BILLS DIGEST No. 49, 2023–24
15 February 2024

Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023 [and] Superannuation (Better Targeted Superannuation Concessions) Imposition Bill 2023


The Authors

Julie Sienkowski, Matthew Collett and Paula Pyburne

Key points

Date introduced: 30 November 2023

House: House of Representatives

Portfolio: Treasury

Commencement: Various dates as set out in the body of this Bills Digest



Abbreviation Definition
ACNC   Australian Charities and Not-for-profits Commission
ACNC Act Australian Charities and Not-for-profits Commission Act 2012
APRA Australian Prudential Regulation Authority
ASFA Association of Superannuation Funds of Australia
ASIC Australian Securities and Investments Commission
ASIC Act Australian Securities and Investments Commission Act 2001
ATO Australian Taxation Office
Bill Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures Bill 2023
BCA Business Council of Australia
CA ANZ Chartered Accountants Australia & New Zealand
CCA Competition and Consumer Act 2010
EY Ernst & Young
FRAA Financial Regulator Assessment Authority
FRAA Act Financial Regulator Assessment Authority Act 2021
FSC Financial Services Council
FT Act Fuel Tax Act 2006
GST Goods and services tax
GST Act A New Tax System (Goods and Services Tax Act) 1999
Imposition Bill Superannuation (Better Targeted Superannuation Concessions) Imposition Bill 2023
ITAA 1997 Income Tax Assessment Act 1997
LSBT Large superannuation balance threshold
NFF National Farmers Federation
PSRA Payment Systems (Regulation) Act 1988
RBA Reserve Bank of Australia
SMSF Self-managed superannuation fund
TA Act Taxation Administration Act 1953
TBC Transfer Balance Cap
TIA Tax Institute of Australia
TSB Total Superannuation Balance



Purpose of the Bill

The Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures Bill 2023 (the Bill) is an omnibus Bill which contains a range of measures relevant to the Treasury portfolio.

The primary purpose of the Bill is to reduce the tax concessions available to individuals with total superannuation balances (TSBs) exceeding $3 million. The purpose of the Superannuation (Better Targeted Superannuation Concessions) Imposition Bill 2023 (the Imposition Bill) is to implement that measure.


Structure of the Bill and commencement

The Bill has 8 Schedules which amend existing Commonwealth statutes and are scheduled to commence as set out in Table 1 below.

Table 1: Schedules and commencement dates

Schedule Commencement
Schedule 1 inserts new Division 296 into the Income Tax Assessment Act 1997 (ITAA 97) and amends the Defence Force Retirement and Death Benefits Act 1973 (DFRDB Act), the Governor-General Act 1974, the Income Tax (Transitional Provisions) Act 1997, Judges’ Pensions Act 1968, Parliamentary Contributory Superannuation Act 1948, Superannuation Act 1976, Superannuation Act 1990 and the Taxation Administration Act 1953 (TA Act) to insert references to new Division 296 of the ITAA 97. At the same time as the Superannuation (Better Targeted Superannuation Concessions) Imposition Act 2023—but only if that Act commences.
Schedule 2 amends the definition of Total Superannuation Balance (TSB) in the ITAA 97 and inserts a reference to the TSB value into the TA Act. The first 1 January, 1 April, 1 July or 1 October after Royal Assent.
Schedule 3 amends the ITAA 97 to clarify that Subdivision 293H of that Act overrides subsection 73(3A) of the Australian Capital Territory (Self-Government) Act 1988. The first 1 January, 1 April, 1 July or 1 October after Royal Assent.
Schedule 4 amends the Australian Charities and Not-for-profits Commission Act 2012 (ACNC Act) to provide two new exceptions for the public disclosure of protected Australian Charities and Not-for-profits Commission (ACNC) information about new and ongoing investigations. The day after Royal Assent.
Schedule 5 amends Financial Regulator Assessment Authority Act 2021 (FRAA Act) to reduce the frequency of the Financial Regulator Assessment Authority’s (FRAA) reviews of the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) from two yearly to five yearly. The day after Royal Assent.
Schedule 6 makes minor and technical amendments to a number of Acts, including the A New Tax System (Goods and Services Tax Act) 1999 (GST Act), the Fuel Tax Act 2006 and the ITAA 97 to simplify provisions, clarify intended outcomes and reduce red tape.[1] Part 1 on the day after Royal Assent. Part 2 on the first 1 January, 1 April, 1 July or 1 October after Royal Assent.
Schedule 7 amends the Corporations Act 2001 to establish three exemptions from the requirement to hold an Australian Financial Services licence for foreign financial services providers. 1 April 2025
Schedule 8 amends the Payment Systems (Regulation) Act 1988 (PSR Act), the Australian Securities and Investments Commission Act 2001 (ASIC Act), the Competition and Consumer Act 2010 (CCA), the Corporations Act and the ITAA 97 to modernise the payments regulatory framework.[2] 6 months after Royal Assent

Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023, section 2.

The Imposition Bill imposes Division 296 tax on individuals with ‘taxable superannuation earnings’ in an income year and sets the amount of the tax at 15 per cent. The date of commencement for the Imposition Bill is the first 1 January, 1 April, 1 July or 1 October after Royal Assent.

The measures are presented in two Bills – an assessment Bill and an imposition Bill. This is because the Constitution requires that laws imposing taxation deal only with the imposition of taxation (section 55).

Structure of the Bills Digest

This Bills Digest deals only with the terms of Schedules 1–3, Part 2 of Schedule 6 and Schedule 8 to the Bill.

Matters not discussed in this Bills Digest are set out in the Explanatory Memorandum to the Bills.

As the matters covered by Schedules 1–3, Schedule 6 and Schedule 8 are independent of each other, the relevant background, stakeholder comments (where available) and analysis of the provisions are set out under each Schedule number.


Committee consideration

Senate Economics Legislation Committee

The Bill and the Imposition Bill have been referred to the Senate Economics Legislation Committee for inquiry and report by 19 April 2024.[3] At the time of writing this Bills Digest no submissions to the Committee have been published.

