Compliance
Compliance Alert: Division 296 Tax and Payday Super From 1 July 2026
Super savers with big balances and employers face major compliance changes starting 1 July 2026—know what to report, calculate, and how system updates like Payday Super affect you.
By NomadicTax Research Team • 5-8 min read • July 7, 2026
## What Has Changed?
- **Division 296 Tax** will apply from the **2026–27 financial year** to super balances that exceed certain thresholds:
- For total super balance (TSB) over **$3 million**, earnings above that threshold face an *additional 15% tax*, bringing total tax to **30%**.
- For TSB above **$10 million**, earnings above that level incur a further **10%**, leading to **40% total tax**. ([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))
- **Payday Super** also becomes mandatory from **1 July 2026**. Employers must pay super guarantee on each payday—**at the same time salary is paid**—instead of end-of-quarter payments. Contributions must be received by super funds within **7 business days**, unless an extended time is permitted. ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/PaydaySuper?utm_source=openai))
## Who Must Comply?
- Individuals with super balances above the $3M threshold—SMSFs and retail/APRA-regulated funds included.
- Employers in all sectors (private/public) must update payroll systems to separate qualifying earnings from other pay items.
- Third-party Service Providers and software developers will need to update systems to support payday-based SG contributions, new codes, and real-time or near-real time payments. ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/PaydaySuper?utm_source=openai))
## Key Compliance Steps for Individuals & Employers
### For Individuals / Super Fund Members:
- Monitor your *total super balance* (across all funds)—includes SMSFs and APRA-regulated funds.
- Keep accurate records of earnings (investment returns) in relation to the thresholds.
- Anticipate assessments: ATO will issue **Division 296 tax notices** in the second half of 2027–28 after relevant earnings are reported. ([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))
### For Employers / Super Funds:
- Update payroll and contribution systems to calculate SG on each payday.
- Distinguish **qualifying earnings (QE)**—beyond just ordinary time earnings.
- Super funds must allocate or return contributions within 3 business days.
- Update compliance with SuperStream and New Payments Platform standards. ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/PaydaySuper?utm_source=openai))
## Example
Employer X has an employee earning \$80,000/year plus bonuses and commissions. Starting July: total earnings including bonuses are considered QE. Each payday, Employer X must calculate SG on the entire QE and remit within 7 business days. If the employee’s super balance exceeds \$3M, earnings above that threshold will be taxed under Division 296—so that employee’s reported earnings from the fund matter.
## Tips to Prepare
- For super fund members near \$3M or \$10M, model expected investment returns; small changes could push your earnings into higher tax brackets.
- Employers: engage software vendors now to ensure systems support payday SG, reporting of QE, error handling, fund validation, etc.
- Maintain clean records—dates, payroll reports, super statements, and communications from super funds.
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*Author: NomadicTax Research Team*
Category: Compliance
Read Time: 5–8 min