounts, so if you have accounts with multiple superannuation providers, you will need to consider your exposure on a cumulative basis.
Also account for any death benefit pensions, insurance payouts, or reserve allocations, which could unexpectedly push you over the limit.
2. Revisit Legacy Pensions
If you have a legacy pension (e.g. a lifetime or market linked pension), your TSB may be calculated using actuarial assumptions which may result in higher than expected effective account balances. One planning opportunity may be to consider your ability to commute that pension into accumulation before 30 June 2025 to avoid triggering unnecessary Division 296 liabilities.
There are also opportunities to potentially convert your legacy pensions into more modern account based pensions. This process is complex and as such we recommend speaking to your superannuation advisor if this issue affects you.
This issue is most relevant for long-standing participants in the resources industry who commenced their superannuation savings many years ago under different rules.
3. Model the Tax Impact
Work with your adviser to project what your tax liability might be with and without Division 296. In some cases, the impact may be small. In others, it may prompt serious planning, particularly if you hold growth or illiquid assets likely to generate unrealised gains without necessarily having the ability to access necessary cash funds to meet the Division 296 tax cost.
4. Consider Strategic Withdrawals
If you have met a condition of release (e.g. reaching preservation age or permanently retiring), you may wish to consider the effectiveness of partially withdrawing funds or reallocating assets into alternative vehicles such as family trusts or investment companies. These moves could help you avoid being assessed on unrealised gains, although they come with their own trade-offs (such as bringing forward capital gains or removing assets from the superannuation environment).
⚠️ Keep in mind: The loss of super’s concessional tax environment may outweigh the Division 296 tax. Any decision must weigh your long-term goals, tax profile, and estate planning needs.
5. Don’t Rush—But Don’t Ignore It
Legislation is not yet final. It may change, and there may be transitional rules or exemptions. That said, doing nothing could leave you with a large tax bill and few options once your 30 June 2025 balance is locked in.
Why This Matters for Resources Professionals
Those working in mining, energy and resources often reach high super balances earlier than the general population due to higher incomes, performance bonuses, FIFO allowances, and employer contributions. They are also more likely to hold property or lumpy, illiquid assets within SMSFs—making tax planning and liquidity management even more critical.
This tax is also an opportunity to revisit broader planning questions:
- Should I consider holding a larger proportion of investments outside super?
- Could this be the right time to support adult children (e.g. with a pre-death inheritance strategy)?
- How does this align with my estate planning goals?
Final Thoughts: Tailored Advice is Crucial
The Division 296 tax is one of the most controversial changes to superannuation in recent years and it won’t impact everyone equally. Two members with similar balances may face vastly different tax outcomes depending on how their funds are structured and what strategies they adopt before 30 June 2025.
Ready to Take the Next Step?
Navigating the proposed Division 296 tax is about more than just minimising a future liability, it is about ensuring your superannuation strategy still aligns with your long-term goals, protects your wealth, and works within the evolving tax landscape.
For personalised advice on how Division 296 may impact you and the options available, contact Craig Barry at +61 (0) 7 3007 2000 or email contact@resourcesunearthed.com.au.
Let us help you stay ahead of legislative change—and turn complexity into confidence.