Senate Standing Committee for the Scrutiny of Bills

The Senate Standing Committee for the Scrutiny of Bills (Scrutiny of Bills Committee) commented about the Bills in Scrutiny Digest 1 of 2024 (pp. 24–28). The comments are canvassed under the relevant Schedule heading below.


Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bills’ compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bills are compatible.[4]

Parliamentary Joint Committee on Human Rights

The Parliamentary Joint Committee on Human Rights had no comment on the Bills.[5]


Schedules 1–3: reducing tax concessions

Quick guide to Schedules 1-3

The amendments in Schedules 1-3 reduce the tax concessions available to members of superannuation funds by imposing a tax of 15 per cent on certain earnings based on the percentage of the total superannuation balance exceeding the $3 million threshold. The tax is imposed directly on the individual.


The modern Australian retirement income system comprises three elements, which have become known as the three pillars:

  • a publicly provided means tested age pension
  • mandatory private superannuation saving and
  • voluntary saving (including voluntary superannuation saving).

Compulsory superannuation was introduced in Australia in 1992.[6] When it was first introduced, the Superannuation Guarantee was 3% of wages.[7] While this was a big change, in November 1991, 71% of employed persons were covered by superannuation. Over time superannuation was subject to various tax concessions.[8] Until 2007 there were no limits on non-concessional (after tax) contributions to superannuation and so some people accumulated very large balances.[9] In 2007 a limit of $50,000 on concessional contributions was also introduced.[10] Changes have been made to both the concessional and non-concessional caps since 2007, but both are indexed.

There have been equity concerns about disparities in superannuation savings and earnings for some time. In 2013, the Labor Government proposed a 15% tax on superannuation income streams above $100,000.[11]

The Government’s policy intent in relation to superannuation is that it is designed to provide for a person’s retirement rather than acting as a wealth creation vehicle. Consistently with this, the Government is currently seeking to implement an objective for superannuation in its Superannuation (Objective) Bill 2023, as follows: ‘The objective of superannuation is to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way.’[12]

On 28 February 2023, the Treasurer, Dr Jim Chalmers MP, issued a media release which stated:

The Albanese Government is making Australia’s world‑class superannuation system more sustainable and fairer with one modest change that affects less than 0.5 per cent of all Australians. …

Currently, earnings from superannuation in the accumulation phase are taxed at a concessional rate of up to 15 per cent. This will continue for all superannuation accounts with balances below $3 million.

From 2025‑26, the concessional tax rate applied to future earnings for balances above $3 million will be 30 per cent.

This is expected to apply to around 80,000 people, and they will continue to benefit from more generous tax breaks on earnings from the $3 million below the threshold.

This adjustment does not impose a limit on the size of superannuation account balances in the accumulation phase. And it applies to future earnings – it is not retrospective.

The $3 million cap was included in the 2023–24 Budget (Budget Paper No. 2, p. 15). The Budget Paper stated the rationale for the measure as follows: ‘This reform is intended to ensure generous superannuation concessions are better targeted and sustainable.’

According to the Government the change is expected to apply to around 80,000 people, which is less than 0.5% of Australians with a superannuation account in the 2025–26 income year.

The tax will only apply to the proportion of earnings corresponding to balances above $3 million, and earnings corresponding to funds below $3 million will continue to be taxed at 15 per cent or less.

The tax is imposed directly on the individual and is separate from the tax arrangements of the superannuation fund or scheme.

The Government is not planning to index the $3 million cap, to limit the amount that can be accumulated in superannuation or to require members to withdraw amounts in excess of $3 million.[13]

Policy considerations

The measure appears to be aimed at achieving policy consistency, which is an objective of a good tax system.[14] The superannuation system was intended to provide for people in retirement, rather than enabling some taxpayers to avoid tax and build their wealth to pass on to the next generation.[15]

When assessed against the principles of a good tax system, the $3 million cap should also improve vertical and horizontal equity. In the tax system, horizontal equity is the principle that taxpayers with equal income should pay equal tax. Vertical equity requires that tax obligations vary in proportion to income such that if A has a greater income than B, A will owe more income tax than B.

The measures in Schedules 1–3 of the Bill are likely to promote vertical equity because most superannuation tax concessions go to high income earners who are most likely to have a superannuation balance of more than $3 million. Under the present system, older taxpayers pay less tax than younger taxpayers, and better-off taxpayers pay less tax than less well-off taxpayers.

Many different stakeholder groups observed that making changes to superannuation undermines confidence in superannuation, which is a long-term investment vehicle.[16] The proposal could also be seen as lacking in fairness to those taxpayers who have contributed to superannuation in accordance with the pre-existing rules and are now being required to pay the tax.

Additionally, the proposed new tax affects individuals differently, depending on their ability to change their financial arrangements. Several factors influence this, including whether an individual is in the retirement or accumulation phase, the liquidity of assets held in superannuation, and whether an individual is in a defined benefit scheme.

There are two particularly contentious aspects of the proposal. The first is that the $3 million cap is not indexed, which means that owing to inflation increasing numbers of taxpayers will become liable, and the second is that it will tax unrealised gains.


