Overview: What is Division 296 Tax?
From 1 July 2026, an additional tax under Division 296 will apply to super earnings for those whose Total Super Balance (TSB) exceeds $3 million at year end. If TSB exceeds $10 million, an additional tax applies on earnings over that higher threshold. Importantly, only the earnings portion above threshold—not the full balance—are taxed. (community.ato.gov.au)
Key Details & Rates
- LSBT (Large Super Balance Threshold): $3,000,000; earnings above this taxed at 15%. (community.ato.gov.au)
- VLSBT (Very Large Super Balance Threshold): $10,000,000; earnings above this taxed at 25% total (i.e. additional 10% on earnings above $10 million, besides the 15% on earnings between $3 million and $10 million). (community.ato.gov.au)
- Applies if your TSB is above the threshold either just before the start of the year or at the end—the greater of the two balances is used. (community.ato.gov.au)
Who is Impacted?
- Individuals with SMSFs containing large balances, or those with multiple super funds whose total across funds exceeds thresholds.
- APRA regulated funds will report relevant earnings on high-balance members; SMSFs must do similarly if applicable. (community.ato.gov.au)
- Even if your super fund is under $3 million, remember contributions or transfers that push you over are relevant for future years.
Examples
- Sarah has a TSB of $3.5 million at year end: only earnings linked to the $500,000 above $3 million will be taxed at 15%. Earnings for balances below $3 million are taxed as normal.
- Mark has $11 million; the $7 million between $3–$10 million is taxed at 15%, and the $1 million above $10 million is taxed at 25%. Earnings on first $3 million are unaffected by Division 296.
Planning & Actions for Large Balance Holders
- Track all super accounts: consolidate if needed to avoid surprises from split balances.
- Estimate earnings: work with fund manager to model earnings under various return assumptions.
- Consider investment structuring: e.g. tax-exempt components, or adjusting exposure toward income types vs capital gains, given different earning treatments by your fund.
Administration & Timing
- Notices of Assessment under Division 296 for the 2026–27 financial year will be issued in the latter half of 2027–28, after funds report relevant earnings. (community.ato.gov.au)
- LSBT and VLSBT thresholds will be indexed annually to CPI in future. (community.ato.gov.au)
Conclusion: If your super is large or nearing the $3 million mark, this change deserves attention now. Proper tracking, planning, and consulting with professionals can reduce unexpected tax burdens.