Tax Planning
High Balance Super Taxation: Planning Strategies under Division 296
If your total super balance will exceed A$3 million, Division 296 tax introduces a new layer of strategy for super accumulation and drawdowns — smart planning now can mitigate extra tax.
By NomadicTax Research Team • 5-8 min read • August 11, 2026
## Understanding Division 296: What Has Changed
Beginning **1 July 2026**, Division 296 under the ATO’s new **Better Targeted Superannuation Concessions** regime generates **additional tax** on super earnings above specified thresholds. For the **2026-27 financial year**, the **Large Super Balance Threshold (LSBT)** is **$3 million**, and the **Very Large Super Balance Threshold (VLSBT)** is **$10 million**. Earnings above the LSBT are taxed at **15%**, and an extra **10%** applies to those above VLSBT. The tax only applies to the portion of earnings linked to the excess balance. ([community.ato.gov.au](https://community.ato.gov.au/s/article/a07Mo00001w0qcO/what-division-296-tax-changes-means-for-your-super-balance?utm_source=openai))
## Who Is Likely Affected
- Individuals with **accumulated super balances over $3 million** across all super funds (APRA, SMSF etc.) by year-end.
- Those who have growth-oriented investments in super, as earnings will be taxed on the margin above the threshold.
- High net-worth individuals using super as a primary vehicle for retirement savings and wealth accumulation.
## Planning & Mitigation Strategies
| Strategy | Key Consideration | Potential Benefit |
|---|---|---|
| **Evaluate investment mix inside super** | Balancing growth vs income assets; earnings taxed above LSBT are in scope. Partially shifting to lower-earning assets may reduce exposure. | Lower taxable earnings and smoother ramp-up beyond thresholds. |
| **Rollovers and retirement income streams** | Some retirement products (like capped defined benefit streams) may impact transfer balance caps and trigger different tax outcomes. | Structuring to minimise Phase-outs and tax leakage. |
| **Draw down or draw forward versus accumulation** | Taking out balances or using pension phase earlier might reduce exposure for high earners. | Potential to stay below threshold or limit earnings above it. |
| **Indexation awareness** | LSBT & VLSBT may rise with CPI in future years. Plan horizons to anticipate thresholds. | Timing contributions or transfers before thresholds are indexed might reduce liability. |
## Example Scenario
- Alice has a TSB of **$3.5 million** at 30 June 2027. Her super fund’s earnings for the year are $200,000.
- Only the portion of earnings **proportional to excess balance ($3.5m - $3m = $0.5m)** will be taxed at **15%** under Division 296.
- If Alice crosses the **$10m VLSBT**, any earnings above that will also attract **additional 10%** rate.
## Actions You Should Take Before Year-End
- Obtain accurate TSB projections now. Know where you are relative to LSBT/VLSBT thresholds.
- Review expected super earnings for 2026-27; forecast growth in each asset.
- Consult with your SMSF trustee or super fund about reporting practices for earnings.
- Consider timing lump-sum contributions or transfers to reduce exposure in high balance years.
## Compliance & Reporting
- Super funds must report “relevant super earnings” for members whose TSB exceeds LSBT. ATO issues assessments in the latter half of 2027-28. ([community.ato.gov.au](https://community.ato.gov.au/s/article/a07Mo00001w0qcO/what-division-296-tax-changes-means-for-your-super-balance?utm_source=openai))
- Ensure clear records of super fund balances, asset allocations and earnings attribution to comply with ATO’s thresholds and tax assessments.
**Conclusion**: For high-balance super members, Division 296 introduces a non-trivial tax on earnings above certain balance thresholds. Early planning and careful investment strategies can help minimise extra tax, while staying compliant with new reporting and timing requirements.