Submissions to the Treasury consultation on the draft Bill were almost universally critical of the lack of indexing. From Australian Super:

Indexation of the threshold at which the measure applies would lead to greater certainty and promote stability and confidence in the system. This is important given the long-term horizon of superannuation savings. This is important as members who are complying with the purpose of superannuation have a right to know how the earnings on their superannuation will be treated for tax purposes while it is compulsorily preserved…

Thresholds in the superannuation system that related to an individual’s balance or their contributions are indexed. This includes the transfer balance cap, the concessional contributions cap and the non-concessional contributions cap.[17]

Acknowledging that the Transfer Balance Cap (TBC)[18] was indexed, Mercer stated:

It is therefore recommended that the definition of a large superannuation balance threshold be amended so that the threshold is the greater of:

  • $3 million; and
  • 1.5 times the Transfer Balance Cap.[19]

Robert Carling calculated that the Transfer Balance Cap could reach $3 million ‘in 16 years – if not sooner’.[20]

Taxation of unrealised capital gains

The second contentious issue is that the proposal amounts to a tax on unrealised capital gains, that is, it violates the principle of the Australian tax system that capital gains are normally taxed on realisation not accrual. Accrual taxation of gains creates valuation and liquidity problems. According to the Australia Institute:

Problems with accrual taxation include the fact that taxpayers with gains may not have liquid resources to pay tax. Obviously, this is less of an issue where shares, bonds and managed investments are concerned because these are highly liquid, although people might resent being forced to sell. One option for dealing with the liquidity issue allows asset holders to carry over their tax owing, with interest, until the asset is sold ... This is not concessional if the interest applied is at least equal to the long-term bond rate. (p. 13)

In this respect, the taxation of unrealised gains could be seen as particularly unfair to taxpayers who have placed large illiquid assets (such as a farm or business premises) into their superannuation fund under existing laws and now may lack sufficient funds to pay the tax. In its submission, the Law Council of Australia observed that:

… personal long-term choices have been made between superannuation and other options, those monies that have been directed into superannuation savings have been subject to preservation and other superannuation regulatory restrictions over the longer term on the reasonable expectation of the investor that those restrictions represented the cost or trade-off for long term tax concessions. Now, a change to the taxation rules would retrospectively affect that “trade-off” because the tax concessions upon which the decision was based are to be impacted.[21]

This seems to apply particularly to farms. In its submission to the Treasury consultation on the Exposure Draft of the Bill the National Farmers’ Federation (NFF) gave examples of how the proposed new tax would affect members who had placed family farms into a self-managed superannuation fund (SMSF) and who used lease payments from the next generation as their retirement income. The value of agricultural land can fluctuate wildly, sometimes as much as 20 – 30% in one year, but lease value does not change at the same rate.[22]

The NFF strongly recommended excluding agricultural land assets from the calculation of the total superannuation balance and suggested using the Australian Taxation Office (ATO) definition of primary production assets.[23]

Valuation of defined benefit schemes

The Better Targeted Superannuation Concessions consultation paper sought submitters’ views on valuing defined benefit interests at 16 times the annual payments available under the scheme.[24]

The amendments in Schedule 1 of the Bill refer to a defined benefit interest value. Stakeholders have pointed out that valuing a defined benefit interest in the way described above is a blunt instrument which does not take into account the age of the recipient. Given that individuals with defined benefit interests could quite possibly vary in age from approximately 50 to close to 100, this presents a significant equity issue. Robert Carling suggested that:

The capital value of defined benefit pensions to be included in the superannuation balance should be recalculated each year under actuarially determined rules to recognise the impact of age on capital value.[25]


The Bill has been the subject of consultation. Stakeholders have provided submissions and significant changes have been made in response. Treasury has summarised the consultation process in the Explanatory Memorandum at pages 225–232.

In the consultation on the draft legislation, which was held in October 2023, Treasury received 70 submissions, including 9 confidential submissions.

In relation to some major design features, the Government did not accept stakeholders’ suggestions. Many stakeholders did not support either non-indexation of the threshold or the taxation of unrealised gains.

Policy position of non-government parties/independents

The Coalition opposes the measure. On 5 March 2023, on the ABC’s Insiders program, the Shadow Treasurer, Angus Taylor MP, criticised the Government’s proposal for not indexing the $3 million cap and for taxing unrealised capital gains.

On 1 September 2023, the Greens said their support for the measure will be contingent on passage of legislation to pay superannuation on Paid Parental Leave (PPL).

In February 2023, Independent MPs including Kylea Tink, Zoe Daniel and Zali Steggall said that capping superannuation tax concessions at $3 million may undermine the confidence of people saving for retirement.

Position of major interest groups

At the time of writing, submissions to the Senate Economics Legislation Committee inquiry into the Bill were not publicly available. As such, the positions of major interest groups regarding Schedules 1 to 3 of the Bill are based on submissions to the Treasury consultations on the relevant Exposure Drafts of the Schedules, where the provisions are identical or substantially the same.

While the Association of Superannuation Funds of Australia (ASFA) and AustralianSuper were broadly supportive of the measure, many other submissions on the Exposure Draft were critical of the main design features of the tax. Some stakeholders have maintained these views. For example, on 1 December 2023, it was reported that both the Chartered Accountants Australia & New Zealand (CA ANZ) and the SMSF Association opposed the legislation.

Mr Tony Negline of CA ANZ was quoted as saying:

These changes will unfairly impact on people who are in or approaching retirement who followed the rules, and are also a tax trap for young players.

Mr Peter Burgess of the SMSF Association stated:

Taxing unrealised capital gains is a tax on market movements and changes in asset values, not income – an alarming precedent as it represents a fundamental change in how tax policy is implemented in Australia.

Overview of Schedules 1 to 3 of the Bill

Under these Schedules to the Bill, the headline rate of tax on earnings from balances of $3 million and below remains at 15 per cent. However, the Bill imposes up to an overall 30 per cent tax on earnings equal to the percentage of the person’s total superannuation balance (TSB) above $3 million (the ‘large superannuation balance threshold’ or LSBT).

Earnings are calculated with reference to the difference in the total superannuation balance (TSB) at the start and end of the income year, adjusting for withdrawals and contributions. Negative earnings can be carried forward and offset against this tax in future years’ tax liabilities.

It is clear from paragraph 1.12 of the Explanatory Memorandum that the Commissioner of Taxation will calculate the tax liability and notify individuals of their liability for a given income year.

Individuals will have the choice of either paying the tax out-of-pocket (from outside their superannuation funds) or from their funds by requesting a release of superannuation money.[26] If an individual holds multiple superannuation interests, they can choose which interest(s) to release the money from.

