DIV296 Tax and what it means
So, the Treasury Laws Amendment (Better Targeted Superannuation Concessions) Bill 2023 (Draft Bill) debuted for public feedback on October 3, 2023.
This bill aims to introduce some fresh tax rules in the world of superannuation.
Here’s the deal: The Draft Bill suggests adding a new section called Division 296 in the Income Tax Assessment Act 1997 (Cth) (ITAA 1997), which outlines the core functions of the new bill.
Another document, the Superannuation (Better Targeted Superannuation Concessions) Imposition Bill 2023 (Imposition Bill), dives deeper into the nitty-gritty details of how the tax will work.
Starting from July 1, 2025, this new DIV296 tax will kick in if someone’s total superannuation balance (TSB) exceeds AUD $3 million and goes up during the year compared to before the year started. We call this increase in TSB “superannuation earnings.” The part of these earnings that’s over $3 million gets taxed at a rate of 15%.
“Fringe Benefits Tax is levied on the employer — covering the value of non-cash benefits such as company cars, gym memberships or entertainment.”
There are a few concerns
There are a few concerns about these new rules.
Many experts agree that there should be limits on tax breaks for retirement savings, but they have worries about some parts of the new rules:
Taxing gains that have yet to be realised might be unfair.
This could affect people who own property and have limited cash reserves to pay the tax.
One way to solve this is by having self-managed super funds report income for each member separately.
If your retirement savings lose money, you can’t get that money back as a refund. But if gains are taxed, it seems fair to allow refunds for losses.
The $3 million limit doesn’t change with inflation. Even though it might only affect 80,000 people initially, more people might be affected over time because their retirement savings grow.
Once your retirement savings hit $3 million and you can’t take the money out yet, you’ll have to pay tax on any more growth. This could be a significant change for people who can access their retirement savings later but have more than $3 million. They’ll have no choice but to pay the tax.
Talks are happening to address these concerns, and the team at North Advisory Wealth is keeping a keen eye on the developments.
How this tax works
It’s all about percentages and calculations.
For example, if your super balance is $6 million, half of which is over the $3 million mark, you’ll pay the extra tax on half of your earnings. Simple, right? Well, sort of.
These new rules also have some changes compared to what was discussed before.
For example, the way they figure out your super balance is getting a makeover, and there are some exceptional cases where you won’t have to pay this DIV296 tax. We will discuss these cases in a later article when there is proper clarity.
While the tax office will handle the math and send out the bills, financial advisors must get the lowdown on these rules to guide their clients through the financial maze. There might be some bumps along the way, and there needs to be more room for discussion on the significant change in how we handle retirement savings.
North Advisory is active in this new space, and we will keep a close eye on proceedings and ensure timely information to our affected clients.
“Lavish perks may feel like a bonus, but without careful FBT planning, what begins as a benefit can quickly become a hidden expense.”
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About the author
Marius Fourie - Director & Business Advisor
As Director and Business Advisor, Marius uses his accounting expertise and empathetic skills to work directly with business owners and help them feel at ease with their finances.
Marius saw a common need in clients that just wasn’t being met by accounting providers.
That need was for clear, open communication and streamlined accounting services that didn’t come padded out with any unnecessary features.
Business owners just don’t have time to compare different accounting firms to see which one has the best packages with the best inclusions (many of which they would pay for but never use).
Key Takeaways
FBT Applies More Often Than You Think
Everyday benefits like car use, meals, entertainment and reimbursed expenses can trigger FBT if not structured correctly.
The FBT Year Catches Businesses Out
Because the FBT year ends on 31 March, proactive planning is essential to avoid last-minute issues and unexpected tax bills.
Record-Keeping Is Essential
Logbooks, employee declarations and receipts are critical for correctly calculating FBT and supporting your position if reviewed by the ATO.
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Frequently Asked Questions
What is Fringe Benefits Tax (FBT)?
FBT is a tax paid by employers on certain non-cash benefits provided to employees or their associates. This can include vehicles, entertainment, expense payments and private use of business assets.
Who is responsible for paying FBT?
The employer is responsible for calculating, reporting and paying FBT — not the employee. It’s a separate obligation to income tax and GST.
What is the FBT year in Australia?
The FBT year runs from 1 April to 31 March, not the standard financial year. This different reporting period often leads to missed obligations if businesses aren’t prepared.
Are all employee benefits subject to FBT?
No. Some benefits are exempt or concessionally taxed, such as certain work-related items, minor benefits under $300, and specific vehicle or remote area concessions (where eligibility criteria are met).
What are the risks of getting FBT wrong?
Errors can result in ATO penalties, interest charges and audits. Many businesses either overpay FBT unnecessarily or underpay due to poor record-keeping or misunderstanding the rules.
What is Div 296 tax and who will it affect?
Division 296 (Div 296) is a proposed additional tax on superannuation earnings for individuals with total super balances above $3 million. North Advisory explains it’s aimed at reducing tax concessions for high-balance super holders, and the government estimates less than 0.5% of Australians will be impacted when it begins (from 2026–27).
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