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Understanding the Proposed Division 296 Superannuation Tax

Updated: Jul 1

The Australian Government is proposing a new tax measure, known as Division 296, which will be aimed at individuals with superannuation balances exceeding $3 million. Whilst this is not law yet and is still being debated in the Senate, it is set to commence on 1 July 2025. The tax introduces an additional levy of 15% on earnings associated with the portion of superannuation balances above the $3 million threshold. This is in addition to the existing 15% on super earnings, effectively doubling the tax rate to 30% for earnings attributable to the excess amount.


hands of two people pointing at charts on a tablet used on a blog about proposed division 296 tax measures

Key Features of Division 296:

  • Applicability: This tax targets individuals whose Total Superannuation Balance (TSB) exceeds the $3 million at the end of a financial year.

  • Earnings Calculation: It includes both realised and unrealised gains, meaning increases in asset values are tax even if they are not sold.

  • Threshold: The $3 million cap is not indexed, hence this will potentially affect more individuals over time due to inflation.

  • Payment options: Individuals can choose to pay the liability personally or release funds from their superannuation accounts.


Calculating the Division 296 Tax:

To determine the Division 296 tax liability, the following steps need to be taken:


  1. Calculate Earnings: Earnings = (TSB at end of financial year + Withdrawals – Net Contributions) – TSB at start of financial year.

  2. Determine Proportion of Earnings Attributed to Balance of $3 Million:

    Proportion = (TSB at end of financial year – $3 million) / TSB at end of financial year.

  3. Calculate Tax Liability:

    Tax = 15% × Earnings × Proportion


Example Calculation:

Consider an individual with the following superannuation:

  • TSB on 30 June 2026: $4,300,000

  • TSB on 30 June 2025: $4,000,000

  • Contributions during the year: $30,000

  • Withdrawals during the year: $80,000


Step 1. Calculate Earnings

Earnings = ($4,300,000 + $80,000 – $30,000) – $4,000,000 = $350,000


Step 2. Determine Proportion Attributable to Balance over $3 Million

Proportion = ($4,300,000 – $3,000,000) / $4,300,000 ≈ 30.23%


Step 3. Calculate Tax Liability

Tax = 15% × $350,000 × 30.23% ≈ $15,870.75


Therefore, the individual would incur an additional tax liability of approximately $15,870.75 under Division 296 for the 2025-2026 financial year if this proposal were to go ahead in its current form.


Some Considerations:

  • The inclusion of unrealised gains means that individuals may face tax liabilities on increases in asset values without actual income or gain realisation.

  • The lack of indexation on the $3 million threshold could lead to more individuals being affected over time due to inflation and investment growth.

  • For Defined Benefit Funds, these schemes have specific valuation rules. Members of these style of funds may defer tax payment until retirement.


Next Steps / Where to from here?

Scion Private Wealth is a Brisbane financial planner and private wealth adviser with expertise in investment management, retirement financial planning, tax optimisation strategies and intergenerational wealth transfer

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