Tax Planning
How to Plan for the ‘Better Targeted Superannuation Concessions’ From 1 July 2025
If your super balance could exceed $3 million, the new Division 296 tax on super earnings over that threshold will apply—this article shows you how to prepare.
By NomadicTax Research Team • 5-8 min read • November 19, 2025
## What is the Better Targeted Superannuation Concessions (BTSC)?
From **1 July 2025**, the Australian Government will apply a **15% tax on earnings in superannuation balances above $3 million**. This measure, known as Division 296 tax, targets high-balance accounts and affects individuals whose total super balance (TSB) exceeds $3 million at the end of a financial year. ([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/stakeholder-relationship-groups-key-messages/smsf-auditors-professional-association-stakeholder-group/smsf-auditors-professional-association-stakeholder-group-key-messages-8-july-2025?utm_source=openai))
Key points:
- The tax is **separate** from the income tax and super fund earnings tax. You’ll receive a Notice of Assessment (NOA) for it. ([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/stakeholder-relationship-groups-key-messages/smsf-auditors-professional-association-stakeholder-group/smsf-auditors-professional-association-stakeholder-group-key-messages-8-july-2025?utm_source=openai))
- If you don’t pay by due date, the ATO can issue a **default release authority** to your super fund to release funds to cover the liability. ([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/stakeholder-relationship-groups-key-messages/smsf-auditors-professional-association-stakeholder-group/smsf-auditors-professional-association-stakeholder-group-key-messages-8-july-2025?utm_source=openai))
- Defined benefit interests have deferred debt unless benefits are paid. ([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/stakeholder-relationship-groups-key-messages/smsf-auditors-professional-association-stakeholder-group/smsf-auditors-professional-association-stakeholder-group-key-messages-8-july-2025?utm_source=openai))
## Who will be affected?
- Individuals whose **TSB is more than $3 million** at 30 June of a financial year. ([ato.gov.au](https://www.ato.gov.au/about-ato/new-legislation/in-detail/superannuation/better-targeted-superannuation-concessions?utm_source=openai))
- SMSF members, members of large APRA-regulated funds, and defined benefit funds. ([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/special-purpose-working-groups-key-messages/better-targeted-superannuation-concessions-working-group/better-targeted-superannuation-concessions-working-group-key-messages-20-march-2025?utm_source=openai))
- Most are not affected—about **0.5%** of super holders. ([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/special-purpose-working-groups-key-messages/better-targeted-superannuation-concessions-working-group/better-targeted-superannuation-concessions-working-group-key-messages-20-march-2025?utm_source=openai))
## How to Plan Now: Practical Steps
1. Monitor Your Super Balance Regularly
Track your TSB using your super statements. If you’re close to $3 million, consider timing of contributions or withdrawals if possible.
2. Consider Adjusting Investment Strategy
Super earnings above $3 million attract higher effective tax. Lower volatility investments may reduce high earnings in boom years when assessments happen.
3. Manage Contributions and Rollovers
Contributions still must follow normal rules. But try to avoid large rollover inflows right before 30 June if you’re close to threshold.
4. Think About Debt Payment or Fund Withdrawal Elections
Once you get your NOA you may elect to withdraw from your super fund to pay the Division 296 tax. Understand how that interacts with your fallback if unpaid. ([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/stakeholder-relationship-groups-key-messages/smsf-auditors-professional-association-stakeholder-group/smsf-auditors-professional-association-stakeholder-group-key-messages-8-july-2025?utm_source=openai))
5. Defined Benefit Funds Persons Should Assess Timing
You may defer payment of the tax liability until benefits are paid, but interest and admin of NOA still apply. ([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/stakeholder-relationship-groups-key-messages/smsf-auditors-professional-association-stakeholder-group/smsf-auditors-professional-association-stakeholder-group-key-messages-8-july-2025?utm_source=openai))
## Example
Sarah has a TSB of $3.5 million at 30 June 2025. Her earnings for the year in the super fund amount to $200,000. The portion of super earnings attributable to the $500,000 *above* the threshold is taxed at 15%. So Sarah will pay Division 296 tax on the earnings that relate to that $500,000 portion.
## Frequently Asked Questions (FAQs)
| Question | Answer |
|----------|--------|
| Can I avoid this tax by withdrawing early? | Withdrawals may have other tax or preservation rules. Typically you’ll elect to pay from your super or personally once NOA is issued. ([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/stakeholder-relationship-groups-key-messages/smsf-auditors-professional-association-stakeholder-group/smsf-auditors-professional-association-stakeholder-group-key-messages-8-july-2025?utm_source=openai)) |
| Do earnings *below* $3 million still get taxed? | No—standard tax treatment of super earnings continues for balances up to $3 million. |
| Is BTSC law yet? | Legislation is passed for Better Targeted Super Concessions with effect from 1 July 2025. ([ato.gov.au](https://www.ato.gov.au/about-ato/new-legislation/in-detail/superannuation/better-targeted-superannuation-concessions?utm_source=openai)) |
## Actionable Insights
- Check balances early in the year and forecast whether you’ll cross the threshold.
- Use concessional vs non-concessional contributions wisely.
- Consult your super fund about how they report Division 296 tax contributions or required labels in SMSF returns. ([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/stakeholder-relationship-groups-key-messages/smsf-auditors-professional-association-stakeholder-group/smsf-auditors-professional-association-stakeholder-group-key-messages-8-july-2025?utm_source=openai))
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By planning your contributions, investments, and cash flows now, you can lessen the surprise tax hit when the BTSC takes effect. It pays to be proactive.