Superannuation has long been one of the most tax-effective places to hold wealth in Australia. From 1 July 2026, that remains true — but a new tax called Division 296 changes the maths for people with large balances. The legislation passed Parliament in March 2026, so it is now law rather than a proposal.
If your total superannuation savings are approaching or above $3 million, Division 296 is worth understanding well before it first applies. The good news is that the year ahead — to 30 June 2027 — is a genuine planning window, not a deadline that has already passed.
What Division 296 is
Division 296 is an additional tax on the earnings of very large superannuation balances. It sits on top of the existing 15% tax that super funds already pay on earnings in the accumulation phase.
It targets your total superannuation balance (TSB) — the combined value of all your super interests across every fund, not the balance in any single account. The thresholds apply per person, so a couple each has their own separate threshold.
Crucially, the extra tax only applies to the proportion of your earnings that relates to the balance above the threshold — not your whole balance. Most of your super continues to be taxed exactly as it is today.
How the two-tier tax works
Division 296 applies in two tiers, based on where your total super balance sits:
| Portion of total super balance | Extra Division 296 tax | Total tax on that slice of earnings |
|---|---|---|
| Below $3 million | Nil | 15% (unchanged) |
| Between $3 million and $10 million | +15% | up to 30% |
| Above $10 million | +25% | up to 40% |
Both thresholds are indexed to inflation — the $3 million threshold rises in $150,000 increments, and the $10 million threshold in $500,000 increments. That indexation matters: it means the thresholds keep pace with growth over time rather than quietly capturing more people each year.
A simple illustration. Say your total super balance is $4 million at year end and your funds earned $200,000 over the year. The portion of your balance above $3 million is $1 million — that’s 25% of your $4 million balance. So 25% of your earnings ($50,000) is subject to the extra 15% Division 296 tax, an additional $7,500 for the year. The other 75% of your earnings is taxed as normal.
Who it affects
Division 296 is aimed at a relatively small group — people whose combined super sits above $3 million. If your total super balance is comfortably below that, this measure does not affect you, and salary sacrifice and other superannuation strategies remain as attractive as ever.
You may want to look more closely if any of these apply:
- Your combined super is near or above $3 million across all funds and accounts.
- You hold a self-managed super fund with assets that have grown strongly — particularly property or shares with large unrealised gains.
- You expect a contribution, rollover, or asset revaluation to push your balance over the threshold in the next few years.
- You’re part of a couple where one partner’s balance is well above $3 million while the other’s is much lower.
The 30 June 2027 first test
Division 296 commenced on 1 July 2026, but the first time your balance is actually measured for it is 30 June 2027. That gives the 2026–27 financial year a special status.
In future years, the tax uses the higher of your balance at the start or the end of the year — an integrity rule that stops people from simply withdrawing just before year end. For the first year only, Division 296 looks solely at your total super balance on 30 June 2027. The year to that date is therefore the cleanest opportunity to review your position and act before the measure bites.
This is the planning window. It is not about rushing changes immediately from 30 June 2026, but about using the year ahead deliberately, with advice, while the rules are settled and the first assessment is still in front of you.
Realised earnings, not paper gains
An earlier version of this measure proposed taxing unrealised gains — paper increases in value on assets you hadn’t sold. That approach was dropped. Division 296 as legislated is based on realised earnings, which is a far more reasonable basis and removes the risk of being taxed on gains you haven’t actually received.
Super funds will apply a “fair and reasonable” method to determine earnings. SMSFs use a specific methodology based on each member’s time-weighted share of the fund over the year, with the finer detail to be set out in supporting regulations.
What SMSF trustees should check
If you run an SMSF, two practical points deserve attention.
Get your 30 June 2026 valuations right. Because the tax works off your total super balance, the value placed on fund assets matters. Direct property and unlisted investments should be valued accurately and at genuine market value — not a conservative carrying figure carried over from prior years.
Consider the cost-base reset election. SMSFs can elect to reset the cost base of the fund’s CGT assets to their market value as at 30 June 2026. Doing so means only realised gains above that reset value count for Division 296 purposes. The election has strict conditions — it must cover all the fund’s CGT assets, be made in the approved form, and be lodged by the fund’s tax return due date — so it needs to be weighed deliberately, not left to the last minute. It interacts with the broader CGT rules that apply inside an SMSF.
Planning levers to consider
For clients likely to be affected, there are several strategies worth discussing. None is right for everyone — they depend entirely on your circumstances, your stage of life, and your goals.
- Investment structure. Whether some wealth is better held outside super — for example in a company, trust, or personal name — given the changed after-tax position.
- Drawing down from super. If you’ve met a condition of release, moving part of your balance out of super may be appropriate, balanced against the concessions you’d give up.
- Spouse equalisation. Where one partner is well above $3 million and the other well below, evening out balances over time can keep more of a couple’s super under the thresholds.
- Intergenerational transfers. Bringing forward estate and wealth-transfer planning so that wealth moves to the next generation in a considered, tax-aware way.
- Liquidity to pay the tax. Division 296 is levied on you personally — you can pay it yourself or elect to release the amount from super. Either way, the fund or you will need accessible cash to meet it. It can’t be reduced by personal deductions, offsets, or losses.
Why advice matters now
Division 296 doesn’t change the fundamentals — super is still highly tax-effective for the vast majority of Australians. But for those near the thresholds, the right response is rarely obvious. Withdrawing from super, restructuring, or equalising balances each have trade-offs, and the wrong move can cost more than the tax itself.
Because the first measurement date is 30 June 2027, you have time to plan properly rather than react. That’s the value of starting the conversation now: working through whether you’re likely to be affected, by how much, and which levers — if any — make sense for your situation.
If your super is approaching $3 million, or you’re an SMSF trustee weighing the cost-base reset, talk to our team. We’ll help you understand where you stand and build a considered plan across your super, retirement strategy, and estate — well before the first Division 296 assessment falls due.