Tax Planning
How Australia’s New Super Tax Division 296 Will Impact High-Balance Australians
From 1 July 2026, Australia’s tax landscape is shifting for those with large superannuation balances. Division 296 introduces steep additional taxes on earnings above $3 million – here’s what that means and how to plan.
By NomadicTax Research Team • 5-8 min read • July 19, 2026
## What Is Division 296?
Division 296, part of the *Treasury Laws Amendment (Building a Stronger and Fairer Super System) Act 2026*, imposes **additional tax on superannuation earnings** for individuals whose total superannuation balance (TSB) exceeds new thresholds.([aph.gov.au](https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/bd/bd2526/26bd048?utm_source=openai)) Earnings in super funds are usually taxed at **15%**, but under Division 296:
| TSB Range | Additional Tax | Total Tax on Earnings in That Range |
|-----------|------------------|---------------------------------------|
| Up to $3 million | 0% | 15% |
| $3 million to $10 million | +15% | 30% |
| Above $10 million | +25% | 40% |
These higher rates apply **only to earnings attributable to the portion of the balance above those thresholds**, not to the entire super balance.([aph.gov.au](https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/bd/bd2526/26bd048?utm_source=openai))
## Effective Date and Key Details
- Division 296 comes into effect from **1 July 2026**, with the first assessments expected in the 2027-28 income year.([csc.gov.au](https://www.csc.gov.au/News-and-insights/2026/March-5-Division-296-tax?utm_source=openai))
- Both thresholds ($3 million and $10 million) will be **indexed annually**, aiming to limit inflation creep pushing people into higher tax tiers.([aph.gov.au](https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/bd/bd2526/26bd048?utm_source=openai))
- For retirees, earnings in the **Retirement phase** (allocated pensions) are generally taxed at **0% up to $3 million**, after which the additional Division 296 tax kicks in on the excess portion.([csc.gov.au](https://www.csc.gov.au/News-and-insights/2026/March-5-Division-296-tax?utm_source=openai))
## Who Is Affected
- Australians who hold a **super balance above $3 million** at year-end — whether accumulating or in retirement phase — will face higher tax on earnings above that threshold.
- SMSF (Self-Managed Super Fund) members or large super funds with high asset growth could be impacted more heavily.
## Planning Strategies to Consider
Here are actions those potentially affected may take:
- **Project your balance growth**: Estimate whether your TSB will cross $3 M or $10 M thresholds. Asset allocation matters—higher growth assets may accelerate exposure.
- **Timing withdrawals**: If you are considering withdrawals or transitions to retirement phase, the timing may affect how much earning above thresholds applies.
- **Switch phases strategically**: Retirement-phase earnings are taxed more favourably (0%) below $3 M; consider shifting portions into Retirement accounts if eligible.
- **Invest outside super**: Once thresholds are near, non-super investments may avoid Division 296 entirely.
- **Tax advice and valuations**: Ensure accurate valuation of ‘earnings’ and clear division of balances for mixed proportion (accumulation/retirement). Engaging with a tax professional is crucial.
## Example Case Study
**Sam**, aged 62, has total super balance of $5 million in accumulation phase. In 2026-27, earnings attributable to $2 million (i.e. the portion above $3 M) will be taxed at **30%** (15% base + 15% additional), instead of 15%. If those earnings were $100,000, tax liability on that $2 M portion increases by approximately $15,000 annually.
**Maria**, aged 65 in retirement phase with $12 million total super, will pay 0% on earnings up to $3 M portion, 15% on earnings from $3M-$10M portion, and **25% on earnings above $10M**, reflecting the higher bracket. She may consider holding some assets outside Retirement accounts to manage taxable earnings.
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Division 296 marks a significant change for high-balance super owners. While many will not be directly impacted, those crossing the thresholds should prepare.
## Takeaway
If your super balance is **approaching or exceeding $3 million**, now is a critical time to review structure, allocation, and retirement plans. Proper planning in 2025-26 and early 2026-27 can mitigate tax shocks and optimize post-Division 296 outcomes.