Tax Planning

How ‘Division 296’ Changes Super for High-Balance Account Holders

Discover how the new ‘Division 296’ tax impacts those with large super balances — including thresholds, enforced changes, and strategies to mitigate tax liabilities.

By NomadicTax Research Team • 5-8 min read • August 16, 2026

## What is Division 296? Starting the **2025-26 financial year** (effectively 1 July 2025 for APRA and self-managed super funds), **Division 296** introduces an additional tax on super earnings for individuals whose total super balance (TSB) exceeds the **large super balance threshold (LSBT)**. ([ato.gov.au](https://www.ato.gov.au/api/public/content/0-bc598107-7819-44fd-a84c-9ded73fe60b1?utm_source=openai)) - LSBT is set at **$3 million** for 2026-27. If your TSB is above this, you’ll pay **15%** on the portion of earnings attributable to the balance above $3 million. ([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 your TSB exceeds a **very large super balance threshold (VLSBT)** of **$10 million**, an extra **10%** is imposed on earnings above that VLSBT amount. ([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)) ## Who Must Report and When the Tax Will Be Assessed - **Super funds** (both APRA-regulated funds and SMSFs) will report relevant super earnings to the ATO. SMSFs will have new labels added to the SMSF Annual Return for reporting. ([ato.gov.au](https://www.ato.gov.au/api/public/content/0-1ef514f7-8f71-4ac2-889f-6fb8d0600df6?utm_source=openai)) - **Notices of Assessment (NOA)** for Division 296 tax for the 2026-27 financial year will be issued in the **latter half of 2027-28**, once relevant earnings are reported. ([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)) - The liability will be payable **84 days after the date on the NOA**. There’s an option to elect for withdrawal from a super fund to pay the liability. If unpaid, a release authority can be used by the ATO to access funds. ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/sites/default/files/2026-02/PLS_working_group_key_outcomes_20_January_2026.pdf?utm_source=openai)) ## Impact on Defined Benefit Interests and Exemptions - For earnings from a **defined benefit interest** in accumulation phase, where no end-benefit has been taken, the liability is **deferred** until 21 days after first benefit payment. ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/sites/default/files/2026-02/PLS_working_group_key_outcomes_20_January_2026.pdf?utm_source=openai)) - **Exemptions** include: child recipients of super income streams during the year, and structured settlement contributions from personal injury payments. Also, for the transition year (2026-27), if an individual **dies before 30 June 2027**, they may be exempt. ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/sites/default/files/2026-02/PLS_working_group_key_outcomes_20_January_2026.pdf?utm_source=openai)) ## Example Scenarios - Sophia has a TSB of $4 million at 30 June 2027. Earnings on her super for that year total $200,000. Under Division 296, only the portion of earnings attributable to **$1 million over the $3 million LSBT** is taxed at 15%. So she pays **15% × (earnings allocated to that excess)**, not 15% on her full earnings. - Jordan has $12 million. Above $10 million, extra 10% applies on earnings above $10M; the portion between $3-10M gets taxed at 15%. ## Planning Strategies - **Track your contributions** carefully across multiple super funds to estimate whether you’ll exceed LSBT. - **Time earnings and withdrawals**: For example, drawing down defined benefit interests earlier could trigger assessment sooner, while deferring may help. - **Consider structuring contributions** in years when earnings are lower. - Know that the choice to use super funds to release money to pay tax can preserve non-cash assets. **Summary:** If you have a high super balance, Division 296 means a new layer of tax on earnings over $3M (and extra over $10M). But it applies specifically and with technical rules, plus important exemptions and deferral options. Planning ahead can make a real difference.