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)
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
- Estimate your end-year super balance so you can anticipate tax exposure.
- Structure earnings-generating assets carefully—higher yield instruments increase taxed earnings.
- 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.