Key issue: non-indexation of the threshold

Item 18 in Schedule 1 to the Bill amends the Dictionary in subsection 995-1(1) of the ITAA 1997 to insert several new definitions—including the definition of large superannuation balance threshold being $3 million. There is no provision in the Bill for the LSBT to be indexed.

Submissions to the Treasury consultation by AustralianSuper, the Business Council of Australia (BCA), CA ANZ, Deloitte, Ernst & Young (EY), Mercer, the SMSF Association and the Tax Institute (TIA) were amongst those seeking for the threshold to be indexed. ASFA suggested that the threshold be revisited in a post‑implementation review. CPA Australia did not call for indexation but considered the description of the tax as up to 30 per cent as misleading.

Key issue: superannuation interests and total superannuation balance

Basic concepts

‘Superannuation interest’ is defined in section 995-1 of the ITAA 1997 as:

(a)  an interest in a * superannuation fund;[27] or

(b)  an interest in an * approved deposit fund; or

(c)  an * RSA; or

(d)  an interest in a * superannuation annuity.

Subsection 307-205(1) of ITAA 1997 defines ‘the value of a superannuation interest’ at a particular time as:

(a) if the regulations specify a method for determining the value of the superannuation interest — that value; or

(b)  otherwise — the total amount of all the *superannuation lump sums that could be payable from the interest at that time.

Relevant provisions

The term total superannuation balance (TSB) is currently defined in subsection 307-230(1) of the ITAA 1997. The TSB is derived by adding the TSB values of any superannuation interest, death benefit superannuation interest, rollover benefit and limited recourse borrowing arrangement (LBRA)[28] held by the individual. Item 3 in Schedule 2 to the Bill amends subsection 307-230(1) to update references to superannuation interests in the definition. According to ASFA, the definition replaces the well-known concept of the ‘transfer balance account’ as defined in ITAA 1997 section 294-15. According to the Explanatory Memorandum to the Bill:

The original intention underpinning the link to the transfer balance account was to remove the requirement for certain income streams, such as defined benefit income streams, to be valued on an annual basis for the TSB, instead leveraging the existing transfer balance account value. The calculation of earnings for the Division 296 tax requires these valuations to be applied on an annual basis. The amendments to the TSB streamline the definition of TSB to align with this annual valuation requirement (p. 14)

Item 5 of Schedule 2 to the Bill repeals subsections 307-230(2) to (4) and inserts proposed subsections 307-230(2) to (5) so that the TSB makes provision for family law splits and excludes ‘structured settlement contributions’ (as defined in section 294-80 of the ITAA 1997). ASFA (at pages 4‑5) and AustralianSuper suggested that an exclusion should be equally extended to total permanent disability (TPD) insurance proceeds from a policy paid into a member’s account that is held within superannuation, with ASFA also proposing payments in respect of a terminal medical condition (TMC) be excluded. This suggestion has not been taken up in the Bill.

Total superannuation balance value is defined in proposed section 307-230A (inserted by item 6 of Schedule 2 to the Bill) as being determined either by a method or value prescribed in regulations or, if there is no prescribed method or value, by using what is colloquially known as the ‘withdrawal benefit’ for the interest (which is not applicable to defined benefit interests). This is the total amount of superannuation benefits that would become payable if the individual had the right to cause the interest to cease at that time and had caused the interest to cease at that time.

Proposed subsection 307-230A(2) sets out several matters that the regulations may take into account in specifying a value or method. Under proposed paragraph 307-230A(2)(c), this extends to a defined benefit interest. Proposed subsection 307-203A(3) allows the relevant Minister to approve a legislative instrument for the methods or factors used to determine the TSB value.

Key issue: liability for the tax

Item 15 in Schedule 1 to the Bill inserts proposed Division 296–Better targeted superannuation concessions into the ITAA 1997. Within new Division 296, proposed sections 296-20 to 296-30 create exceptions to liability for child recipients, persons who receive structured settlement contributions and persons who die before 30 June in an income year. Otherwise, an individual will be liable to pay the tax if they have taxable superannuation earnings.

To determine whether a person has taxable superannuation earnings as set out in proposed section 29635, it is first necessary to subtract the LSBT from the TSB at the end of the year, divide by the TSB at the end of the year and multiply by 100. This percentage is then multiplied by the amount of superannuation earnings for the income year to provide the amount of taxable superannuation earnings.

Under proposed section 296-40, superannuation earnings are defined as either the amount of ‘basic superannuation earnings’ for the year or an amount worked out under section 296-110. Basic superannuation earnings are determined by subtracting the previous TSB from the current ‘adjusted TSB’: proposed subsection 296-40(2).

The adjusted TSB is the sum of the TSB for the year and withdrawals, minus contributions: proposed section 296-45. Omitting withdrawals and contributions would distort the TSB.

The terms your withdrawals total and your contributions total are defined in proposed sections 296-50 and 296-55. Death benefit income streams are excluded as a contribution: proposed subsection 296-55(3). These terms are subject to modifications prescribed by regulations: proposed section 296-60. According to ASFA and Financial Services Council (FSC) these are significant elements of the legislative design. Their ability to be modified by subordinate legislation could be seen as creating uncertainty.

Key issue: taxation of unrealised (notional) gains and losses

According to Treasury:

The calculation of earnings includes all notional (unrealised) gains and losses, similar to the way superannuation funds currently calculate members’ interests.

In their submissions to Treasury, several stakeholders criticised the taxation of unrealised gains, including the BCA, CA ANZ, CPA Australia, Deloitte, EY, the FSC, the SMSF Association and the TIA. The TIA stated that the taxation of unrealised gains has historically only been used in Australia in the context of anti-avoidance provisions.

EY has summarised (at p. 4) concerns that the taxation of unrealised gains will result in:

  • volatility issues – where fluctuations in the value of assets may not be able to be predicted as reliably as income from those assets
  • liquidity issues – individuals may be forced to dispose of illiquid assets to cover the tax on earnings with transaction costs incurred
  • poor fund outcomes - the timing of the disposal to realise assets in time to meet the tax due may adversely impact the value of the fund
  • increased tax calculated on a year-by-year basis compared to taxing the ultimate gain on disposal.

