What is Division 296 Tax?
From 1 July 2026, Australia’s superannuation system introduces an additional tax called Division 296 tax. It applies to super earnings tied to the portion of a person’s Total Super Balance (TSB) that exceeds specified thresholds. (community.ato.gov.au)
- If your TSB is over $3 million (the Large Super Balance Threshold) for the 2026-27 year, the portion of earnings above that threshold will be taxed at an additional 15%. (community.ato.gov.au)
- If your TSB exceeds $10 million (the Very Large Super Balance Threshold), there's an additional 10% tax on earnings above this higher threshold. (community.ato.gov.au)
Importantly, this doesn’t mean your entire super is taxed harder—only the earnings associated with the excess portion over the thresholds. (community.ato.gov.au)
Who Is Impacted?
- Individuals with TSB > $3 million at year-end 2026-27. SMSFs (Self-Managed Super Funds) are included. (community.ato.gov.au)
- Those with TSB > $10 million face higher incremental tax. (community.ato.gov.au)
- Defined benefit interests may have deferred obligations until benefits are taken. (ato.gov.au)
Key Dates and Reporting
- The income year 2026-27 is the first year this applies. (community.ato.gov.au)
- Super funds will report relevant super earnings, and individuals will receive a Notice of Assessment later (in the 2027-28 financial year) when earnings are known. (community.ato.gov.au)
- The Notice of Assessment is payable 84 days after the date it’s issued. Within 60 days of the Notice, the individual may elect to release funds from their super to pay the tax. If not paid, the Commissioner can issue a default release authority to the super fund. (ato.gov.au)
Planning Tips & Examples
Actionable strategies to consider now:
- Monitor TSB trends — if your balance is near $3M or $10M, consider limiting non-qualified contributions or investment growth in high-earning assets.
- Track earnings separately** so you can properly allocate excess earnings over the threshold.
- Structure accumulation with care—some defined benefit entitlements could delay liability until benefits are paid.
- Use excess earnings carry-forwards if negative earnings in prior years exist to offset earnings now.
- Review fund mechanisms for elections to pay debt from super funds vs personally.
- Rebalance investments in high-earning segments (e.g. switch growth assets to defensive ones if you expect earnings to be taxed highly).
Example:
Sarah has a TSB of $4 million at 30 June 2027. Suppose her fund earns $200,000 in earnings for the year. Under Division 296:
- First $3 million TSB: no Division 296 tax.
- The $1 million over threshold: earnings corresponding (say 25% of total earnings = $50,000) taxed at extra 15% → additional tax of $7,500.
If her TSB was $12 million, earnings over $10M portion would face an additional 10% on relevant earnings.
Takeaway
If you expect your super to exceed $3 million (or already do), Division 296 tax will increase complexity and potentially reduce net returns. Proper planning now—monitoring balances, considering contributions and investment allocations—can help manage the impact.