Division 296 tax excluded interests

When Division 296 tax does not apply to super earnings

Division 296 tax will not apply to earnings from a super interest in any of the following:

• constitutionally protected funds held by a current or former State higher level office holder, both for the current or former office holder and any person receiving a retirement phase super income stream from the interest after their death
• a super fund established under the Judges Pensions Act 1968 held by a current or former Justice of the High Court or judge or justice of a Court created by Parliament both for the current or former office holder and any person receiving a retirement phase super income stream from the interest after their death
• a super fund established under the Judges Pensions Act 1968 as it applies under the Supreme Court Act 1933 (ACT) held by either a current or former Chief Justice or Judge of the Supreme Court of the Australian Capital Territory or any person receiving a retirement phase super income stream from the interest after their death
• a super fund established under the Supreme Court (Judges Pensions) Act 1980 (NT) held by either a current or former Chief Justice or Judge of the Supreme Court of the Northern Territory or any person receiving a retirement phase super income stream from the interest after their death
• a non-complying Australian fund for the income year.

These super interests are referred to as 'excluded interests'. Earnings from these interests are taken to be nil for the purposes of Division 296 tax.

Earnings will also be nil for an income stream that is a pension payable under section 123 of the Federal Circuit and Family Court of Australia Act 2021.

Excluded earnings counted in your total super balance

Although earnings from excluded interests are not subject to Division 296 tax, the values of these interests are still counted in your total super balance (TSB) when determining whether your TSB exceeds the large super balance threshold (LSBT) and very large super balance threshold (VLSBT). If your TSB does exceed the LSBT, Division 296 tax is imposed only on the earnings from super interests that are not excluded.

Constitutionally protected funds

Constitutionally protected funds (CPFs) are untaxed super funds that don't pay income tax on contributions or earnings they receive.

Some state governments operate CPFs for their employees, such as West State Super and Gold State Super in Western Australia and Triple S in South Australia.

Funds created for members of the judiciary are also often CPFs. Contact your super fund to find out if it is a CPF.

State higher level office holders (SHLOHs)

Division 296 tax is not imposed on earnings from super interests in CPFs held by individuals who are or have ever been SHLOHs.

You will also not have Division 296 tax imposed on earnings from an interest included in your TSB if all the following apply:

• You become the retirement phase recipient of a super income stream because of a member's death.
• An interest of the member was excluded from paying Division 296 tax as they were a SHLOH.
• The super income stream is paid from the member's excluded interest.

You’re a SHLOH if you are any of the following:

• the Governor of a State
• a member of staff of the Governor of a State
• a Minister of the Government of a State
• a member of the staff of a Minister of the Government of a State
• a member of the Parliament of a State
• the Clerk of a house of the Parliament of a State
• a deputy Clerk of a house of the Parliament of a State or an office holder of the Parliament of a State of equivalent seniority
• the head of a Department of the Parliament of a State or an office holder of the Parliament of a State of equivalent seniority
• the head of a Department of the Public Service of a State or a statutory office holder of equivalent seniority, including a statutory office holder who is the head of an instrumentality or agency of a State
• the head of a body, including an office or a commission, within a Department of the Public Service of a State if the body has either
  • the general administration of an Act of the State under a statute
  • a distinct statutory function that is critical to the constitutional functioning of the State
• an office holder within a Department of the Public Service of a State if the office holder has either
  • the general administration of an Act of the State under a statute
  • a distinct statutory function that is critical to the constitutional functioning of the State
• a head or deputy head of a body, including an office or a commission of a State if the body has a predominant legal function that is critical to the constitutional functioning of the State
• the Solicitor-General of a State
• a judge, justice or magistrate of the court of a State
• a member of a tribunal of a State, or a commissioner of a commission of a State, who exercises judicial power of a State
• a commissioner, deputy commissioner or assistant commissioner of a police force of a State, or an officer of equivalent rank of a police force of a State.

Commonwealth justices and judges

Division 296 tax is not imposed on earnings from interests in a fund that is established under the Judges Pensions Act 1968, where before or at any time during the year you were or are, either a:

• Justice of the High Court
• Justice or judge of a court created by Parliament.

You will also not have Division 296 tax imposed on earnings from an interest included in your TSB if all the following apply:

• You become the retirement phase recipient of a super income stream because of a member's death.
• An interest of the member was excluded from paying Division 296 tax as it was an interest in a fund established under the Judges Pensions Act 1968.
• The super income stream is paid from the member's excluded interest.

ACT and NT Supreme Court judges

Division 296 tax is not imposed on earnings from super interests held by a current or former judge or justice of the Supreme Court of the Australian Capital Territory in a super fund established under the Judge's Pensions Act 1968 as it applies under the Supreme Court Act 1933 (ACT).

Division 296 tax is not imposed on earnings from super interests held by a current or former judge or justice of the Supreme Court of the Northern Territory in a super fund established under the Supreme Court (Judge's Pensions) Act 1980 (NT).

You will also not have Division 296 tax imposed on earnings from an interest included in your TSB if all the following apply:

• You become the retirement phase recipient of a super income stream because of a member's death.
• An interest of the member was excluded from paying Division 296 tax as it was an interest in a fund established under either the Judges Pensions Act 1968 as it applies under the Supreme Court Act 1933 (ACT) or the Supreme Court (Judge's Pensions) Act 1980 (NT).
• The super income stream is paid from the member's excluded interest.

Federal Circuit and Family Court of Australia

If you have an income stream that is a pension payable under section 123 of the Federal Circuit and Family Court of Australia Act 2021, super earnings from that interest will be excluded from the calculation of super earnings for the purposes of Division 296 tax.

Non-complying super funds

If you hold an interest in an Australian super fund that is non-complying at the end of the year, super earnings from that interest will be excluded from the calculation of total super earnings for the purposes of Division 296 tax.

You will also not have Division 296 tax imposed on earnings from an interest included in your TSB if all the following apply:

• You become the retirement phase recipient of a super income stream because of a member's death.
• An interest of the member was in a non-complying super fund at the end of the year.
• The super income stream is paid from the member's excluded interest.