Tax Planning
Australia’s Super Strategy: What Division 296 Tax Means for High-Balance Funds
Australia introduces Division 296 from 1 July 2026, taxing super fund earnings above $3 million, with further penalties once the balance exceeds $10 million—a critical update for those with large retirement savings.
By NomadicTax Research Team • 5-8 min read • July 8, 2026
## What Is Division 296 Tax?
Beginning **1 July 2026**, Australia’s tax regime will include a new measure—**Division 296**—affecting individuals whose **Total Superannuation Balance (TSB)** at the end of the financial year exceeds **$3 million**. Under the new rules:
- Super earnings attributed to the portion of the balance **above $3 million** will be taxed at **15%**.
- If the TSB exceeds **$10 million**, an **additional 10% tax** applies to earnings above that very large balance threshold (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))
Importantly, this tax **does not apply** to the entirety of the super balance—only to earnings linked to amounts exceeding the thresholds.
## Who Is Affected & How to Respond
| Scenario | Balance End 2025-26 Year | Tax Implication |
|----------|----------------------------|------------------|
| TSB = AUD 2.5 million | No Division 296 tax |
| TSB = AUD 5 million | Earnings on AUD 2 million (5m−3m) taxed at 15% |
| TSB = AUD 12 million | Earnings on AUD 7 million taxed first at 15%, and if earnings above 10m apply, portion above 10m taxed at additional 10% |
If you expect your super balance will breach these thresholds, planning becomes essential.
## Strategies to Mitigate Impact
* **Timing contributions and withdrawals**: By managing voluntary contributions or transitions in and out of super, you can reduce the portion subject to tax.
* **Investment allocation matters**: Adjusting growth vs defensive assets may affect earnings subject to Division 296. High growth/volatile assets could lead to higher earnings—and higher taxes—once thresholds exceeded.
* **Monitoring thresholds carefully**: Since the taxable portion depends on the *balance at the end of the year*, setting your financial position just below thresholds (if feasible) may help.
* **Tax advice for large super funds**: Super fund trustees and high-net-worth individuals should engage professional tax advice to structure portfolios and contributions effectively.
## Real-World Example
John has a super balance of **AUD 4 million** at June 30, 2026. His super fund’s earnings for the year were AUD 400,000. Under Division 296:
- The **AUD 1 million** (4m − 3m) excess = portion subject to 15% tax, applied proportionally to earnings.
- Earnings relating to first **AUD 3 million** are taxed normally.
- If John had AUD 11 million, the AUD above 10 million would get taxed at **25%** total (15% + additional 10%) on earnings tied to that portion.
## Key Takeaways for Long-Term Financial Planning
1. Estimate your end-year super balance so you can anticipate tax exposure.
2. Structure earnings-generating assets carefully—higher yield instruments increase taxed earnings.
3. Spread out major contributions or withdrawals to avoid scrunched balances that trigger higher rates.
**Bottom line**: Division 296 represents a material change for Australia’s wealthier super holders. Keeping an eye on your balance now—and taking preventative measures—can help limit surprise tax liabilities.