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University of Adelaide Report highlights numerous concerns with taxing $3M+ member super balances

A recent report by University of Adelaide’s International Centre for Financial Services (Report), issued in October 2023, has raised numerous concerns on the proposed new Division 296 tax. The proposed 15% tax on taxable superannuation earnings on superannuation fund member’s with more than $3 million in total superannuation balance (TSB) is set to commence from 1 July 2025.  In this article we have extracted some of the key findings of the Report.

Further background information is available in the articles below.

Affected SMSF members

The Report was based on data on more than 720,000 SMSF members over the period FY2021-FY2022 confirming that an estimated 50,000 SMSF members will be affected by the new tax. Treasury estimated that around 80,000 people including those in both SMSFs and APRA funds would be affected. This suggests that the majority impacted by Div 296 will be SMSF members (over 60%).

Tax on unrealised gains

The Report notes that the taxation of unrealised gains is rare in OECD countries and even rarer in OECD pension/superannuation systems. Importantly, the Report states that deferring the taxation of unrealised gains until they are realised is very likely to “grow the pie” for both superannuants, and those taxing superannuants in the longer term.

The Report further notes that Australia’s tax system clearly delineates between income and capital gains tax (CGT), and the CGT regime, which has been in place now for almost 40 years, is based primarily on realised gains evidenced by completed transactions. Given both the benchmarking to other OECD nations and Australia’s own economic history, the authors of the Report interpret the structure of the current proposal – to reduce superannuation tax concessions for individuals with TSBs in excess of $3 million – as a somewhat radical departure from existing taxation policy, with potentially far broader consequences than just those outlined by Treasury in their consultation paper.

Lack of liquidity

The Report also highlights the issue of SMSF member liquidity to meet the new tax burden. Some notable findings include:

  • The mean liability of the tax per member would have been $89,000 based on FY2021 data and $83,000 on FY2022 data.
  • Selling illiquid assets is typically associated with substantial transaction costs, and the Government’s proposal to cover the new liability with funding external to superannuation is unlikely to be possible for all affected members.
  • Somewhere between 3% and 11% of affected SMSF members will find it difficult to cover the new tax expense from liquid assets within their superannuation fund. This proportion is higher during periods of capital market growth (ie, 2021) and lower during periods with bearish capital markets (ie, 2022).
  • There is an estimated four-fold increase in the rate of liquidity problems, from 3.1% to 13.5%, once members meeting the added tax expense in a prior period is accounted for. This implies an additional cumulative liquidity risk factor for affected members.

Broadly, the Report confirms that there will be a cohort of affected members suffering liquidity issues to pay the new tax. Despite submissions requesting a deferment of the tax until illiquid assets are realised, there has been no recognition for a deferral mechanism apart for defined benefit funds.


The Report recommended careful reconsideration by the legislators, specifically regarding the tax treatment of unrealised capital gains based on adjusted annual changes in TSBs. The University of Adelaide joins a growing number of industry associations calling for a change to the new tax including the SMSF Association, Tax Institute, the major accounting bodies and the Institute of Financial Professionals Australia.

The full University of Adelaide Report can be found here.

Naturally, DBA Lawyers would be pleased to provide advice and assistance on the new Div 296 tax if requested.

Training on Div 296

We also provide staff training via Zoom (Australia wide) or in-house (Victoria) to your team/group and respond to your specific training needs and real client practical examples. This training can assist with the development of your in-house expertise within your firm to assist clients. For more information regarding in-house training please contact us.

For our recent SMSF Online Update session on Div 296 on 6 October 2023, click here.

Related Articles:

Other related articles can be accessed here:

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This article is for general information only and should not be relied upon without first seeking advice from an appropriately qualified professional. The above does not constitute financial product advice. Financial product advice can only be obtained from a licenced financial adviser under the Corporations Act 2001 (Cth).

Note: DBA Lawyers presents monthly online SMSF training. For more details or to register, visit or call 03 9092 9400.

For more information regarding how DBA Lawyers can assist in your SMSF practice, visit

By Daniel Butler ([email protected]) Director and Fraser Stead ([email protected]) Lawyer, DBA Lawyers.


9 November 2023

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