Tax Planning
How Australia’s Division 296 Super Tax Affects High-Balance Savers Before 2025-26
For super fund members with over A$3 million balances, a new tax from 1 July 2025 imposes a 15% rate on earnings above the threshold. This article breaks down how Division 296 works and how to minimise liability.
By NomadicTax Research Team • 5-8 min read • April 14, 2026
## 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](https://www.ato.gov.au/about-ato/consultation/in-detail/stakeholder-relationship-groups-key-messages/superannuation-administration-group/superannuation-administration-group-key-messages-30-october-2023?utm_source=openai))
## Key Dates & Who’s Affected
- **Effective from**: 1 July 2025 income year (2025-26 financial year).([ato.gov.au](https://www.ato.gov.au/api/public/content/0-1ef514f7-8f71-4ac2-889f-6fb8d0600df6?utm_source=openai))
- **Threshold**: A$3 million total super balance (TSB), measured at end of 2025-26 year.([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/stakeholder-relationship-groups-key-messages/superannuation-administration-group/superannuation-administration-group-key-messages-30-october-2023?utm_source=openai))
- **Applicable to**: members of large funds, defined benefit schemes, self-managed superannuation funds (SMSFs) exceeding the threshold.([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/stakeholder-relationship-groups-key-messages/superannuation-administration-group/superannuation-administration-group-key-messages-30-october-2023?utm_source=openai))
## Calculating the Division 296 Tax
- Only the **earnings portion** attributable to the balance exceeding A$3 million are taxed at 15%.([ato.gov.au](https://www.ato.gov.au/api/public/content/0-1ef514f7-8f71-4ac2-889f-6fb8d0600df6?utm_source=openai))
- Members may have **carried-forward negative super earnings** (if earnings fall below zero), which can offset future earnings over the threshold.([ato.gov.au](https://www.ato.gov.au/api/public/content/0-1ef514f7-8f71-4ac2-889f-6fb8d0600df6?utm_source=openai))
- 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](https://www.ato.gov.au/api/public/content/0-1ef514f7-8f71-4ac2-889f-6fb8d0600df6?utm_source=openai))
## 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](https://www.ato.gov.au/about-ato/consultation/in-detail/stakeholder-relationship-groups-key-messages/superannuation-administration-group/superannuation-administration-group-key-messages-17-june-2025?utm_source=openai))
- You will receive a **Notice of Assessment (NOA)** with your Division 296 liability. Delay in payment may trigger default authority.([ato.gov.au](https://www.ato.gov.au/api/public/content/0-1ef514f7-8f71-4ac2-889f-6fb8d0600df6?utm_source=openai))
- If you prefer, you may elect within 60 days of NOA to **withdraw money from your fund** to pay the debt.([ato.gov.au](https://www.ato.gov.au/api/public/content/0-1ef514f7-8f71-4ac2-889f-6fb8d0600df6?utm_source=openai))
## 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](https://www.ato.gov.au/api/public/content/0-1ef514f7-8f71-4ac2-889f-6fb8d0600df6?utm_source=openai))
- **Adjust investment profile**: Assets that produce relatively stable income may help plan cash flows to match expected liabilities.
## Action Plan
1. Check your projected total super balance as at 30 June 2026.
2. Speak with your fund or financial advisor to model your expected earnings over threshold.
3. Ensure your SMSF or fund is ready to report using new labels for Division 296.
4. 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.