EY also noted that the proposed changes do not recognise potential eligibility for any CGT discounts.

Carrying forward negative superannuation earnings to future years

If an individual makes an earnings loss in a financial year (referred to as transferrable negative superannuation earnings), this can be carried forward to reduce the tax liability in future years.  Superannuation earnings can be a positive or negative amount.

Under proposed subsection 296-105(1), an individual has transferrable negative superannuation earnings if superannuation earnings for the year are less than nil and either or both of the following apply:

  • the TSB at the end of the year is above the $3 million cap
  • the TSB just before the start of the year is greater than the $3 million cap.

Under proposed subsection 296-105(2), an individual has unapplied transferrable negative superannuation earnings for an income year equal to the amount of their superannuation earnings for a previous income year in which the individual had transferrable negative superannuation earnings.

If a person has unapplied transferrable negative superannuation earnings and a TSB above the threshold for an income year, their superannuation earnings will be reduced by applying their unapplied transferrable negative superannuation earnings.

Where a person has a TSB at the end of the year lower than $3 million, a TSB immediately before the start of the year greater than $3 million and unapplied transferrable negative superannuation earnings, then their superannuation earnings will be determined under proposed subsections 296-110(1) and (2). This is calculated by subtracting unapplied transferrable negative superannuation earnings for the year from basic superannuation earnings for the year.

The TIA pointed out that, as these losses are quarantined to the Division 296 tax, there will be situations where the losses are never utilised (p. 6). To improve fairness, EY (p. 7) and the TIA (p. 7) recommended including an option to carry back negative earnings at a proportional rate for prior years and to receive a refund of the tax paid in respect of that earlier year. CA ANZ (p. 12) recommended a refund for unrealised losses.

Key issue: payment of tax

The time allowed for payment of the tax is 84 days: proposed subsection 296-205. The FSC considered that more time should be allowed to pay, particularly if an illiquid asset is involved (e.g., the sale of a rural or commercial property).

Temporary residents who receive a departing Australia superannuation payment are entitled to a refund of tax: proposed section 296-405.

Interest charges

As with other tax debts, under amendments to the Taxation Administration Act 1953, (item 15 in Schedule 1) there will be interest charges relating to Division 296 tax. There will be a general interest charge (in relation to outstanding liabilities that remain unpaid by the due date) and a shortfall interest charge (where an amount of tax becomes due and payable because of an amended assessment): proposed section 296-215.

The Division 296 general interest charge is lower than for other tax debts. The Explanatory Memorandum states at paragraph 1.74 that this is so that taxpayers are subject to a rate of interest that is broadly like market rates.

Key issue: interests in defined benefit schemes

Under a defined benefit scheme, the retirement benefit is determined by a formula instead of being based on investment return. Most defined benefit funds are corporate or public sector funds. Many are now closed to new members.

The Treasury states (p. 2) that ’the Government’s intent is to ensure broadly commensurate treatment for defined benefit interests compared to other superannuation interests. Treasury will consult further on the appropriate treatment for defined benefit interests.’ The BCA states (p. 4) it is difficult for defined benefit schemes to be treated similarly to accumulation schemes because defined benefit schemes have ‘no contributions or earnings’ and (because they come from an untaxed source) ‘are taxed in the hands of the beneficiaries at full marginal rates subject to an offset’.

Individuals who have interests in defined benefit schemes will have their tax determined by the formula set out in proposed Division 134—Division 296 tax which is inserted into Schedule 1 to the Taxation Administration Act 1953 (TAA) by item 58 in Schedule 1 to the Bill. Under proposed section 134-15, the formula multiplies the taxpayer’s Division 296 tax for the year by the taxpayer’s defined benefit interest value divided by the taxpayer’s TSB at the end of the year. Defined benefit interest value means either the sum of the TSB values of the taxpayer’s defined benefit interests at the end of the year, or nil.

Under proposed section 307-230A of the ITAA 1997 (inserted by item 6 in Schedule 2 to the Bill) there is a regulation-making power to specify a value or a method to determine the TSB value. Under proposed paragraph 307-230A(2)(c), this extends to a DB interest. As no regulation has been publicly released, this creates some uncertainty.

Members of defined benefit schemes in the accumulation phase do not have a pension or lump sum they can use to pay a tax debt. Consequently, once the Commissioner of Taxation has determined the amount of tax payable for an income year, their tax liability is deferred to a Division 296 debt account.

Key issue: release of benefits

Items 1 to 12 of Schedule 1 to the Bill make consequential amendments to the Defence Force Retirement and Death Benefits Act 1973 and the Governor-General Act 1974 to provide that persons covered by those Acts can seek a release of benefits from their superannuation funds to meet any deferred tax liability under ITAA 1997 Division 293 (which imposes tax on taxable contributions by an individual whose income for surcharge purposes exceeds $250,000) and Division 296.

Key issue: excluded superannuation earnings

Item 15 inserts proposed Subdivision 296-E, into the ITAA 1997 under which certain earnings are excluded from taxable superannuation earnings and are known as ‘Division 296 excluded interests’. These relate to State higher level office holders and Commonwealth justices and judges.

Under two High Court rulings,[29] the Commonwealth cannot impose tax on an interest in a ‘constitutionally protected fund’. These are funds which hold superannuation contributions on behalf of State government high-level office holders.

The Commonwealth is also unable to impose tax in respect of an interest in a superannuation fund established under the Judges’ Pensions Act 1968 (Cth). This is by virtue of section 72(iii) of the Commonwealth Constitution.

Item 15 in Schedule 1 to the Bill inserts proposed Subdivision 296-G—Other provisions into the ITAA 1997. Proposed section 296-510 makes it clear that earnings from the interests of ACT Supreme Court judges are within the scope of the tax and such earnings are not excluded.

