Tax Planning
How Division 296 Tax Affects High Super Balances From 1 July 2026
Super members with balances over $3 million need to understand the new Division 296 tax — what it is, who it hits, and practical strategies to reduce its impact under Australia’s 2026-27 rules.
By NomadicTax Research Team • 5-8 min read • August 13, 2026
## What is Division 296 Tax?
From **1 July 2026**, an additional tax called Division 296 applies to superannuation earnings corresponding to balances that exceed certain thresholds.([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 new thresholds are:
- **Large Super Balance Threshold (LSBT):** $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))
- **Very Large Super Balance Threshold (VLSBT):** $10 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))
Earnings over the LSBT are taxed at **15%**, and earnings over the VLSBT incur an **additional 10%**, making those excess earnings taxed at 25%. It’s important that only the earnings linked to the excess, not the entire super balance, are taxed.([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 Will Be Affected?
This tax will affect:
- **Individuals (APRA-regulated or SMSF)** whose **total super balance (TSB)** at **end of year** exceeds $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 you hit $10 million, the portion above that gets the higher rate.([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 tax starts accruing in **financial year 2026-27**, and assessments will be issued in the **latter half of 2027-28**, after funds have reported earnings.([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
> Alice has $3.5 million in total super savings at 30 June 2027. Her super fund earns returns of $200,000 during the year.
>
> • Portion over LSBT = $3.5 million − $3.0 million = $500,000.
> • Earnings attributed to that excess: assume proportional — $200,000 × ($500,000 / $3,500,000) ≈ $28,571.
> • Tax on those earnings = 15% × $28,571 ≈ **$4,286**.
If Alice had a $12 million balance and similar proportional earnings, the portion over $10 million would carry the extra 10%.
## Actionable Strategies to Consider
- **Monitor total super balances**—know all accounts, including SMSF, public funds, and those held overseas (if relevant).
- **Manage earnings timing**—seek to reduce taxable super-earnings exposure above thresholds by smoothing returns or rebalancing asset allocations.
- **Consider pension accounts**—some earnings in retirement pension phase have different tax treatments; check whether these apply to you.
- **Review contribution strategies**—excess concessional contributions, for example, may push you over the threshold; limit contributions accordingly.
- **Use SMSF structuring or family trusts**—if you have flexibility, possibly split balances among family or restructure to avoid individual over-threshold balances, while respecting legal requirements.
## Implications for Funds and Compliance
- Funds (APRA and SMSFs) will need to **report relevant earnings**, determine eligibility for Division 296, and coordinate assessments.([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))
- Be aware of indexing—both $3 million and $10 million thresholds may be indexed to the CPI in future years.([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))
## What to Do Now
- If your super balance is near $3 million, begin modelling. See how different investment returns might affect your exposure.
- Speak to a financial adviser or tax professional about structuring (pension phase, fund types, insurance costs).
- Check your super funds’ statements; consolidate where possible to simplify tracking.
- Keep documentation of earnings, balances at year-end, and any elections or elections regarding contribution caps.
**Bottom line:** Division 296 is a new tax for large super balances, effective 1 July 2026. With careful planning, you can manage your exposure and possibly reduce the liability without overhauling your entire super strategy.