Compliance
Australia’s New Super Tax Rules for High Balances: Division 296 Explained
Starting 1 July 2026, Australians with super balances over certain thresholds will face new taxes under Division 296. Learn who’s affected, how earnings are taxed, and what steps to manage the impact.
By NomadicTax Research Team • 5-8 min read • July 20, 2026
## What is Division 296?
Division 296 is an Australian tax measure introduced to adjust how **earnings on superannuation balances above certain thresholds** are taxed. It comes into effect from **1 July 2026 (financial year 2026-27)**. ([community.ato.gov.au](https://community.ato.gov.au/s/article/a07Mo00001w0qcO/what-division-296-tax-changes-means-for-your-super-balance?utm_source=openai))
**Thresholds**:
- **Large super balance threshold (LSBT):** AUD 3 million. Earnings above this are taxed at **15%**. ([community.ato.gov.au](https://community.ato.gov.au/s/article/a07Mo00001w0qcO/what-division-296-tax-changes-means-for-your-super-balance?utm_source=openai))
- **Very large super balance threshold (VLSBT):** AUD 10 million. Earnings above this are taxed an *additional* **10%** on the portion above the VLSBT. ([community.ato.gov.au](https://community.ato.gov.au/s/article/a07Mo00001w0qcO/what-division-296-tax-changes-means-for-your-super-balance?utm_source=openai))
If your super balance is $5 million at year-end, only the earnings associated with the amount above the $3 million LSBT are taxed at the higher rate—**not your entire super**.
## Why the Change? Implications for Australians
- Designed to ensure **fairness** in the taxation of super balances—aligning treatment of those with significantly larger balances.
- Aimed at closing tax concessions on high super balances that previously benefited only a small group.
- Raises incentives for individuals with large balances to review their **super accumulation strategies**.
## Practical Scenarios & Examples
| Scenario | Total Super Balance (TSB) | Tax Treatment on Earnings |
|----------|----------------------------|----------------------------|
| Susan has TSB = AUD 2.5 million | Below LSBT | No Division 296 tax; earnings taxed normally under existing super rules. |
| Michael has TSB = AUD 4.5 million | Above LSBT, below VLSBT | Earnings above AUD 3 million taxed at 15% (portion above threshold only). |
| Emma has TSB = AUD 12 million | Above VLSBT | Earnings above AUD 3 million taxed at 15%, earnings above AUD 10 million taxed extra 10% (i.e. 25% on portion above VLSBT). |
## What You Should Do Now
- **Check your super balance** at year end and estimate expected earnings. If you expect to cross thresholds, consider restructuring contributions or withdrawals before 30 June 2026.
- **Diversify retirement assets**: Consider investment pathways outside superannuation or income outside the super system for portions exceeding thresholds.
- **Keep meticulous records** of your super earnings and fund balances.
- **Consult a superannuation or tax professional** to explore strategies suited to your risk profile and retirement horizon.
## Actionable Tax-Planning Tips
- Adjust regular contributions if close to thresholds.
- If nearing the VLSBT, consider adopting more defensive investment options to limit earnings during threshold periods.
- Use non-super investment vehicles (e.g. taxable accounts) for growth once you exceed threshold, to preserve lower earnings tax profiles.
- Review any legislative changes annually, as thresholds and rules may be updated.
## Bottom Line
Division 296 starts from July 2026, adds tax on earnings above $3 million LSBT, and extra tax above $10 million VLSBT.
Managing super balances and diversifying retirement portfolios can help high-balance members reduce tax impact and make informed financial decisions.