Tax Planning

Division 296 Tax: Super Strategies for High Net-Worth Individuals

From 1 July 2025, individuals with super balances over $3 million may now face the new Division 296 tax—this article explains who’s affected, how it’s calculated, and smart ways to manage the impact.

By NomadicTax Research Team • 5-8 min read • May 8, 2026

## What Is Division 296 Tax? Division 296 is a new tax measure aiming to better target superannuation tax concessions. It applies to **earnings** on the portion of an individual’s Total Superannuation Balance (TSB) **above $3 million**, starting in the **2025-26 financial year**—from **1 July 2025**.([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/stakeholder-relationship-groups-key-messages/superannuation-administration-group/superannuation-administration-group-key-messages-30-october-2023?utm_source=openai)) The tax rate is **15%** on the earnings attributable to that excess portion; for super balances over $10 million, an additional 10% on contributions may also apply under some proposals.([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/sites/default/files/2026-02/PLS_working_group_key_outcomes_20_January_2026.pdf?utm_source=openai)) This tax is separate from regular income tax and the tax paid by super funds themselves.([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/stakeholder-relationship-groups-key-messages/superannuation-administration-group/superannuation-administration-group-key-messages-30-october-2023?utm_source=openai)) ## Who Is Impacted? - Individuals with **super savings exceeding $3 million** at the **end of the 2025-26 financial year**.([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/stakeholder-relationship-groups-key-messages/superannuation-administration-group/superannuation-administration-group-key-messages-30-october-2023?utm_source=openai)) - Both Self-Managed Super Funds (SMSFs) and large industry or retail super funds.([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/stakeholder-relationship-groups-key-messages/superannuation-administration-group/superannuation-administration-group-key-messages-30-october-2023?utm_source=openai)) - Defined Benefit Funds: tax applies when benefits are paid from accumulation-equivalent interests.([ato.gov.au](https://www.ato.gov.au/api/public/content/0-1ef514f7-8f71-4ac2-889f-6fb8d0600df6?utm_source=openai)) - It's expected to affect less than 1-2% of superannuation account holders. Most people with balances under $3 million will be unaffected.([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/stakeholder-relationship-groups-key-messages/superannuation-administration-group/superannuation-administration-group-key-messages-30-october-2023?utm_source=openai)) ## How It’s Calculated & Paid - The base earnings on the portion of your TSB above $3 million are identified for the **2025-26 year**. Earnings could be positive or negative; negative earnings carry forward to offset future years.([ato.gov.au](https://www.ato.gov.au/api/public/content/0-1ef514f7-8f71-4ac2-889f-6fb8d0600df6?utm_source=openai)) - Notice of Assessment (NOA) will be issued to individuals, who have **84 days** to pay.([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/sites/default/files/2026-02/PLS_working_group_key_outcomes_20_January_2026.pdf?utm_source=openai)) Alternatively, individuals may **elect** to withdraw from their super fund within 60 days of NOA to pay the tax.([ato.gov.au](https://www.ato.gov.au/api/public/content/0-1ef514f7-8f71-4ac2-889f-6fb8d0600df6?utm_source=openai)) If unpaid, the ATO may issue a **default release authority** to the fund for release of the required funds.([ato.gov.au](https://www.ato.gov.au/api/public/content/0-1ef514f7-8f71-4ac2-889f-6fb8d0600df6?utm_source=openai)) - For Defined Benefit interests in accumulation phase: tax liability is deferred until first benefit is paid; deferred debts still attract interest if unpaid by year-end.([ato.gov.au](https://www.ato.gov.au/api/public/content/0-1ef514f7-8f71-4ac2-889f-6fb8d0600df6?utm_source=openai)) - SMSFs will supply data via new labels in their **2026 SMSF Annual Return (SAR)**; guidance has been provided.([ato.gov.au](https://www.ato.gov.au/api/public/content/0-1ef514f7-8f71-4ac2-889f-6fb8d0600df6?utm_source=openai)) ## Strategies to Manage the Impact - Consider the **timing of contributions**: if you expect your TSB to exceed $3 million, plan contributions to manage balances. For example, delaying making large contributions may help reduce the taxable portion. But always balance with long-term investment growth. - Use negative super earnings carry-forwards wisely. Losses or negative returns on super can offset future positive earnings attributable to the excess portion.([ato.gov.au](https://www.ato.gov.au/api/public/content/0-1ef514f7-8f71-4ac2-889f-6fb8d0600df6?utm_source=openai)) - If you're holding portions of your wealth outside super (e.g. investment property, shares), reassess allocation: moving wealth into taxed entities vs super may offer different tax efficiencies. - Track your super balance closely: the ATO will index the threshold and may adjust excess rate thresholds over time. Budget for additional tax liabilities in financial planning. - Seek advice early: the NOA will likely arrive after close-off of the year; ensure you have liquidity or election options to pay via the fund (if applicable). ## Example Scenario **Jane**, aged 60, has a TSB of $4 million as at 30 June 2026. Her super fund earned **7%** for that year. The portion above $3 million is $1 million. *Earnings on that million = $70,000*. Division 296 tax on that amount = **$10,500** (15%). Jane receives NOA and either pays or withdraws funds from her super. If instead her super had negative earnings, she would carry forward a loss only impacting future years when earnings are positive. ## Key Dates to Note - **1 July 2025**: Division 296 measure commenced.([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/stakeholder-relationship-groups-key-messages/superannuation-administration-group/superannuation-administration-group-key-messages-30-october-2023?utm_source=openai)) - **30 June 2026**: First year for TSB being measured and earnings taxed under Division 296.([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/stakeholder-relationship-groups-key-messages/superannuation-administration-group/superannuation-administration-group-key-messages-30-october-2023?utm_source=openai)) - **SAR 2026**: New reporting required from SMSFs and super funds.([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/sites/default/files/2026-02/PLS_working_group_key_outcomes_20_January_2026.pdf?utm_source=openai)) ## Why This Matters Division 296 signals a shift toward making super tax concessions more equitable. For high-balance holders, every dollar in super beyond $3 million may now attract higher fees, compliance scrutiny, and planning considerations. The measure potentially affects retirement planning, investment mix, and decisions around when and how you contribute to super. **Summary**: If you expect your total super balance to exceed $3 million, now is the time to plan. Track balances, assess earnings, and understand your payment obligations once NOAs arrive. For most Australians, Division 296 will have little or no impact—but for high balance holders, the clock is ticking.