Tax Planning

How Australia’s New Division 296 Tax Impacts High-Balance Super Accounts

Super members with balances above $3 million now face steep additional tax rates from 1 July 2026. Here’s how it works and how to plan ahead.

By NomadicTax Research Team • 5-8 min read • July 8, 2026

## What is the Division-296 Tax? From **1 July 2026**, Australia’s new *Division 296 tax* introduces higher superannuation earnings taxation for individuals whose **total super balance (TSB)** exceeds certain thresholds. ([csc.gov.au](https://www.csc.gov.au/advisers/news/2026-05-better-targeted-super-concessions?utm_source=openai)) ### Key thresholds and tax rates - **Large Super Balance Threshold (LSBT)**: $3 million for the 2026-27 financial year. Earnings above this are taxed at **30%** (i.e. an extra 15% on top of the regular 15% super earnings tax). ([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 threshold are taxed at **40%** (extra 25% above the base rate). ([csc.gov.au](https://www.csc.gov.au/advisers/news/2026-05-better-targeted-super-concessions?utm_source=openai)) - Both thresholds indexed to inflation in future years. ([csc.gov.au](https://www.csc.gov.au/advisers/news/2026-05-better-targeted-super-concessions?utm_source=openai)) ## How the tax will apply - Only the **earnings portion** of the super balance that relates to the excess over the threshold is taxed at the higher rate—not the whole balance. ([grantthornton.com.au](https://www.grantthornton.com.au/insights/client-alerts/latest-update-on-division-296-tax-as-we-begin-2026/?utm_source=openai)) - **First assessments** (Notice of Assessment) will be issued in **latter half of 2027-28** based on earnings for 2026-27. ([grantthornton.com.au](https://www.grantthornton.com.au/insights/client-alerts/latest-update-on-division-296-tax-as-we-begin-2026/?utm_source=openai)) - You can pay the Division 296 tax either yourself in cash, or elect to have funds released from your super to pay the liability within 60 days of the NOA. ([grantthornton.com.au](https://www.grantthornton.com.au/insights/client-alerts/latest-update-on-division-296-tax-as-we-begin-2026/?utm_source=openai)) - Non-payment triggers issuance of a *release authority* enabling ATO to force the super fund to pay out amounts. ([grantthornton.com.au](https://www.grantthornton.com.au/insights/client-alerts/latest-update-on-division-296-tax-as-we-begin-2026/?utm_source=openai)) ## Who’s impacted and who’s exempted - Applies to individuals with **TSB > $3 million**. Self-managed super funds (SMSFs) with large balances will need to report earnings to ATO. ([community.ato.gov.au](https://community.ato.gov.au/s/article/a07Mo00001w0qcO/what-division-296-tax-changes-means-for-your-super-balance?utm_source=openai)) - If you have a defined benefit interest and haven’t taken an end benefit, the liability can be **deferred until benefit is paid**. ([grantthornton.com.au](https://www.grantthornton.com.au/insights/client-alerts/latest-update-on-division-296-tax-as-we-begin-2026/?utm_source=openai)) - Special exemptions include **child recipients** of a super income stream and those who receive structured settlement contributions for personal injury. Also, individuals who die before 30 June in the 2026-27 year will be exempt in the transition year. ([grantthornton.com.au](https://www.grantthornton.com.au/insights/client-alerts/latest-update-on-division-296-tax-as-we-begin-2026/?utm_source=openai)) ## Planning strategies to reduce exposure - **Consider fund consolidation or distributions**: If multiple super accounts push your aggregate TSB over $3 million, consolidating or withdrawing balances (where permitted) may reduce exposure. - **Timing of end-benefits**: For those with defined benefit interests, delaying end-benefits (where practical) could time tax deferral. But seek financial and legal advice—may have trade-offs for retirement income and estate planning. - **Reassess investment allocations**: Earnings over thresholds are taxed more heavily; lower-return (lower volatility) strategies for that portion might reduce tax cost. - **Leverage transitional planning**: Since the first assessments occur late in 2027-28, early-action steps (fund selection, reporting) should be undertaken now. ## Example Sarah has a super balance of **$4.5 million** at the end of FY 2026-27, with earnings in that year of **$200,000**. • LSBT is $3 million → her earnings relating to the $1.5 million above LSBT will be taxed at **30%**. • So, on that excess portion, instead of paying 15% she pays 30%—an additional tax of 15% on that portion. • Earnings up to the $3 million threshold are taxed under standard super earnings rules. ## Action checklist - Check your estimated TSB at 30 June 2026 and 2027 to understand exposure. - Speak to your super fund about reporting and whether they track labels required by ATO SAR (SMSF Annual Return). ([grantthornton.com.au](https://www.grantthornton.com.au/insights/client-alerts/latest-update-on-division-296-tax-as-we-begin-2026/?utm_source=openai)) - Consult a qualified tax adviser for structuring options involving defined benefit interests and fund withdrawals. With **enacted legislation** now in force, high super balances will need active monitoring and thoughtful plan adaptation.