Also, an interest in a non-complying superannuation fund is not subject to Division 296 tax. This is because such funds are already taxed at the highest marginal rate and do not receive earnings tax concessions.

Such interests will still need to be counted as part of the person’s TSB. This is to ensure that earnings on any other superannuation interest that the person holds outside of their constitutionally protected fund is within the scope of the tax.[30]

Financial implications

The 2023–24 Budget measure Better Targeted Superannuation Concessions is estimated to increase receipts by $950 million and increase payments by $47.6 million over the 5 years from 2022–23. [31] In 2027–28, the first full year of receipts collection, the measure is expected to increase receipts by $2.3 billion.

All figures in this table represent amounts in $m.

Table 1

2022-23 2023-24 2024-25 2025-26 2026-27
Receipts 0.0 0.0 0.0 325.0 625.0
Payments 0.0 5.6 15.2 16.0 10.8

According to the 2023–24 MYEFO at page 197, the following exclusions are estimated to result in a small, unquantifiable decrease in receipts:

  • earnings from the constitutionally protected funds of State higher level office holders, including State Judges, both while sitting and after ceasing their office
  • earnings from the Judges Pension Scheme interests of sitting Federal judges who are appointed prior to 1 July 2025, whilst they hold that office.

Imposition Bill

Key issues and provisions

Under clauses 4 and 5, the Imposition Bill imposes the additional tax of 15% on superannuation earnings that correspond to the percentage of a person’s total superannuation balance that exceeds $3 million for a year of income.

Clause 6 is a severability provision. This is required so that the tax does not apply if its imposition on a person exceeds the legislative power of the Commonwealth – for example to ensure the tax does not apply to Commonwealth justices and judges and state level office holders.


Schedule 8: Payment Systems Regulation

Quick guide to Schedule 8

Schedule 8 to the Bill amends the Payment Systems (Regulation) Act 1998 (PSRA) to:

  • modernise the payments regulatory framework to address emerging risks related to payments
  • introduce new Ministerial powers that can be exercised in the national interest to ensure the Government can respond to payments issues beyond the existing remit of the Reserve Bank of Australia (RBA)
  • update the penalty regime in the PSRA by introducing civil penalty provisions and enforceable undertakings, and increasing existing maximum criminal penalties.


Nature of the payment systems

According to the RBA:

The ‘payments system’ refers to arrangements which allow consumers, businesses and other organisations to transfer funds usually held in an account at a financial institution to one another. It includes the payment instruments – cash, cards, cheques and electronic funds transfers – which customers use to make payments and the usually unseen arrangements that ensure that funds move from accounts at one financial institution to another.

According to the recent payment system review (p. 2):

Payment systems can be broadly categorised as cash or non-cash payment systems. Cash payment systems involve a range of rules, arrangements and physical infrastructure for the printing, manufacture, monitoring, transfer, distribution and storage of money in its physical form of coins and notes. A defining feature of cash payment systems is the role of logistics and security in enabling the safe and efficient distribution of cash across the economy.

In contrast, non-cash payment systems involve the electronic movement of funds rather than the physical exchange of money. The movement of monetary value occurs through the exchange of payment instructions and adjustments of account records. The arrangements supporting these transfers – the messaging standards, security protocols and technological infrastructure – all form part of non-cash payment systems.

The way that people make payments is changing.[32] The research discussion paper entitled The Evolution of Consumer Payments in Australia: Results from the 2022 Consumer Payments Survey which was prepared by the RBA in November 2023 notes that ‘consumers are using cards more frequently for payments of all sizes and the adoption of contactless functionality has facilitated particularly strong growth in the use of cards for low-value transactions in recent years’ (p. 3). The table below, which is sourced from that research discussion paper demonstrates the trend away from cash to other types of payment.

Table 2: Percentage share of total payments

2007 2010 2013 2016 2019 2022
Number of payments
Cash 69 62 47 37 27 13
Cards 26 31 43 52 63 76
Debit cards 15 22 24 30 44 51
Credit and charge cards 11 9 19 22 19 26
BPAY 2 3 3 2 2 2
Internet/phone banking (a) na 2 2 1 3 3
PayPal na 1 3 3 2 2
Cheque 1 1 0.4 0.2 0.2 0.1
Other (b) 1 1 2 4 2 2
Value of payments
Cash 38 29 18 18 11 8
Cards 43 43 53 54 61 65
Debit cards 21 27 22 26 36 39
Credit and charge cards 23 16 31 28 25 26
BPAY 10 10 11 8 9 8
Internet/phone banking (a) na 12 10 10 14 14
PayPal na 1 2 4 2 3
Cheque 6 3 2 2 2 0.05
Other (b) 3 3 5 3 2 3

Notes: Excludes payments over $9,999, transfers (payments to family and friends), transport cards and automatic payments.

(a) Payments made using banks’ internet or telephone facilities; does not include other payments made using the internet.

(b) ‘Other’ methods include prepaid, gift and welfare cards, bank cheques, money orders, ‘buy now, pay later’ and Cabcharge.

Payments system review

In October 2020 the Review of Australia’s Payments System (the Review), conducted by Scott Farrell commenced. The purpose of the Review was to ensure Australia’s payments system was fit for purpose and capable of supporting continued innovation for the benefit of both businesses and consumers. Mr Farrell was to report on the review by May 2021.

The terms of reference for the Review included that it should ‘take into account international best practice and seek views from the industry and consumers on the regulatory architecture that would be conducive to greater innovation and technology take up’.

Treasury circulated an issues paper for consultation during the period 20 November 2020 to 31 December 2020. Forty-five submissions were received in response to the issues paper.

In August 2021, the government released the final report of the Payments System Review noting that the payments ecosystem is in the midst of rapid change. Whilst this provides increased convenience and opportunities it also gives ‘rise to greater complexity and new risks’.[33] The final report of the Review made 15 recommendations.

