What is Division 296?
From the 2025-26 income year, Australia’s Federal Government will impose a special superannuation tax called Division 296, aimed at individuals whose total superannuation balance exceeds A$3 million. Earnings attributable to the portion of balances above that threshold will be taxed at 15%, higher than the standard 15% rate on balances under A$3M.(ato.gov.au)
Key Dates & Who’s Affected
- Effective from: 1 July 2025 income year (2025-26 financial year).(ato.gov.au)
- Threshold: A$3 million total super balance (TSB), measured at end of 2025-26 year.(ato.gov.au)
- Applicable to: members of large funds, defined benefit schemes, self-managed superannuation funds (SMSFs) exceeding the threshold.(ato.gov.au)
Calculating the Division 296 Tax
- Only the earnings portion attributable to the balance exceeding A$3 million are taxed at 15%.(ato.gov.au)
- Members may have carried-forward negative super earnings (if earnings fall below zero), which can offset future earnings over the threshold.(ato.gov.au)
- If your liability isn’t paid on time, the ATO can issue a default release authority, forcing your fund to release assets to pay the tax.(ato.gov.au)
Practical Examples
| Scenario | TSB at 30 June 2026 | Earnings in 2025-26 | Portion above A$3M | Division 296 tax payable |
|---|---|---|---|---|
| Jane has A$4 million, earnings A$200,000 | A$4,000,000 | A$200,000 | A$1,000,000 | A$1,000,000 × earnings rate proportion = assessed under rules; 15% × product |
| Bob has A$2.5 million, earnings A$100,000 | A$2,500,000 | A$100,000 | Below threshold | No Division 296 tax |
(Exact figures depend on how much of your earnings relate to the portion above A$3M; funds will report labels to calculate.)
How Funds Will Report & Your Obligations
- SMSFs will use two new labels on the 2026 SMSF Annual Return to supply data.(ato.gov.au)
- You will receive a Notice of Assessment (NOA) with your Division 296 liability. Delay in payment may trigger default authority.(ato.gov.au)
- If you prefer, you may elect within 60 days of NOA to withdraw money from your fund to pay the debt.(ato.gov.au)
Strategies to Manage or Reduce Liability
- Monitor your super balance: If you're close to A$3M, avoid unnecessary contributions until after year-end if you expect minimal growth.
- Use carry-forward negative earnings: If past earnings were negative, they can reduce taxable earnings in future years.
- Consider fund structure: For defined benefit interests, certain deferrals exist—seek professional advice to understand timing.(ato.gov.au)
- Adjust investment profile: Assets that produce relatively stable income may help plan cash flows to match expected liabilities.
Action Plan
- Check your projected total super balance as at 30 June 2026.
- Speak with your fund or financial advisor to model your expected earnings over threshold.
- Ensure your SMSF or fund is ready to report using new labels for Division 296.
- Prepare for the NOA and decide whether to use internal fund election to pay liability.
Why It Matters: For those well above A$3M, the Division 296 tax can impose a significant marginal rate on portions of your super-earnings. Planning ahead can reduce the surprise and give you choices to respond.