Tax Planning

Maximising Tax Efficiency: Planning for the Better Targeted Super Concessions (from July 2025)

Understanding the new superannuation tax concession changes above $3 million and how high-balance super trustees can reduce their exposure ahead of the 2025-26 income year.

By NomadicTax Research Team • 5-8 min read • November 24, 2025

## What Are Better Targeted Super Concessions? From **1 July 2025**, the Australian Government’s **Better Targeted Superannu­ation Concessions** policy will introduce **Division 296 tax**, applying a **15% tax on super earnings** attributable to portions of a member’s Total Super Balance (TSB) that exceed **AUD 3 million**. ([ato.gov.au](https://www.ato.gov.au/about-ato/new-legislation/in-detail/superannuation/better-targeted-superannuation-concessions?utm_source=openai)) This new tax is **in addition** to the accumulation phase tax that super funds already pay, resulting in a *combined headline rate* on earnings above $3 million of **around 30%** for many funds. ([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’s Affected? - Individuals whose 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)) - Members of Any superannuation fund type—SMSFs, industry, retail, or defined benefit funds. The rule is based on accumulation earnings and applies regardless of fund type. ([ato.gov.au](https://www.ato.gov.au/about-ato/new-legislation/in-detail/superannuation/better-targeted-superannuation-concessions?utm_source=openai)) ### Actionable Planning Strategies To reduce or defer exposure to Division 296 tax, consider: - Reviewing and **managing the mix of investments**: Excess earnings could be reduced if more of the portfolio is moved to lower-earning or non-accumulated assets (e.g. assets with lower yield). Use of **defined benefit interests** may defer tax until benefits are paid out. ([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)) - **Carrying forward negative earnings**: If in a given year earnings are less than zero (i.e. a loss situation), unused negative super earnings can reduce future years' Division 296 tax. ([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)) - **Electing early withdrawal from super** to cover Division 296 liabilities, where legally permitted, to avoid default release authorisation — especially in SMSFs. ([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)) - Structuring contributions timing: Since TSB is assessed at financial year end, delaying or accelerating certain contributions or benefit payments may help avoid pushing the balance over the threshold. Seek assistance from advisers. ### Example Scenario > Sarah has a TSB of $3.5 million at the end of the 2025-26 year. Her super fund's average earnings rate is 4%. Without any losses or adjustments, she will be taxed **15%** on earnings attributable to the $500,000 above the $3 million threshold—and still pay regular fund tax on all earnings. If Sarah had a previous year of negative earnings of $100,000, she could reduce her taxable income under Division 296 by applying that loss. ### Important Compliance & Reporting Notes - Funds, including SMSFs, will need to report specific labels in annual returns: two new labels are being added to the 2026 SMSF annual return for Division 296 tax reporting. ([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)) - A Notice of Assessment (NOA) will be issued to affected individuals—due 84 days after issue. Individuals may pay directly or elect to release funds from super. ([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)) - Any unpaid Division 296 tax can be collected by the ATO via release authority if not addressed. Deferred periods apply for defined benefit interests. ([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)) --- ## Practical Steps Today 1. **Check your current Total Super Balance**—if approaching $3 million, consider modelling future contributions and earnings. 2. **Review investment strategy with your fund or adviser**—balance between high-yield and stable income assets. 3. **Keep detailed records of earnings and losses**—especially tax-exempt or negative returns. 4. **Plan for liquidity** so that any required tax liability can be met without forced asset sales or cash crunch. 5. **Regularly consult updates** from the ATO—draft legislation, guidance, and fund reporting requirements can evolve. By preparing in advance, high-balance super recipients can avoid unpleasant surprises when Division 296 takes effect.