What is Division 296 — the Better Targeted Superannuation Concessions Tax?
Australia’s Federal Parliament passed the Treasury Laws Amendment (Better Targeted Superannuation Concessions) Act 2025, which introduces Division 296, effective 1 July 2026. Individuals with total superannuation balances (TSBs) over $3 million will pay an additional 15% tax on realised earnings attributable to the portion of their balance above that threshold. Those with balances over $10 million face an extra 10% on earnings above $10 million (bringing the total rate to 25–40% for that portion). (trinitygroup.com.au)
Key Changes and Practical Impacts
- The new tax applies only to realised earnings — market value increases that haven’t been sold are exempt. (egu.au)
- The thresholds ($3 million and $10 million) will be indexed to CPI, meaning inflation may gradually raise them. (bdo.com.au)
- First test date: 30 June 2027; first assessments expected soon after that. (softwaredevelopers.ato.gov.au)
What You Should Do Now — Strategies Before 1 July
Review and Measure Your TSB
- Calculate your total superannuation balance across all super funds as of 30 June 2026. If it’s just under $3 million, you'll want to know.
- For many, especially Self Managed Super Funds (SMSFs) with big assets, crossing the threshold triggers major consequences. Be cautious with growth from illiquid assets.
Consider Liquidity and Realised Gains
- Because the tax only hits realised earnings, delays or deferrals on realising gains (e.g., from property, shares) might help — but be wary of market risks.
- If you have realisable capital gains, you may be able to reset cost bases or defer sales until after the 2026-27 year to reduce liability.
Explore Spouse Transfers and Structuring Options
- Splitting assets or contributions with a lower balance spouse can sometimes reduce exposure.
- Assess rolling over or changing how pension-phase assets are held — earnings in pension phase are generally taxed differently.
Adjust Contribution Behaviour
- With non-concessional contribution caps increasing (see below), you may have room to make after-tax contributions in more tax-efficient ways.
- Ensure you’re not over-contributing accidentally, as the tax liability under Division 296 may leave you locked into unexpected assessments.
Related Super Changes to Know
- Contribution caps increases from 1 July 2026: concessional cap $30,000 → $32,500; non-concessional cap $120,000 → $130,000. (superfind.com.au)
- Transfer Balance Cap increase from $2.0 million to $2.1 million. (superfind.com.au)
- Payday Super reform requires super guarantee (SG) contributions to be paid at the same time as wages (within 7 business days) instead of quarterly. Effective 1 July 2026. (softwaredevelopers.ato.gov.au)
Example Scenario
Sarah, aged 62, has a TSB of $4 million as of 30 June 2026. Over the year, her super earned $200,000 in realised earnings. Under Division 296, the earnings attributable to the portion over $3 million is $1 million (since $4M − $3M = $1M), which is 25% of the total $200,000 earnings for the year. She’ll pay an additional 15% on that $50,000 — i.e., an extra $7,500 in tax. Earnings on first $3M remain taxed at current rate inside benefits rules.
Summary
Division 296 represents one of the most significant superannuation reforms in recent history, especially for high-balance holders. If you’re pointing toward or over $3 million, now is the time to plan. Seek personalised financial advice, model different growth and tax scenarios, and revisit your contribution and asset realisation strategies before 30 June 2026.