Division 296 Tax: What the $3 Million Super Balance Changes Mean for You
Updated: Oct 23
Australia's Division 296 superannuation tax came into effect on 1 July 2026, introducing additional tax on earnings attributable to individual superannuation balances exceeding $3 million.
The legislation establishes a two-tier system, with higher tax rates applying to earnings attributable to balances above $3 million and $10 million. Importantly, the final rules exclude unrealised capital gains from the earnings calculation and provide for future indexation of both thresholds.
For Australians with substantial superannuation savings, particularly high-net-worth individuals and self-managed superannuation fund (SMSF) members, understanding how Division 296 works is an important part of long-term wealth and retirement planning.
Originally published: October 2025 | Last updated: 15 October 2026
This article has been updated to reflect the Division 296 legislation effective from 1 July 2026.
What Is the Division 296 Tax?
Division 296 is an additional tax on certain superannuation earnings attributable to the portion of an individual's total superannuation balance (TSB) exceeding $3 million.
Introduced under the Treasury Laws Amendment (Building a Stronger and Fairer Super System) Act 2026, the tax applies from the 2026–27 financial year.
Under the legislation, individuals with larger superannuation balances may pay additional tax on a proportion of their superannuation earnings, with a higher tier applying to balances exceeding $10 million.
Unlike ordinary superannuation fund earnings tax, Division 296 is assessed directly to the individual by the Australian Taxation Office (ATO).
Key Superannuation Tax Changes at a Glance
The main features of Division 296 for the 2026–27 financial year are:
Commencement date: 1 July 2026.
$3 million threshold: An additional 15% tax applies to the relevant share of taxable superannuation earnings attributable to balances exceeding $3 million.
$10 million threshold: A further 10% applies to the relevant share of earnings attributable to balances exceeding $10 million, bringing the additional tax on that portion to 25%.
Headline tax rates: For accumulation-phase earnings ordinarily taxed at 15% within a super fund, the additional tax can result in combined headline rates of 30% and 40% on the relevant portions.
Threshold indexation: Both thresholds are subject to annual CPI-linked indexation from 2027–28, in prescribed increments.
Earnings calculation: Division 296 uses an earnings-based approach that excludes unrealised capital gains, rather than taxing increases in asset values that have not been realised.
Payment arrangements: The ATO assesses individuals, who may pay the liability personally or elect to release eligible funds from superannuation.
The higher rates do not apply to an individual's entire superannuation balance. They apply to the relevant proportion of taxable earnings attributable to balances above each threshold.
What Does “Realised Earnings” Mean?
One of the most significant differences between the original Division 296 proposal and the final legislation is how superannuation earnings are calculated.
The original proposal would have included unrealised capital gains, potentially taxing increases in asset values even where those assets had not been sold.
The enacted rules instead adopt an earnings-based approach that excludes unrealised capital gains.
For example, if an SMSF holds an investment property that increases in value but hasn't been sold, that unrealised increase is not itself included in the Division 296 earnings calculation.
However, taxable income generated by the property, along with relevant realised capital gains when assets are sold, may contribute to the fund's earnings calculation.
Division 296 earnings are determined using statutory calculations based on relevant fund earnings and adjustments. They are not necessarily identical to the fund's accounting profit or the amount of cash received by a member.
This approach addresses one of the principal concerns raised about the original proposal, particularly for SMSF trustees holding property, business assets or other investments that may be difficult to sell quickly.
How Does Division 296 Tax Work? An Example
Consider a simplified example of an individual with a total superannuation balance of $4 million and $200,000 in taxable superannuation earnings for the financial year.
Assuming the relevant balance remains $4 million for the purposes of the calculation, the proportion exceeding the $3 million threshold is:
($4 million − $3 million) ÷ $4 million = 25%
This means 25% of the $200,000 earnings, or $50,000, would be subject to the additional 15% Division 296 tax.
Additional Division 296 tax: $7,500
The remaining 75% of earnings would not attract the additional Division 296 tax.
This example is illustrative only. Actual liabilities depend on the statutory earnings calculation, applicable balance thresholds, valuation dates and individual circumstances.
