Monthly technical briefing - June 2025 | Macquarie

Recent developments

Welcome to the June Adviser query of the month and technical briefing, an update of technical developments for financial advisers for the period from 23 April 2025 to 23 May 2025.

In this edition, the Adviser query of the month looks at some timing considerations regarding the proposed Division 296 tax now that the Federal Election has been held. We also look at a recent case involving the Full Federal Court’s decision regarding the application of the anti-avoidance tax rules on the transfer of assets within a related group of entities.

Adviser query of the month

Division 296 tax

Question

With the Federal election now over, what might happen to the proposed Division 296 tax?

Answer

You’ve no doubt heard the term Division 296 tax, which is the name given to the proposed tax on earnings for super balances above $3 million.

Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023 (Bill) containing the proposed Division 296 tax was in the Senate and lapsed when the Federal Election was called.

Going forward, for this proposed tax to become law, a new bill must be introduced to Parliament and passed by both houses.

At time of writing, we don’t know when this might occur and whether the details of the tax will differ from those in the lapsed Bill. It is therefore a case of ‘watch this space’ to see how it progresses.

For those wanting to reduce their super balances to lessen or remove the impact of Division 296 tax, waiting to see whether a change of law occurs, and the details of the new law, is most likely advisable.

In addition, it’s also worth noting that the proposed timing of Division 296 meant that there’s not necessarily an urgency with taking action, as outlined below. Again, it’s important to emphasise that the timing aspects of Part 1 below are based on what was contained in the lapsed Bill and may not be legislated.

Timing – Part 1 – proposed

There has been some concern about needing to act before 1 July 2025 for those wanting to reduce their balances below $3 million.

In terms of timing, the proposal was that the tax would only apply to someone who’s ‘total superannuation balance’ (TSB) at the end of the financial year was more than $3 million. 30 June 2026 was to be the first date on which someone’s TSB would be tested to determine if this is new tax was to be imposed. Balances of $3million or below on this date would not be subject to this tax in the 2025/26 year.

For example, if a client had a TSB of, say, $4 million at 30 June 2025, though reduced this to $3 million at 30 June 2026, they would not be subject to Division 296 tax in 2025-26.

A common misconception is that any withdrawals would be added back for determining whether the closing TSB exceeds $3 million. This is not the case. The proposed law added back withdrawals for the purpose of determining the Division 296 tax earnings for the year, however, were not added back when determining if their closing TSB exceeded $3 million.

Therefore, if this tax is legislated as originally proposed, those wanting to reduce their balances would not need to do so until before 30 June 2026.

Timing – Part 2 – non-Division 296 tax impacts

For those wanting to reduce their balance, there may be a benefit in doing so towards the start of the financial year.

This could be the case where the following circumstances exist:

Capital gains will be realised from selling or transferring assets out of the fund
The fund has both pension and accumulation accounts and withdrawals will reduce the accumulation account values
The fund uses the proportionate method for calculating its exempt current pension income (ECPI)

To determine the fund’s ECPI, it must determine the proportion of the fund that relates to pension accounts. The formula for calculating the fund’s ECPI proportion is:

= Average value of pension liabilities/ Average value of all super liabilities

Firstly, by making withdrawals from accumulation accounts, the ‘Average value of all super liabilities’ figure will decrease, resulting in an increased ECPI proportion.

Secondly, as the calculation looks at average values over the course of the year, withdrawing earlier in the year will usually result in a lower ‘Average value of all super liabilities’ when compared to withdrawing later in the year. This will also result in a higher ECPI proportion.

If the proposed Division 296 is legislated mid-way through the year with retrospective effect (eg legislated in October 2025 though commencing 1 July 2025), consideration could be given to waiting until very early 2026-27 to realise capital gains and reduce accumulation accounts. The benefits of waiting until the new year may outweigh the costs of incurring Division 296 tax in 2025-26. As with all scenarios, a case-by-case assessment will be required.

In summary, for most people it will be prudent to hold off on taking action until/if the proposed tax becomes law. However, in some instances, taking action now may be in the client’s best interests as super may no longer be the ideal investment vehicle for the client with or without the proposed tax.

Regulator developments

ATO

ATO

ATO position on Bendel decision – Unpaid present entitlements to corporate beneficiaries

On 28 April 2025 the ATO published insights regarding the case of Commissioner of Taxation v Bendel [2025] FCAFC 15 (Bendal decision) which involved a discretionary trust distributing amounts to a corporate beneficiary for tax purposes but retaining the distribution in the trust, thus creating an unpaid present entitlement.

