Question 1

What is Division 296 and who pays it?

Accepted Answer

Division 296 is a proposed additional 15% tax on the portion of a member's superannuation earnings attributable to a Total Super Balance (TSB) above $3 million.

It is assessed personally on the member — not on the fund — and the member can elect to pay it from outside super or release the money from their fund. Only individuals with a 30 June TSB above $3 million are affected.

Question 2

Does Division 296 tax unrealised capital gains?

Accepted Answer

Yes. The earnings formula uses the year-on-year movement in your TSB, which includes unrealised market value increases on assets you still hold. This is the main reason illiquid asset holders — direct property, unlisted investments — are most concerned.

Question 3

What is the concessional contribution cap for 2024–25?

Accepted Answer

$30,000 per person, indexed annually in line with Average Weekly Ordinary Time Earnings (AWOTE).

The cap was $27,500 from 2021–22 to 2023–24 before increasing to $30,000 from 1 July 2024.

Question 4

What is the non-concessional contribution cap?

Accepted Answer

$120,000 per year for 2024–25. Eligible members under 75 can also use the bring-forward rule to contribute up to $360,000 over 3 years in one transaction.

Access to the cap is restricted if your Total Super Balance at 30 June of the prior year was $1.9 million or more.

Question 5

How does the carry-forward concessional contribution rule work?

Accepted Answer

If your TSB at the previous 30 June was under $500,000, you can use any unused concessional cap from the previous 5 financial years (starting from 2018–19).

This is useful for one-off high-income years — capital gains, contracting bonuses, or business sales — where you want a larger personal deductible super contribution.

Question 6

What is the $1.9 million Transfer Balance Cap (TBC)?

Accepted Answer

The TBC is the lifetime limit on how much of your super can be moved into a tax-free retirement-phase pension. For 2024–25 it is $1.9 million per person.

Amounts above the TBC can stay in accumulation phase (taxed at 15%) but cannot fund a tax-free pension.

Question 7

What is NALI and why do SMSF trustees worry about it?

Accepted Answer

Non-Arm's Length Income (NALI) is income an SMSF receives on terms more favourable than would apply between unrelated parties — for example, an under-market related-party loan or services provided to the fund for free by a trustee in their professional capacity.

NALI is taxed at the top marginal rate (currently 45%) inside the fund instead of 15%, so even small breaches can produce expensive assessments.

Question 8

What is the downsizer contribution and who can use it?

Accepted Answer

Australians aged 55 or over can contribute up to $300,000 each ($600,000 per couple) into super from the sale proceeds of a qualifying main residence they have owned for 10+ years.

Downsizer contributions sit outside the normal concessional and non-concessional caps and are not blocked by the $1.9m TSB limit — but they count towards your TBC once moved into pension phase.

Question 9

What is the minimum pension drawdown each year?

Accepted Answer

Account-based pensions in retirement phase must pay a minimum percentage of the 1 July balance each year, based on the member's age — 4% under 65, scaling up to 14% at 95+.

Failing to pay the minimum causes the pension to revert to accumulation for the year, which means the earnings on supporting assets become taxable at 15% instead of 0%.

Question 10

When does my SMSF have to pay tax?

Accepted Answer

An SMSF pays tax once a year via the SMSF Annual Return. Concessionally-taxed income (contributions, investment earnings on accumulation assets) is taxed at 15%; capital gains on assets held more than 12 months get a one-third discount, taking the effective rate to 10%.

Pension-phase assets earn income tax-free, subject to the Transfer Balance Cap.

SMSF tax & contribution rules