Compliance
How Division 296 Tax Changes Affect High-Balance Superannuation Accounts
Super funds and individuals with large balances need to understand the new Division 296 tax that kicks in from July 2026 — here’s what it is, who it impacts, and how to plan.
By NomadicTax Research Team • 5-8 min read • August 9, 2026
## 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](https://community.ato.gov.au/s/article/a07Mo00001w0qcO/what-division-296-tax-changes-means-for-your-super-balance?utm_source=openai))
- 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](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 **$10 million** (the Very Large Super Balance Threshold), there's an additional **10%** tax on earnings above this higher threshold. ([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))
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](https://community.ato.gov.au/s/article/a07Mo00001w0qcO/what-division-296-tax-changes-means-for-your-super-balance?utm_source=openai))
---
## Who Is Impacted?
- Individuals with **TSB > $3 million** at year-end 2026-27. SMSFs (Self-Managed Super Funds) are included. ([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))
- Those with **TSB > $10 million** face higher incremental tax. ([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))
- Defined benefit interests may have **deferred obligations** until benefits are taken. ([ato.gov.au](https://www.ato.gov.au/api/public/content/0-c07dabca-395b-4b02-982d-57cad9098421?utm_source=openai))
---
## Key Dates and Reporting
- The **income year 2026-27** is the first year this applies. ([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))
- 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](https://community.ato.gov.au/s/article/a07Mo00001w0qcO/what-division-296-tax-changes-means-for-your-super-balance?utm_source=openai))
- 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](https://www.ato.gov.au/api/public/content/0-c07dabca-395b-4b02-982d-57cad9098421?utm_source=openai))
---
## Planning Tips & Examples
**Actionable strategies to consider now:**
1. **Monitor TSB trends** — if your balance is near $3M or $10M, consider limiting non-qualified contributions or investment growth in high-earning assets.
2. **Track earnings** separately** so you can properly allocate excess earnings over the threshold.
3. **Structure accumulation** with care—some defined benefit entitlements could delay liability until benefits are paid.
4. **Use excess earnings carry-forwards** if negative earnings in prior years exist to offset earnings now.
5. **Review fund mechanisms** for elections to pay debt from super funds vs personally.
6. **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.