What is Division 296 Tax?
Division 296 is a newly enacted tax targeting superannuation earnings for individuals whose total superannuation balance (TSB) exceeds certain thresholds. Effective from 1 July 2026, the tax imposes additional tax on earnings above these thresholds at higher rates. (csc.gov.au)
Thresholds & Rates
| TSB Tier | Threshold | Additional Tax on Earnings of Portion Above Threshold |
|---|---|---|
| Tier 1 | Above $3 million and up to $10 million | 30% total on earnings above $3M, i.e. extra 15% above base rate (csc.gov.au) |
| Tier 2 | Above $10 million | 40% total – an extra 25% above base rate for amounts exceeding $10M (csc.gov.au) |
Note: These higher rates apply only the excess earnings, not the full super balance. Base tax rates apply to other earnings.
Who Is Affected
- A very small minority of super fund members with balances above $3 million.
- Mainly high net-worth individuals, long-serving executives, or those with strong investment returns.
- Members of Defined Benefit schemes will see specific treatment still being finalised. (csc.gov.au)
Strategies and Considerations
- Investment Return Planning: Earnings from super above the threshold are taxed more heavily. Consider balancing return-risk profile, potentially reducing exposure to high-return/high-volatility assets for the portion above thresholds.
- Consolidation of Super Accounts: Multiple fund balances count toward your TSB. Merging accounts may help you manage exposure above these thresholds.
- Contribution Caps & Timing: Be mindful of contribution timing so any extra concessional or non-concessional amounts don’t push you significantly over thresholds.
Example
Assume your total superannuation balance is $4 million:
- $3 million portion taxed at standard rates; $1 million in excess taxed at 30% on earnings above $3 million.
- If your earnings rate is 8% p.a., that means earnings of $80,000; $80,000 above first $3M taxed with extra 15% (making 30% total).
If your TSB were $12 million, earnings above $10M portion would also attract an additional 25% extra, so for those earnings you’d face a 40% effective tax on that slice.
Action Items for Super Members
- Review estimated end-of-year TSB to anticipate exposure.
- Adjust investment allocations for the portion of super balance prone to higher tax.
- Liaise with super fund to understand how earnings above thresholds will be calculated and reported.
- Seek personalised advice if in or near threshold bands to optimize tax outcomes.
Category: Tax Planning
Takeaway: If your super balance surpasses $3M, plan now for how that excess will be taxed under Division 296 – small changes before 1 July can help preserve value.