What is Division 296?
Division 296 is a new tax rule that takes effect from 1 July 2026, targeting superannuation members with Total Super Balances (TSBs) above certain thresholds. If your balance exceeds these, you may face additional taxes on earnings over the thresholds. (community.ato.gov.au)
Thresholds and Rates (2026-27 Financial Year)
| Threshold | Tax on Earnings Above Threshold |
|---|---|
| Large Super Balance Threshold (LSBT) – $3,000,000 | 15% tax on earnings above LSBT (community.ato.gov.au) |
| Very Large Super Balance Threshold (VLSBT) – $10,000,000 | Additional 10% tax on earnings above VLSBT (i.e. 25% total) (community.ato.gov.au) |
Only the earnings portion of your super linked to the balance above the threshold is taxed at these higher rates, not the full balance.
Who Will Be Affected?
- Members of SMSFs or APRA-regulated funds whose total super across funds exceeds $3 million at financial year end.
- Members with balances under that will not be impacted.
Reporting & Notice of Assessments
- Super funds must report relevant super earnings to the ATO for members over LSBT or VLSBT. (community.ato.gov.au)
- The ATO will issue Division 296 tax notices for the 2026-27 financial year in the latter half of 2027-28, once earnings have been reported. (community.ato.gov.au)
Examples to Illustrate
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Example A: Rachel has a total super balance of $4 million at 30 June 2027. If her fund earns $200,000 in earnings that year, only the portion tied to $1 million above the $3 million threshold is subject to 15% tax.
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Example B: David has a $12 million super balance. For earnings linked to $7 million above the $3 million LSBT, earnings taxed at 15%; for earnings tied to $2 million above the $10 million VLSBT, that portion faces an additional 10% (i.e. 25% total on that part of earnings).
Planning and Practical Moves
- Projection of balance thresholds: Estimate your balance at year-end to determine if you’ll cross LSBT or VLSBT.
- Consider earnings timing: If possible and practical, shift where earnings are realised or try to hold/ defer high-earning years to manage exposure.
- Review fund choice: Combining or separating accounts strategically might affect total super balance calculations.
Compliance Risks & Considerations
- If earnings are not reported correctly or late, you might miss out on notifications or pay more than necessary.
- There may be indexation in future years — LSBT and VLSBT may not stay fixed. Stay alert to announcements.
Conclusion
If your super balance is approaching $3 million, you should become familiar with Division 296 and its implications for taxation of your super earnings from 1 July 2026. With the burden of reporting and assessment lagging into later years, proactive planning offers clearer control and potentially lowers tax exposure.