Tax Planning
How Australia’s Division 296 Tax Changes Superannuation for High-Balance Individuals
From 1 July 2026, individuals with more than $3 million in super balances will face a new tax on super earnings — we break down what it is, who it affects and how to plan.
By NomadicTax Research Team • 5-8 min read • June 21, 2026
## What is Division 296 Tax?
Starting **1 July 2026**, Australia will implement a new tax under **Division 296** that imposes **additional tax on certain super earnings** for individuals whose total super balance (TSB) exceeds specific thresholds. ([csc.gov.au](https://www.csc.gov.au/advisers/news/2026-05-better-targeted-super-concessions?utm_source=openai))
- **Large super balance threshold (LSBT)**: $3 million. If your balance exceeds this, earnings on the excess will be taxed at an additional **15%**. ([csc.gov.au](https://www.csc.gov.au/advisers/news/2026-05-better-targeted-super-concessions?utm_source=openai))
- **Very large super balance threshold (VLSBT)**: $10 million. Earnings above this higher threshold face an additional **10%** (making a total surcharge of **40%** on those earnings). ([csc.gov.au](https://www.csc.gov.au/advisers/news/2026-05-better-targeted-super-concessions?utm_source=openai))
## Who’s Likely to Be Impacted?
This measure will affect a **small** portion of Australians:
- Those with **super balances greater than $3 million** (for the 2026-27 financial year) will pay extra tax on earnings above that threshold. ([csc.gov.au](https://www.csc.gov.au/advisers/news/2026-05-better-targeted-super-concessions?utm_source=openai))
- If the balance exceeds **$10 million**, earnings above $10 million will be taxed at an additional rate. ([csc.gov.au](https://www.csc.gov.au/advisers/news/2026-05-better-targeted-super-concessions?utm_source=openai))
Notably, the additional tax is **only on earnings relating to the portion** of the super balance exceeding thresholds—not on the entire super savings. ([csc.gov.au](https://www.csc.gov.au/advisers/news/2026-05-better-targeted-super-concessions?utm_source=openai))
## What Counts as Earnings? And Other Key Details
To plan effectively, you need to know what’s counted and how it works:
- Earnings mean **realised investment returns**—interest, dividends, gains—that are assessable under income tax rules. ([csc.gov.au](https://www.csc.gov.au/advisers/news/2026-05-better-targeted-super-concessions?utm_source=openai))
- TSB is measured **at financial year-end**. If your balance exceeds the LSBT or VLSBT at 30 June, you may owe Division 296 tax. ([csc.gov.au](https://www.csc.gov.au/advisers/news/2026-05-better-targeted-super-concessions?utm_source=openai))
- Dividends of existing super balances affect the tax liability only when the earnings relate to the portion exceeding $3 million or $10 million, respectively. ([csc.gov.au](https://www.csc.gov.au/advisers/news/2026-05-better-targeted-super-concessions?utm_source=openai))
## Planning Strategies to Manage or Mitigate Exposure
If you think you might be affected, here are actionable steps:
- **Review contribution caps** and limits earlier **before exceeding $3 million**. Consider gradual withdrawals (if allowed) or restructuring beneficiaries.
- **Use tax-efficient investments** inside super to reduce volatile or high-earning assets in the portion above thresholds.
- **Consider timing of withdrawals**—distribute super pieces over years to avoid a spike above threshold at year-end.
- **Allocation of assets across super funds**: spreading super or reviewing allocation to more tax-conservative portfolios once thresholds are crossed.
- **Seek professional advice**—this change interacts with transfer balance caps, pension phase rules, death benefits and investment choices.
## Example
Jane has a super balance of $4 million at 30 June 2027. The portion above LSBT is $1 million. Earnings on that $1 million for the financial year, say $100,000 return, will be taxed at an extra 15%, so an additional $15,000 tax on those earnings. If she had $11 million (so $1 million above VLSBT), then earnings on that portion above $10 million face 40% surcharge, etc. Multiplying these by returns matters.
## Things to Watch Out For
- Division 296 tax is **enacted** now—effective from **1 July 2026**. ([csc.gov.au](https://www.csc.gov.au/advisers/news/2026-05-better-targeted-super-concessions?utm_source=openai))
- Might intersect with **transfer balance account rules**, **defined benefit schemes**, **pension phase** rules. Always check personal super structure. ([csc.gov.au](https://www.csc.gov.au/advisers/news/2026-05-better-targeted-super-concessions?utm_source=openai))
## Actionable Next Steps
- Request latest statements to assess your TSB.
- Review asset allocations inside super for returns and risk.
- Plan for possible restructuring—consider estate planning, death benefits, splitting balances.
- Ensure you keep excellent records of super earnings; compliance expected.
If you proceed with early planning, you may ease the burden and avoid surprises when July 2026 rolls around. It's a big step in targeting tax concessions toward those with very large pools of retirement savings.