Other reviews

Two other relevant reviews have been carried out:

  • the Senate Select Committee on Australia as a Technology and Financial Centre[34] and
  • the Parliamentary Joint Committee on Corporations and Financial Services Report on Mobile Payment and Digital Wallet Financial Services.[35]

Government response

On 8 December 2021, the Government released its formal response to the Review of the Australian Payments System, the Senate Select Committee on Australia as a Technology and Financial Centre Final Report, and the Parliamentary Joint Committee Corporations and Financial Services Report on Mobile Payment and Digital Wallet Financial Services.

The amendments in Schedule 8 to the Bill respond to recommendations 6 and 7 of the Review (pp. xi-xv).

Policy position of non-government parties/independents

At the time of writing this Bills Digest no comments about the amendments in Schedule 8 to the Bill have been made by non-government parties or independents.

Position of major interest groups

Many submitters such as the ANZ Bank (p. 2) welcomed the Review acknowledging:

It comes after a period of sustained change, development and innovation in the payments system. The origins of today’s regulatory regime date back to 1998 in response to the Wallis Financial System Inquiry. It is appropriate that, more than 20 years later, the Government take stock of the regulatory architecture of the payments system to ensure it remains fit for purpose and can support new developments and innovations to the benefit of end-users, industry and the economy.

The Commonwealth Bank and Eftpos Australia similarly welcomed the Review.

Key issues: Updated definition of payments system and participant

Item 5 in Schedule 8 to the Bill inserts proposed section 7A into the PSRA to set out the definitions of payment system and participant.

Under proposed subsection 7A(1) a payments system is a system under which either or both of the following occur:

  • the making of payments or the transfer of funds and/or
  • the transmission or receipt of messages that effect, enable, facilitate or sequence the making of payments or the transfer of funds.

The payments system includes any instruments or procedures that relate to that system.

A participant in a payment system is a constitutional corporation[36] that operates, administers or participates in the payment system or provides services that enable or facilitate one or more of the following:

  • the operation or administration of, or participation in, the payment system
  • the making of payments, or the transfer of funds, under the payment system
  • the transmission or receipt of messages under the payment system that effect, enable, facilitate or sequence the making of payments or the transfer of funds.

This definition is broader than the current definition in the PSRA. According to the Explanatory Memorandum (p. 135):

The current definition of payment system limits a payment system to a system that facilitates the circulation of money. This means that systems that facilitate payments in non-monetary digital assets or that provide services which facilitate a payment being made, but do not action the payment itself, cannot be considered a payment system under the PSRA. The amendments ensure such arrangements are covered by the definition of ‘payment system’ which is focused on the payment or transfer of funds, instead of the circulation of money. [emphasis added]

Together the new definitions will capture entities providing buy now, pay later products, digital wallet passthrough services such as ApplePay and Google Wallet, and services that facilitate payment in crypto assets.

Stakeholder comment

In its submission to the Review, Afterpay argued strongly that it is not a payment system because of how its platform operates stating:

Afterpay's business model positions it as a service that sits above existing payment systems. Customers choose to use Afterpay as a platform because its value proposition is not limited to being a mere payment system. The payment component of the Afterpay transaction is a small component of the overall services it provides and more relevantly the value it adds to consumers and merchants alike (p. 4).

Key issue: Ministerial powers

Designated payment systems

Item 20 in Schedule 8 to the Bill repeals and replaces subsection 10(1) of the PSRA. The existing power of the RBA to designate a payment system remains unchanged. Item 27 inserts proposed subsection 11(1A) into the PSRA to put this beyond doubt.

Proposed paragraph 10(1)(b) empowers the Minister to designate a payment system as a special designated payment system—provided that the Minister considers that doing so is in the national interest. Item 19 inserts proposed section 8A into the PSRA so that the national interest consideration by the Minister may include those matters which the RBA would consider as a matter of public interest.[37] The Minister must consider any other matters that are materially relevant to determining the national interest.

In addition, the Minister is empowered to nominate special regulators for special designated payment systems and to give directions to them about the performance of their functions: proposed subsection 10(1A) inserted by item 21.

Item 29 inserts proposed sections 11B to 11G into the PSRA. Those sections operate as follows:

  • the Minister may make a notifiable instrument (that is, an instrument which is not disallowable under section 7 of the Legislation Act 2003 and does not automatically sunset) designating a special designated payment system if it is in the national interest to do so: proposed subsection 11B(1)
  • before doing so, however, the Minister must consult with the RBA and each special regulator and consider whether there are any alternatives to such designation: proposed subsection 11B(3)
  • the RBA and/or any entity prescribed as such by regulation will be a special regulator: proposed subsection 11C(1)
  • the Minister may, subject to conditions, make a legislative instrument that nominates one or more special regulators if it is considered to be in the national interest: proposed subsection 11D(1)
  • the Minister may give the following directions by legislative instrument to a nominated special regulator:
    • a matters direction specifying those matters that must be considered before performing or exercising a function or power
    • a purposes direction specifying the purposes for which a function or power must, or must not, be exercised: proposed section 11F.

Scrutiny of Bills Committee

The Scrutiny of Bills Committee commented on a number of the Minister’s powers which are authorised under Schedule 8 to the Bill including, but not limited to, the power in proposed subsection 11B(1) to designate a payment system as a special designated payment system by notifiable instrument if the Minister considers doing so is in the national interest.

Of concern to the Committee was that notifiable instruments made under proposed subsection 11B(1), (in addition to other instruments made under Schedule 8 to the Bill) would not be subject to Parliamentary scrutiny due to their status as non-legislative instruments.

The Committee stated (p. 27) that it:

… expects that any exemption of delegated legislation from the usual disallowance process should be fully justified in the Explanatory Memorandum. This justification should include an explanation of the exceptional circumstances that are said to justify the exemption and how they apply to the circumstances of the provision in question.

