The federal government is charging ahead with a controversial new superannuation tax. But what does it actually mean for you? Financial expert Jason Featherby from Leeuwin Wealth joined Doug to offer practical advice for anyone wondering how to respond.

What Is Division 296?

The proposed tax, officially named Division 296, adds a 15% tax on superannuation earnings above $3 million.

Jason explained, “It’s an extra 15% tax on the earnings of super balances above $3 million per person.” Combined with the existing 15% tax, this could mean a 30% tax rate on that portion.

Taxing Unrealised Gains: Why It’s Controversial

Unlike traditional capital gains tax, Division 296 would apply to unrealised gains. That means paying tax on assets you haven’t sold yet, like property or shares that have increased in value.

Jason described the issue this way: “You may end up paying tax on assets you haven’t even sold.”

This creates a serious problem for people with illiquid assets, such as farms or commercial buildings in their super funds.

No Indexation Means More People Will Be Caught

One of the biggest concerns? The $3 million cap won’t increase over time.

“The cap is not indexed,” Jason warned. “In ten years, $3 million will be worth about $1.5 million in today’s dollars.”

So while only 80,000 people are affected now, that number could balloon. “Eventually it will sweep in a lot more people,” he said, estimating around 500,000 future workers could be impacted.

Double Tax Trouble?

Another red flag is the possibility of being taxed twice.

Jason explained, “You pay the additional 15% tax on unrealised gains. But when you sell, you may also pay the capital gains tax. There’s no credit provided.”

This means some Australians could face double, or even triple, taxation on the same earnings.

Will Politicians Be Exempt?

Many Australians are asking: will this apply to politicians too?

Jason hinted at a likely loophole. “There is a fairly strong whisper that politicians’ defined benefit schemes will be exempted or grandfathered.”

These schemes calculate retirement income using a formula rather than asset value, potentially excluding them from the new rules.

Could It Expand Beyond Super?

The concern doesn’t stop at super funds.

“There is a danger that the government rolls this out to family trusts. Even ultimately the family home,” Jason warned. “This is an easy pool of money to get your hands on.”

So What Should You Do?

First and foremost, don’t panic.

“If you’ve got over $3 million in your fund, well done,” Jason joked. “But I don’t think you need to panic yet.”

He advised against rushing to pull money out of super. “It’s not in yet, and we don’t have all the details. Wait and plan over the course of the next year.”

For retirees, there are alternatives. “You can pull your money out and invest it through a trust or company. But get advice, there are pros and cons.”

You can also split super contributions with a spouse to even out balances and stay under the cap.

And if you’ve built up a large balance? “Why not give the kids a bit of their inheritance early? See them enjoy it while you’re still around.”

Final Thoughts: Stay Calm, Get Advice

Jason reminded listeners that uncertainty is nothing new in superannuation.

“Most people embrace super, but those who don’t often say, ‘The government keeps changing the rules.’ And this doesn’t help.”

Despite the proposed changes, Jason still believes in the system. “Super is still very tax-efficient. Keep saving. Keep getting advice.”

His final tip? “Reacting too soon can cost you. Get some good advice and don’t panic.”

Listen to the full conversation below.