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Australia’s Division 296 Tax: What Superannuation Members Need to Know from 1 July 2026

Starting 1 July 2026, Australians with super balances above $3 million face new tax on earnings—here’s what you need to know and how to manage.

By Nomadic Tax Institute research team · 5-8 min read · Created

What Is Division 296 Tax?

The Division 296 tax is a change introduced by the Australian Taxation Office (ATO) that imposes additional tax on superannuation earnings if your Total Super Balance (TSB) exceeds certain thresholds. It will take effect from 1 July 2026. (community.ato.gov.au)

Thresholds for 2026-27 Financial Year:

  • Large Super Balance Threshold (LSBT): $3 million
  • Very Large Super Balance Threshold (VLSBT): $10 million

If your TSB exceeds $3 million, the earnings proportional to the excess will be taxed at 15%. If over $10 million, that portion above $10 million gets an additional 10% tax. (community.ato.gov.au)

How It’s Calculated

  • TSB is assessed at end of financial year.
  • Some funds will also consider balance just before financial year starts. The greater of the two may apply in future years.
  • Only earnings related to the amount exceeding the thresholds are taxed at the higher rates. (community.ato.gov.au)

Who This Applies To

  • Members of super funds whose total super assets are held in one or more super funds; includes SMSFs (Self-Managed Super Funds).
  • It’s not all super balance that’s taxed—only the earnings portion above LSBT/VLSBT thresholds.
  • Super funds will report relevant earnings to ATO; you'll see assessments later. (community.ato.gov.au)

Timeline and Reporting

  • Financial year 2026-27 starts 1 July 2026—first year the threshold applies.
  • Notices of assessment from ATO are expected to be issued in latter half of 2027-28 when super fund earnings are reported. (community.ato.gov.au)

Practical Strategies to Consider

  • Consolidate multiple super accounts to avoid reaching TSB thresholds unintentionally.
  • Review fund performance—super funds with lower earnings may reduce Division 296 tax exposure.
  • Plan timing of withdrawals if eligible or needed.
  • Consult financial & tax advisor, especially for SMSFs, to understand your fund’s exposure and reporting obligations.

Example Scenarios

  1. TSB of $4 million:

    • $3M threshold → first $3 million earnings taxed normally
    • $1M excess earnings taxed at 15% above threshold

  2. TSB of $12 million:

    • Earnings on first $10M: taxed normally or under regular super tax rules
    • Earnings on $2M above VLSBT taxed at 15% + 10% extra = 25% total tax on that segment

Key Takeaways

  • If you expect your TSB to exceed $3 million in 2026-27, assess your strategy now.
  • Understand what portion of your earnings above thresholds will face the higher rates—not whole account.
  • Watch for your super fund’s reporting and assessment in 2027-28.
  • These rules represent a growing trend globally: taxing wealth or earnings over high wealth thresholds.

Bottom line: Division 296 makes Australian super earnings over certain high-balance thresholds subject to layering tax, so high-balance super owners must plan carefully.

Sources

Existing article citations

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what-division-296-tax-changes-means-for-your-super-balance (community.ato.gov.au)