AUSTRALIA Trends and Developments Contributed by: William Moore, Frank Hinoporos, Emma Woolley and Todd Bromwich, Hall & Wilcox
Superannuation Reform In 2023, the Australian government announced reforms to the taxation of high-value superannuation balances. Under the draft legislation, commonly refer - enced as Division 296 of the Income Tax Assessment Act 1997 (Cth), individuals whose total superannua - tion balance exceeds AUD3 million at the end of a financial year would be subject to an additional 15% tax on the portion of earnings attributable to the por - tion of the balance above AUD3 million. It was pro - posed that there would be no indexation to the thresh - old, the total superannuation balance would include unrealised gains, and the reform would commence from 1 July 2025. Since the original announcement, the bill has been amended in response to feedback, industry con - cerns and political negotiation. On 13 October 2025, Treasurer Jim Chalmers announced changes to the Better Targeted Superannuation Concessions policy, which revises the earlier Division 296 ITAA design and makes several practical changes that materially affect self-managed super fund trustees and their advisers. The items of most significance to clients and advisers include: • a delay to the start date of the measures, with the measures applying from 1 July 2026 based on member’s balances as of 30 June 2026; • the total concessional tax rate applied to earnings being increased from its existing level of 15% to: (a) 30% on earnings on balances between AUD3 million and AUD10 million; and (b) 40% on earnings on balances above AUD10 million; • annual indexation of both thresholds in line with the Consumer Price Index; • the removal of the taxation of unrealised capital gains; and • the implementation of measures to ensure defined benefit pensions receive similar taxation treatment to other types of superannuation pensions. From 1 July 2027, the low-income superannuation tax offset will increase from AUD500 to AUD810, and the income eligibility threshold will increase from AUD37,000 to AUD45,000.
Transitional arrangements will limit the impact on existing investments by applying the changes only to capital gains arising on or after 1 July 2027. The 50% CGT discount will continue to apply to gains arising before that date. Taxpayers may wish to obtain mar - ket valuations to assist with the assessment of capital gains attributable to the periods before and after 1 July 2027. There are limited exceptions to these reforms, includ - ing that investors in new residential properties may still choose to access the 50% CGT discount or apply cost base indexation to a property. Pre-CGT assets At present, capital gains made on pre-CGT assets (ie, assets acquired before 20 September 1985) are disre - garded for tax purposes. However, from 1 July 2027, pre-CGT assets will also become taxable. Taxpayers holding pre-CGT assets will need market valuations as of 1 July 2027 to establish a tax cost base in the asset on which future CGT liability will be based. The capital gains that will be taxable will be the capital gains generated on pre-CGT assets from 1 July 2027. Limits placed on negative gearing Losses from residential properties acquired after 7:30pm AEST on 12 May 2026 will be deductible only against rental income or capital gains derived from the sale of residential properties, and not against other income such as salary and wages. These changes do not apply to commercial properties and other asset classes such as shares, which remain subject to exist - ing taxation arrangements. The current rules, under which losses from residen - tial properties can be deducted against other income, will be “grandfathered”, meaning properties acquired before 7:30pm AEST on 12 May 2026 (including con - tracts entered into but not yet settled) will be exempt from these changes. Exemptions will also apply to eligible new builds and targeted build-to-rent devel - opments, with the intention of ensuring that nega - tive gearing benefits continue to be directed toward investment that increases housing supply. Proper - ties in widely held trusts and superannuation funds (including self-managed superannuation funds) will also be excluded from the new measure.
61 CHAMBERS.COM
Powered by FlippingBook