Tax Planning
How Division 296 Tax Affects High-Balance Super Accounts
New Division 296 measures introduce additional tax on super earnings above $3 million; here’s who’s affected, how it’s calculated, and strategies to manage your super tax burden.
By NomadicTax Research Team • 6 min read • August 15, 2026
## What is Division 296 Tax?
As of 1 July 2026, Division 296 of the **Income Tax Assessment Act 1997** introduces **an additional tax on super earnings** for individuals whose **Total Super Balance (TSB)** exceeds a threshold known as the **Large Super Balance Threshold (LSBT)** — initially $3 million for the 2026-27 financial year.([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))
### How the thresholds work:
| Threshold | Amount | Tax on earnings above threshold |
|---|---|---|
| LSBT | **$3,000,000** | **15%** on earnings related to the amount above LSBT ([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)) |
| Very Large Super Balance Threshold (VLSBT) | **$10,000,000** | **Additional 10%** on earnings above VLSBT ([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)) |
Only the earnings portion **linked to the excess over these thresholds** are taxed at higher rates — not the super balance itself.
## Who’s impacted?
The changes affect individuals with very large superannuation balances (SMSFs or APRA funds). Two key points:
- Assessment of your TSB at **year-end** (financial year end) for LSBT and VLSBT.([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))
- For future years, TSB will be checked both **just before the financial year** and at the **end of the year**, with the greater value used.([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))
## Practical example
Suppose Carla’s TSB at 30 June 2027 is $4 million. Her earnings for that year are $240,000.
- $1,000,000 of her balance is **above LSBT ($3 million)**. On the proportion of earnings that corresponds to that excess, she pays **15% extra tax**.
- If Carla’s balance had exceeded $10 million, earnings above that would face the additional 10% surtax.
## Planning considerations & strategies
- If close to LSBT, consider spreading super balances across funds (if permissible), or timing contributions to avoid pushing over threshold just at year-end.
- Review investment options: earnings on assets that yield higher returns will amplify tax exposed above thresholds.
- Coordinate estate planning: death benefit/or transfer arrangements might trigger TSB changes.
## Obligations for funds & timing
- Super funds must report relevant super earnings to the ATO — SMSFs must inform if individual’s TSB exceeds LSBT; APRA funds will be notified if impacted.([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))
- Division 296 tax assessments will be issued in the **latter half** of the 2027-28 financial year, after funds report.([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))
## Why the change matters
The intent is to better target super tax concessions and improve tax fairness. For high-balance super accounts, these changes increase the tax burden on earnings above thresholds while preserving the existing treatment for amounts below. Early planning and accurate reporting is now more important than ever.