What Is Division 296 Tax?
From 1 July 2026, Australians with super balances (Total Super Balance, TSB) over AUD 3 million will be subject to a new tax under Division 296, levied at 15% on the portion of earnings attributable to the balance above that threshold. (ato.gov.au)
This means even if your fund’s overall earnings are taxed, the portion linked to that excess part is taxed separately on your individual assessment. The law comes into force in the 2025–26 income year. (ato.gov.au)
Who Is Affected?
- Individuals whose TSB at 30 June 2025 exceeds AUD 3 million, as that’s when the threshold is first assessed. (ato.gov.au)
- Applies to members of SMSFs, large public funds, defined benefit interests—even if those are finally converted to accumulation phase. (ato.gov.au)
- The tax is separate from other super taxes like Division 293 or regular fund earnings tax. It results in a Notice of Assessment (NOA) to the individual. Payment options include yourself or electing for your super fund to release the necessary amount. (ato.gov.au)
What the Law Requires
- Funds will need to provide extra information via new reporting labels (especially SMSFs via their annual return) so the ATO can calculate your Division 296 liability. (ato.gov.au)
- If not paid by the due date, the ATO can issue a default release authority to your fund to pay the tax for you. (ato.gov.au)
- Negative super earnings (when earnings in a year are less than zero) may be carried forward to reduce division 296 tax in future years. (ato.gov.au)
Planning Tips to Mitigate Your Tax
- Lower your TSB below AUD 3 million over time. Consider shifting funds or optimizing defined benefit interests—if possible.
- Use super fund elections wisely; timing of withdrawals or fund restructures may help.
- Monitor your fund’s investment strategy. Capital gains may contribute to earnings—tax planning may reduce exposure.
- Ensure your SMSF or large fund is ready with the new reporting labels and has systems to provide required data. (ato.gov.au)
Example Scenario
Sarah, aged 55, has a TSB of AUD 3.5 million at 30 June 2025. Her fund earns AUD 200,000 in earnings in 2025–26. Under Division 296, only the portion of earnings attributed to the AUD 500,000 excess will be taxed at 15%, so AUD 75,000 (15% of AUD 500,000 portion) is subject to Division 296. The rest of the earnings are taxed under normal super rules.
Key Takeaways
- If you believe your TSB is near or over AUD 3 million, now is the time to take action.
- Align your fund’s strategy, reporting, and record-keeping to reduce risk of surprises and avoid penalties.
- Division 296 offers no limit on super balance—so even if taxed, you can still hold more than AUD 3 million; it’s earnings above that threshold that are taxed extra.