Who Is Affected by the $3 Million Super Balance Threshold?
Division 296 primarily affects individuals with substantial superannuation savings, including some high-net-worth individuals, business owners, professionals and SMSF members.
Importantly, the $3 million threshold applies to an individual's total superannuation balance across their superannuation interests, rather than simply the balance of an individual SMSF or super fund.
For example, a couple with a combined SMSF balance of $4 million would not automatically be subject to Division 296. Their individual superannuation balances would need to be assessed separately.
Individuals approaching the $3 million threshold should consider the potential implications for their long-term retirement and investment strategies, even if they are not yet affected by the additional tax.
How Will the Division 296 Tax Be Applied?
Division 296 is assessed annually by the Australian Taxation Office using information reported by superannuation funds and other relevant records.
The general process involves:
Assessing superannuation balances: The ATO determines whether an individual's total superannuation balance exceeds the applicable thresholds, using the relevant statutory balance dates.
Calculating taxable earnings: Relevant superannuation earnings are determined using the legislated calculation methods and adjustments.
Applying the additional tax: The appropriate proportion of earnings attributable to balances above $3 million and, where applicable, $10 million is subject to Division 296.
Issuing an assessment: The ATO calculates the individual's liability and issues a Division 296 assessment.
Paying the tax: Individuals can generally pay the liability using personal funds or elect to release eligible amounts from their superannuation fund.
Division 296 applies from the 2026–27 financial year, with the first assessments expected during 2027–28.
Although the tax is assessed personally, it is important to consider how payment may affect cash flow and retirement savings.
Does Division 296 Apply to SMSFs?
Yes. Division 296 applies to eligible individuals regardless of whether their superannuation savings are held in a large industry fund, retail fund or self-managed superannuation fund (SMSF).
For SMSF members with substantial balances, the new rules introduce additional considerations when reviewing investment structures, taxable earnings, asset disposals and long-term retirement strategies.
While unrealised capital gains are excluded from the Division 296 earnings calculation, realised gains and other relevant taxable earnings may contribute to an individual's liability.
SMSF trustees should also consider the additional reporting requirements and how Division 296 interacts with existing superannuation and taxation obligations.
The introduction of Division 296 does not automatically mean an SMSF is no longer appropriate. Any decision to change fund structures or investment arrangements should be based on a broader assessment of individual circumstances.
What Should You Do Next?
For individuals with total superannuation balances approaching or exceeding $3 million, Division 296 makes it particularly important to review how superannuation fits into their broader wealth management strategy.
Some considerations include:
Reviewing your total superannuation balance across all funds.
Understanding how the additional tax may affect your investment returns.
Assessing the potential impact of futu
re realised capital gains.
Considering how superannuation investments fit alongside assets held outside super.
Reviewing cash flow and payment arrangements for any future Division 296 liability.
Seeking financial and tax advice before making substantial changes to your superannuation strategy.
Importantly, the introduction of Division 296 does not necessarily mean that withdrawing money from superannuation or restructuring investments will produce a better outcome. These decisions should account for personal tax rates, investment objectives, preservation rules and long-term retirement goals.
For a broader look at contribution options, additional superannuation taxes and retirement planning considerations, read our guide to superannuation strategies for high-income earners in Australia.
Final Thoughts
With Division 296 now in effect, Australians with substantial superannuation balances face additional considerations when planning their financial future.
The revised legislation provides greater clarity through indexed thresholds and an earnings-based approach that excludes unrealised capital gains. However, understanding how the additional tax interacts with your existing investments and retirement objectives remains important.
At Scion Private Wealth, we provide personalised superannuation advice in Brisbane, helping clients make informed decisions about their retirement savings, investment strategies and broader wealth management needs.
Discuss Your Superannuation Strategy With Scion
If you're approaching or exceeding the $3 million superannuation threshold, speak with Scion Private Wealth about how Division 296 could affect your long-term financial planning.
Book a consultation to discuss your circumstances and explore your options.
Important information: This article provides general information only and does not constitute personal financial or tax advice. Superannuation and taxation rules are complex, and individual circumstances vary. Seek appropriately qualified advice before implementing any strategy.
