Tax Planning
How Australia’s Division 296 Tax Transforms Superannuation for High Balance Funds
New superannuation reforms from 1 July 2026 introduce Division 296, applying **steeper tax rates on earnings above $3 million and $10 million**, reshaping retirement planning for high-net-worth Australians.
By NomadicTax Research Team • 5-8 min read • July 2, 2026
## What is Division 296?
Division 296 is a newly enacted tax reform under the *Treasury Laws Amendment (Building a Stronger and Fairer Super System) Bill 2026*, which imposes additional taxes on **superannuation earnings** for individuals whose **Total Super Balance (TSB)** exceed certain high thresholds.([aph.gov.au](https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/bd/bd2526/26bd048?utm_source=openai))
| Threshold | Portion of Super Balance Above Threshold | Additional Tax Rate on Earnings |
|-----------|--------------------------------------------|-------------------------------|
| Above AU$3 million up to AU$10 million | Earnings on that tranche | +15% (30% total)([csc.gov.au](https://www.csc.gov.au/advisers/news/2026-05-better-targeted-super-concessions?utm_source=openai)) |
| Above AU$10 million | Earnings on that excess portion | +25% (40% total)([dentons.com](https://www.dentons.com/en/insights/alerts/2026/march/26/ato-crackdown-on-smsfs-tops-superannuation-priorities-for-2026-and-division-296-tax-introduced?utm_source=openai)) |
## When It Takes Effect
- Begins **1 July 2026**. Applies for income years starting from that date.([csc.gov.au](https://www.csc.gov.au/advisers/news/2026-05-better-targeted-super-concessions?utm_source=openai))
- For the **2026-27 financial year**, TSB is measured at end of the year; first assessment will use balances and earnings to 30 June 2027.([dentons.com](https://www.dentons.com/en/insights/alerts/2026/march/26/ato-crackdown-on-smsfs-tops-superannuation-priorities-for-2026-and-division-296-tax-introduced?utm_source=openai))
## Who Is Affected & What to Watch
- Those with defined benefit pensions: such pensions may be re-valued for TSB under the new law.([community.ato.gov.au](https://community.ato.gov.au/s/question/a0JRF000004jouP/p00412363?utm_source=openai))
- SMSFs (Self-Managed Super Funds) and high balance individuals will face higher tax on their investment earnings. Massive SMSFs with more than AU$1 trillion in assets are under close regulatory scrutiny.([dentons.com](https://www.dentons.com/en/insights/alerts/2026/march/26/ato-crackdown-on-smsfs-tops-superannuation-priorities-for-2026-and-division-296-tax-introduced?utm_source=openai))
## Implications & Planning Strategies
- **Portfolio restructuring**: Individuals approaching or just above the thresholds may consider splitting balances into multiple funds where possible, reviewing asset allocation to limit high return investments in super funds.
- **Maximise LISTO** (Low Income Super Tax Offset): From 1 July 2027, LISTO thresholds increase (income threshold from $37,000 to $45,000; maximum payment brought to $810). Enhances benefit for low income earners.([aph.gov.au](https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/bd/bd2526/26bd048?utm_source=openai))
- **Defined benefit pensions**: Review current pension values and interact with financial advisers to understand how revaluation may affect your super status.
## Compliance & Action Steps
- Trustees must report TSB accurately as of year-end (30 June) and earnings per relevant tranche.
- Individuals should review all super accounts to confirm total balances.
- Start estimating potential Division 296 liability in financial planning now—delaying could mean surprise tax bills.
## Example
Suppose Jane has a super balance of $5 million at 30 June 2027. Earnings for that year were 8%.
- The earnings on the $3M-$5M tranche (i.e., $2 million) will have an **extra 15% tax** on that portion—so instead of paying only the standard 15%, Jane pays 30% on those earnings.
- Earnings on the base $3 million continue at standard rates. If Jane had more than $10M, earnings above $10M would get taxed at 40%.
**Bottom line:** Division 296 rewards balance discipline. If your super exceeds $3M, those extra earnings are going to be taxed more heavily. Planning early is key.