Tax Planning
Division 296 Super Tax Explained: High Balance Impacts & Strategies
Learn who pays the new super earnings tax on balances over $3M, how it's calculated and what retirement-savvy individuals can do to mitigate its effects.
By NomadicTax Research Team • 5-8 min read • April 26, 2026
## What Is Division 296?
Division 296 arises from the **Treasury Laws Amendment (Building a Stronger and Fairer Super System) Bill 2026**, which was passed by both houses of Parliament in March 2026 and takes effect from **1 July 2026**. It introduces an additional tax on realised super investment earnings for individuals with **Total Superannuation Balances (TSB)** exceeding **$3 million**. ([grantthornton.com.au](https://www.grantthornton.com.au/insights/client-alerts/division-296-tax-has-passed-parliament-and-will-take-effect-from-1-july-2026/?utm_source=openai))
## Who Is Affected & How It Operates
- If your super balance is **above $3 million** as at end of a relevant income year, any **realised earnings** attributed to your super account will be taxed under Division 296. Values above thresholds are taxed at additional rates (varying tiers) based on proportion of earnings. ([superannuation.asn.au](https://www.superannuation.asn.au/wp-content/uploads/2026/02/ASFA_Building-a-Stronger-and-Fairer-Super-System-Legislation_Feb2026.pdf?utm_source=openai))
- Crucially, **unrealised capital gains** are excluded, per the final version of legislation—only earnings realised after the threshold date enter the calculation. ([sw-au.com](https://www.sw-au.com/insights/article/division-296-tax-has-passed-parliament-and-what-it-means-for-large-super-balances/?utm_source=openai))
- Super funds will need to report **realised earnings** for members whose TSB exceeds the $3 million threshold. How those earnings are measured depends on the type of fund (SMSF vs large public/private funds). ([superannuation.asn.au](https://www.superannuation.asn.au/wp-content/uploads/2026/02/ASFA_Building-a-Stronger-and-Fairer-Super-System-Legislation_Feb2026.pdf?utm_source=openai))
## Practical Examples
- Suppose Jane has a TSB of $4M. At end of income year, her fund realizes investment earnings of $200,000. The portion of earnings attributable to her balance above $3M may be taxed above normal rates under Div. 296.
- Mark has $2.5M, below threshold—no added tax. But if investment earnings push some assets into realized gains next year and he crosses $3M, the newly realized earnings over that limit become relevant.
## Strategies to Consider Before or After 1 July 2026
- **Manage Realisations**: Delay realising gains or income in years where your balance crosses $3M, if possible.
- **Use Let-it-ride Tactics**: For SMSFs or account-based income, monitor investment turnover and consider timing around when earnings are realized.
- **Review Fund Structure**: If you have multiple super interests (e.g., SMSF plus account in public fund), check combined TSB; perhaps shift investments depending on tax efficiency.
- **Consider tax advice**: Specialists can help estimate impact, especially for those close to threshold—what earnings are likely, which funds may aggregate balances.
## What You Should Track & Know
- Your **Total Superannuation Balance** each year—ATO collects these, so ensure statement matches your records.
- The funds’ **realised earnings vs income** reported annually; whether your fund provides the necessary detail.
- How various asset allocation (growth vs income vs realized gains) influences your earnings in super; low-turnover assets may produce fewer realized earnings.
- Impact of fees and investment costs reducing net earnings, hence affecting taxable earnings base.
## Broader Considerations
Division 296 aims to raise revenue from those with high super balances, thereby ensuring **fairer retirement contributions tax burden**. It also increases administrative reporting obligations both for individuals and super funds.
If your super balance is approaching or exceeds $3M, it’s time for a detailed tax and portfolio review. Proactive planning between now and 30 June 2026 (first relevant year) may help reduce unexpected tax bills.