This update comes on the back of the ATO’s application to the High Court to appeal the decision of the Full Federal Court and its Interim Decision Impact Statement. In this publication the ATO considers how the ATO will be administering these types of arrangements in the period before the High Court’s position is known.

Further information can be found here: Deputy Commissioner Louise Clarke discusses Bendel decision

ATO and websites with fake news on super preservation age

The ATO is alerting the public about an increase in fraudulent websites spreading false information regarding changes to the superannuation preservation and withdrawal rules effective from 1 June.

The maximum preservation age is remaining at 60 for everyone born on or after 1 July 1964 and is not changing for those born before this date.

Further information can be found here: ATO warns against websites sharing fake news on superannuation preservation age

Other topics of interest

End of year strategies 2024-25

We’ve released our end of year strategies document as a quick reference guide for strategies that may need to be considered for clients. Areas covered include:

Super accumulation
Self managed superannuation funds
Benefit payments
Personal taxation
Looking ahead to 2025-26

Further information can be found here: Year end strategies: technical tips for financial services professionals

Macquarie’s product end of year cut of dates and more can be found here: The EOFY Hub

Aged care – New resources supporting the recent reforms

The Department of Health, Disability and Ageing has been releasing new information to help with the recent aged care reforms, many of which commence from 1 July 2025.

The New Aged Care Act resources for older people, their families and carers page is homepage providing links to many booklets, fact sheets and webinars.

The Aged care reform roadmap provides a useful overview of the reforms and planned time frames.

Ther resources include residential care fees and means testing webinar slides, recording and frequently asked questions.

Share transfers and the application of Part IVA – Full Federal Court decision

The Full Federal Court handed down its’ decision in Merchant v FCT [2025] FCAFC 56, which is a long running matter between the ATO and the taxpayer.

In summary, during the 2014-15 year, shares in a listed company were transferred from the family’s trust to a related SMSF, realising a large capital loss. This loss was used to offset a subsequent capital gain arising from the sale of a start-up company owned by the trust to a third party.

A number of years later, the ATO made a determination under the anti-avoidance rules in Part IVA of the Income Tax Assessment Act 1936 (Cth) to deny the trust the benefit of the capital loss. In essence, the ATO took the view that the sale was analogous to a ‘wash sale’ with the shares remaining in the family group and the predominant purpose of the transaction was to obtain a tax benefit.

In May 2024 the Federal Court found in favour of the ATO to deny the taxpayer the benefit of the capital loss.

This decision was appealed by the taxpayer to the Full Federal Court where the taxpayer submitted that the sale of the listed shares to the SMSF was not contrived as the two entities were different in character, with one being a super fund.

In April 2025 the Full Federal Court handed down its decision to deny the appeal. It was a split decision (two against, one in favour) with the majority concluding that the primary judge from the Federal Court correctly concluded that the listed share sale was entered into for the dominant purpose of obtaining a tax benefit, notwithstanding the other commercial purposes advanced by the Appellant.

They noted the related party transaction (which gave rise to the capital loss) had no practical, commercial or economic consequences though a sale to a third party would be unlikely to attract Part IVA.

The dissenting judge noting that the primary judge from the Federal Court had focused on the ‘actual purpose’ and subjective reasoning rather than the objective purpose.

The split decision highlights the complexity of the general anti-avoidance rules and sheds some light on the manner in which courts may apply these rules in the scenario of private groups undertaking restructures and preparing for the sale of assets. It also highlights the importance of documenting all reasons, and not just the tax reasons, for deciding to transfer or sell assets. Therefore, additional care should be taken when recommending an asset sale that realises a capital loss where the objective is to offset a capital gain from a separate transaction.

Notes:

This case also contained issues not usually dealt with by financial advisers, including dividend stripping when intercompany loans owed by the start-up company were forgiven prior to sale as well as taxation of financial arrangements (TOFA) issues regarding this company.
One of the directors of the SMSF’s corporate trustee was found by the ATO to have contributed to the SMSF contravening a number of superannuation laws, including the provision of financial assistance to a member or their relative and the sole purpose test. They were deemed not to be a fit and proper person and were subsequently disqualified from acting as a director. The disqualification was challenged at the Administrative Appeals Tribunal, which found in favour of the applicant and their disqualification was set aside.

AFCA report – Systemic Issues Insights Report

In its most recent report, AFCA outlines its findings and key insights from a range of systemic issues it has seen in the first two quarters of the 2024-25 financial year. The reports issues in a range of industry sectors, including:

Banking and finance
Life insurance
Investment and advice, and
Superannuation

Further information can be found here: Systemic Issues Insights Report FY24-25 – Edition 6

Monthly technical briefing - June 2025