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)
| 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) |
| Above AU$10 million | Earnings on that excess portion | +25% (40% total)(dentons.com) |
When It Takes Effect
- Begins 1 July 2026. Applies for income years starting from that date.(csc.gov.au)
- 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)
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)
- 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)
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)
- 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.