There will be a lot written about the changes to DIV 296 tax that were announced on the 13th of October by Treasurer Jim Chalmers. Will it be measured commentary? Seems unlikely.

At Morningstar we’ve tried to take an investor centric position in the debate. Much of the wider debate has centred on how much people should be taxed and if you are or aren’t ‘rich’ based on a $3 million threshold. We will continue to avoid any commentary on those topics including the new 40% tax on earnings for anyone who has exceeded $10 million in super.

Our view has always centred on the realities of planning for and achieving a retirement goal. Retirement has the longest time horizon of any investing goal. Your decisions may have implications decades in the future. This includes both investment choices and determining how much to contribute to super.

Investing is an act of faith in the future. An investor takes this leap of faith knowing the future is unknowable. While investing outcomes are unknown it helps to have stability from a regulatory and tax perspective. That should be the goal for policy makers.

Changes in taxes and regulations are difficult to navigate for long-term investors. None of us can jump in a time machine to revisit our previous decisions based on the new rules. Life is about adapting to change. But it doesn’t mean there shouldn’t be a high bar before super tax rules are updated.

The changes to the DIV 296 tax make it easier for Australians to plan for retirement. The first good news is for lower income Australians. The low-income super tax offset or LISTO is designed to make sure compulsory super contributions aren’t taxed at a higher rate than income.

LISTO will increase to $810 from $500 and the eligibility threshold will be raised from $37,000 to $45,000. Shani called for this change in an article last year.

Other changes also benefit investors. Adding indexation provides more stability than vague commentary about future governments adjusting the threshold.

Getting rid of the unplannable impact of unrealised capital gains helps investors model out retirement scenarios with more accuracy and make it easier to hold a wide range of asset classes that may benefit specific investors.

Current retirees with earnings on balances over $3 million will face a tax increase of 15% to 30% starting on 1 July 2026. For those with earnings on balances over $10 million will face an additional tax increase of 10% on earnings to 40%.

For retirees impacted by new taxes it is even more important to focus on tax efficiency. The good news is that tax outcomes are often impacted significantly by investor behaviour like overtrading. Be mindful of how your investment approach impacts your tax outcomes.

It also may be an opportunity to revisit your withdrawal approach. Shani does a great job outlining the different levers to increase withdrawal rates in her article on the 4% rule while James writes about the new 4%. Ashley Owens writing on Firstlinks shares his thoughts on not running out of money in retirement.

Having more than $10 million in super may not make sense from a tax perspective. Shani includes our best tax resources to understand the different options available.

Email me at [email protected] with your thoughts.

Shani and I have a favour to ask

Out book Invest Your Way was released on the 8th of October. A big thank you to everyone who ordered a copy in presale.

Order now from Booktopia for a signed copy!

The book is also available on Kindle and the audiobook will be released on October 13th. We appreciate your continued support.

Invest Your Way is a personal finance book that combines foundational investing theory, real-world application and our own experiences. It is designed to help readers create a financial plan and investing strategy that is tailored to their unique goals and circumstances.

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