What is Division 296 tax?
Division 296 introduces a new tax specifically targeting super balances that exceed certain thresholds. From 1 July 2026, individuals with a Total Super Balance (TSB) over $3 million may face a 15% tax on earnings associated with the super balance above that threshold. If their TSB exceeds $10 million, an additional 10% tax applies on the earnings above that very large threshold. (community.ato.gov.au)
Who is affected?
- APRA-regulated funds & self-managed super funds (SMSFs). If your combined super across funds surpasses the thresholds at year-end, your earnings above those levels are taxed more heavily.
- The tax applies only on the portion of earnings that correspond to what is over the threshold—not your entire balance.
- Thresholds may be indexed in line with inflation/CPI in coming years. (community.ato.gov.au)
When will you receive this tax assessment?
Notice of assessments under Division 296 will be issued in the latter half of the 2027-28 financial year for earnings and balances relating to the 2026-27 financial year, once your fund reports relevant earnings. (community.ato.gov.au)
Practical Examples
- Example 1: If you finish 30 June 2027 with a TSB of $4 million, you're $1 million above the $3 million threshold. Suppose your fund earns $100,000 in relevant earnings that year; 15% of the earnings attributable to the excess $1 million will be taxed more by Division 296.
- Example 2: If your balance is $12 million, first $3 million is standard; next $7 million is taxed per the 15% rate; the $2 million above $10 million has an additional 10% rate on those portioned earnings.
Tax-Planning Strategies to Consider
- Consider rolling over or equalising balances: Diversifying super funds or making contributions/withdrawals that shift your balance below thresholds.
- Monitor investment earnings: Seek funds that have stable or defensive earnings above thresholds during high-volatility periods.
- Spread earnings where possible: Some fund-level decisions may help smooth earnings. But tax isn't avoidable—only optimised.
What to Watch Out For
- Ensure accurate tracking of all your super funds—administered or self-managed. Don’t miss hidden balances.
- Don’t assume high earnings indicate automatic liability—only earnings corresponding to the excess over thresholds are taxed.
- Keep detailed records; you may need reporting from your fund or fund administrator.
By understanding Division 296 now and using proactive strategies, very super-rich Australians can better anticipate their liabilities and structure their portfolios accordingly.