Compliance
Division 296: What Australia’s new super rule means for high-balance members
From 1 July 2026, new taxes on super earnings over $3 million will impact those with very large balance—here’s how it works and what you can do.
By NomadicTax Research Team • 5-8 min read • July 27, 2026
## Overview of Division 296 tax reform
Division 296 introduces **additional tax** on earnings from superannuation **for individuals whose Total Superannuation Balance (TSB) exceeds specific thresholds**. It takes effect **from 1 July 2026**, with the **first assessments expected in the 2027-28 financial year**.([csc.gov.au](https://www.csc.gov.au/Employers/News/2026/March-5-Division-296-tax?utm_source=openai)) Key thresholds for 2026-27:
| TSB amount | Additional tax on earnings (above that threshold) |
|---|---|
| Over **$3 million** | earnings over this threshold taxed at an **extra 15%** (total applies to that portion) ([csc.gov.au](https://www.csc.gov.au/Employers/News/2026/March-5-Division-296-tax?utm_source=openai)) |
| Over **$10 million** | earnings over this are taxed at **additional 25%** total (extra 15% plus additional 10%) ([csc.gov.au](https://www.csc.gov.au/Employers/News/2026/March-5-Division-296-tax?utm_source=openai)) |
Note: the **additional rates only apply to the portion of earnings linked to the excess**. Earnings under the thresholds remain taxed at the standard 15% super rate.([csc.gov.au](https://www.csc.gov.au/Employers/News/2026/March-5-Division-296-tax?utm_source=openai))
## Who needs to understand this change?
- **High net worth individuals** with large super balances. If your TSB is near or above $3 million, the impact could be material.
- **Super fund members, financial advisors**, family office holders—anyone planning long-term super savings strategy.
## Concrete calculations: how much extra tax might you pay?
**Example:**
A member, *Alexa*, ends the 2026-27 year with TSB of **$5 million**. Suppose her super fund returns 6% on average across all assets, so earnings are **$300,000** for the year. The portion of her balance $2 million above the threshold ($5M − $3M) would attract extra tax:
- Earnings attributable to the first $3M taxed at 15% = $450,000 tax on $3M × 6% = $270,000 base earnings, paying **$40,500**.
- Earnings on the excess $2M (i.e. $120,000) taxed at extra 15%, so $18,000 additional tax—for that portion total rate **30%**.
So she pays **approximately $18,000 more** in tax on those excess earnings.
If TSB went over $10M, the portion above $10M would attract a further **10% additional levy**.
## Planning strategies to reduce exposure (legally)
- **Investment growth vs contributions**: Extra contributions don’t directly affect earnings above $3M, but reorganising asset allocations may reduce volatile or high-earning portions. Lower yield stable assets may smooth exposure.
- **Timing of drawdowns**: If transitioning to drawdown or pension phase, earnings taxed differently—evaluate transition timing.
- **Utilise concessional contribution caps**: ensure contributions are structured prudently to avoid overshooting thresholds unnecessarily. If you are near the threshold, plan whether contributions this year are optimised.
- **Seek diversified investment vehicle structures**: within permitted super frameworks, some assets may produce different earnings profiles; balancing growth vs tax efficiency could matter.
## Risks & considerations
- **Legislation is new and guidance is still developing**, particularly around how earnings are attributed above thresholds. Accuracy in reporting, especially concerning super fund valuation and attribution, will be essential.([csc.gov.au](https://www.csc.gov.au/Employers/News/2026/March-5-Division-296-tax?utm_source=openai))
- **Super fund fees and investment performance** may eat into returns, so actual net impact could vary.
- **Unions or political shifts** could change parameters; stay engaged with policy updates.
**Bottom line:** If your super balance exceeds $3 million, Division 296 will introduce notable additional tax on future earnings. Early modelling and adjustment of investment strategy can cushion the effect before the tax kicks in.