What is Division 296?
From 1 July 2026, Australia will enforce the Division 296 tax under the Treasury Laws Amendment (Building a Stronger and Fairer Super System) Act 2026. Individuals with Total Superannuation Balances (TSB) above $3 million will incur an additional 15% tax on realised earnings for the portion of balance that exceeds this threshold. A second threshold at $10 million carries a further 10%, meaning those excess earnings are taxed at effectively 40%. (pwc.com.au)
Importantly, the tax applies only to realised earnings—dividends, interest, rent and gains from assets that have been sold—not to unrealised or “paper” gains. (fordhamgroup.com.au)
The first assessments will be based on balances and earnings for the 2026-27 financial year (ending 30 June 2027). (grantthornton.com.au)
Thresholds and Indexation
| Threshold | Effective Portion | Tax Rate on That Portion |
|---|---|---|
| Over $3 million up to $10 million | Earnings attributable above $3 million | +15% extra (on top of the base 15%) = 30% total (pwc.com.au) |
| Over $10 million | Earnings attributable above $10 million | +25% extra = 40% total (pwc.com.au) |
Both thresholds will be indexed to inflation: the $3 million in $150,000 increments and $10 million in $500,000 increments. (fordhamgroup.com.au)
Who Is Affected & Key Dates
- If your TSB as at 30 June 2027 exceeds $3 million or $10 million, you may face Division 296 tax. (grantthornton.com.au)
- The tax is calculated based on each fund’s realised earnings, proportionally allocated across your superannuation interests. (bdo.com.au)
- Even pension-phase super counts toward the TSB for these purposes. (bdo.com.au)
Planning Strategies Before the First Assessment
- Review your super balance now — check your combined TSB across all funds and compare to $3 million and $10 million thresholds.
- Consider cost-base resets for concessional funds, especially for SMSFs and small APRA funds, which may opt-in to reset the base of CGT assets at market value as of 30 June 2026. (fordhamgroup.com.au)
- Evaluate asset sales — since only realised gains trigger the tax, holding illiquid assets or delaying sales may defer liability.
- Forecast contributions and withdrawals, considering whether withdrawing before 30 June 2027 could reduce your TSB under threshold (but be cautious of impacts and revisions). (grantthornton.com.au)
- Stay aware of reporting changes — SMSFs will report via new labels in the annual return from 2026-27; individuals will receive Notice of Assessment (NOA) 84 days after the ATO issues it. (australia.acclime.com)
Pitfalls to Avoid
- Acting before legislation is fully in force: details could change.
- Withdrawing funds without considering other tax or concessional implications.
- Relying on asset valuations that are out-of-date or illiquid without proper documentation.
Example
Sarah has an SMSF with a $4 million balance on 30 June 2026, and in FY 2026-27 it earns $200,000 realised earnings. Portion above $3 million is $1 million / $4 million = 25% of the earnings attributable. So Sarah’s Division 296 tax: $200,000 × 25% × 15% = $7,500. Total effective tax on that portion becomes 30%, so full earnings taxed accordingly.
Action Plan
- Organise a super review with your financial adviser now.
- Ensure all fund statements, valuations and cost bases are well documented before 30 June 2026.
- Consider whether fund structures or fund types could alter exposures.
- Use the coming months to minimise exposure, not panic.
Division 296 alters rules for high-wealth super holders; being an informed, proactive superannuation member will make a big difference.