As the Committee does not accept that sufficient justification has been given it has requested the Treasurer’s advice as to, among other things, why it is necessary and appropriate for instruments made under proposed subsection 11B(1) to be notifiable instruments which are exempt from the full range of Parliamentary scrutiny. At the time of writing, the Treasurer’s response had not been received by the Scrutiny Committee.[38]

About access regimes

Where the RBA has designated a payment system, it may then impose an access regime or establish standards to be complied with by participants in the system. By way of example, there is an access regime for the ATM system which sets a cap on the fee that an existing participant in the ATM system can charge a new entrant to establish a direct connection and the elimination of interchange fees.

Item 33 in Schedule 8 to the Bill inserts proposed subsection 12(1A) into the PSRA so that a nominated special regulator may, by legislative instrument, impose an access regime on participants in a special designated payment system. However, it should be noted that item 26 in the table at section 10 of the Legislation (Exemptions and Other Matters) Regulations 2015 provides that instruments made under Subdivision A of Division 3 of Part 3 of the PSRA (which includes the making of access regimes) are not subject to disallowance. According to the Explanatory Memorandum to the Bill (p. 146) ‘allowing instruments made under these sections to be disallowable may cause significant commercial uncertainty and delay’. The Scrutiny of Bills Committee sought the Treasurer’s advice as to why it is necessary and appropriate for instruments made under proposed subsection 12(1A) to be exempt from disallowance, noting it ‘does not consider the fact that the Legislation (Exemptions and Other Matters) Regulation 2015 authorises an exemption from disallowance is sufficient to exclude legislation from parliamentary oversight’ (p. 28).

Key issue: penalty regime

The amendments in Part 3 of Schedule 8 to the Bill repeal existing offence provisions for failure to comply with a direction (section 21) and failure to give the RBA information (section 26) and replaces them with new provisions covering both criminal and civil penalties.

Tables 6.4 and 6.5 of the Explanatory Memorandum (pp. 156, 157) set out the details of the increased penalties for offences under section 21 of the PSRA and the new civil penalties under sections 21 and 26 respectively.

Financial implications

According to the Explanatory Memorandum (p. 6) the financial impact of Schedule 8 to the Bill is nil.


Other provisions: certain technical amendments

Quick guide to Schedule 6

The amendments in Part 1 of Schedule 6 to the Bill make technical and minor amendments to the Australian Consumer Law (which is located in Schedule 2 to the Competition and Consumer Act 2010) and the Corporations Act 2001. Those amendments are not discussed in this Bills Digest.

The amendments in Part 2 of Schedule 6 are technical and allow the law relating to the attribution of input tax credits to tax periods to operate as intended.


There are rules in the goods and services tax (GST) law regarding when input tax credits are normally attributable to tax periods: A New Tax System (Goods and Services Tax) Act 1999 (GST Act), subsections 29-10(1), (2) and (3). This is also the case for fuel tax credits: Fuel Tax Act 2006 (FT Act), subsections 65-5(1) to (3). Previously, the Commissioner of Taxation (the Commissioner) had an administrative practice of processing documents lodged by taxpayers purporting to be amended or revised GST returns. However, the High Court decided in Commissioner of Taxation v Travelex Limited [2021] HCA 8 that the Commissioner does not have the authority to amend or revise a GST return. The amendments effectively restore the historical practice.

Also, subsection 29-25(1) of the GST Act states that the Commissioner may determine the tax periods to which input tax credits are attributable. The Government has identified that the interactions between subsection 29-25(1) and Division 93 of the GST Act (which places a four-year time limit on claiming input tax credits on a creditable acquisition) have not been properly addressed.

Finally, if a taxpayer has incurred GST as a business cost, and an input tax credit cannot be claimed, the taxpayer should generally be able to claim an income tax deduction. Subsection 27-15 of ITAA 1997 provides that, with some exceptions, a taxpayer cannot deduct a payment of GST under Division 33 of the GST Act. Currently, GST payable by reverse charge is not one of those exceptions. The reverse charge makes the purchaser of the supply rather than the supplier responsible for remitting GST.

Policy position of non-government parties/independents

At the time of writing this Bills Digest no comments about the contents of Part 2 of Schedule 6 to the Bill had been made by non-government parties or independents.

Position of major interest groups

CA ANZ has stated in a submission that:

The proposed new sub-sections 29(4)-(6) will assist in making ‘lawful’ many past BAS (Business Activity Statement) amendments based on a perceived unlawful administrative practice which is consistent with the original policy intent of subsection 29-10(4).

Key issues and provisions

Item 7 in Schedule 6 to the Bill repeals existing subsection 29-10(4) of the GST Act and replaces it with proposed subsections 29-10(4) to (6). The new subsections provide that where an input tax credit has not been taken into account in a tax period, a taxpayer can ask the Commissioner to attribute the input tax credit to a later specified tax period. Item 10 in Schedule 6 to the Bill makes similar amendments to the FT Act. The amendments apply in relation to input tax credits and fuel tax credits that are ordinarily attributable to periods starting on or after 1 July 2012.

To address the interactions between subsection 29-25(1) and Division 93 of the GST Act, item 14 inserts proposed subsections 93-10(1) and (2) into the GST Act. The subsections provide that, if the Commissioner makes a subsection 29-25(1) determination, the taxpayer only ceases to be entitled to the input tax credit to the extent that the input tax credit has not been taken into account in an assessment during the four-year period after the taxpayer was required to lodge a GST return for the period to which the credit was attributable. Otherwise, the taxpayer will be entitled to the input tax credit.

Item 22 in Schedule 6 to the Bill inserts proposed subsection 27-15(4) into the ITAA 1997 so that a taxpayer can deduct the amount of GST payable as a reverse charge, to the extent that the assessed net amount includes GST that:

  • exceeds the input tax credit that the taxpayer is entitled to, and
  • is payable because of Divisions 83, 84 or 86 of the GST Act (which set out the requirements for income tax deductions for reverse charged supplies).

Financial implications

According to the Explanatory Memorandum (p. 4) the amendments in Schedule 6 to the Bill are ‘estimated to result in a small but unquantifiable impact on receipts, and a small but unquantifiable impact on payments over the five years from 2022–23.