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) 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)
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)
- 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)
- 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)
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.
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.