What Is Division 296 and What’s Changing
From 1 July 2026, if your Total Super Balance (TSB) at the end of the financial year exceeds $3 million (Large Super Balance Threshold, LSBT), you’ll be taxed at 15% on the portion of your super fund’s earnings that exceed this threshold. Should your balance surpass $10 million (Very Large Super Balance Threshold, VLSBT), an additional 10% tax applies to those earnings beyond the VLSBT. (community.ato.gov.au)
These changes don’t affect your entire super balance—only the earnings tied to the portion above each threshold. To determine your liability, ATO compares your balance both just before the start of the year and at year-end and applies the greater one for threshold assessment. (community.ato.gov.au)
Who’s Most Likely to Be Affected
You're likely impacted if:
- You are in an APRA-regulated fund or an SMSF with balances exceeding $3 million.
- You don’t consolidate your super funds, and balances across multiple entities push you over thresholds.
- Your earnings rate in super is high—growth or investment returns play a bigger role than contributions.
Smaller balances aren’t affected, and earnings on portions below $3 million continue to be taxed under existing rules.
Actionable Strategies Before 30 June 2026
| Strategy | Why It Matters | Steps to Take |
|---|---|---|
| Review all super accounts | You might be close to the thresholds due to multiple accounts | Consolidate funds where possible; ensure you know TSB at year-end |
| Understand earnings attribution | To assess how much of your earnings will be taxed at higher rates | Monitor high-return investments; consider diversifying for more consistent returns |
| Evaluate timing of contributions or rollovers | To optimise whether balances exceed thresholds at start or end of year | Delay or advance rollovers depending on projected balance movements |
| Plan with your fund or advisor | Funds will report earnings; getting ahead helps with tax planning | Seek estimates, model outcomes under different scenarios |
Examples
-
Emily has a single SMSF with a balance that starts the year at $2.9 million and ends at $3.2 million. She’ll be taxed 15% on earnings only over $3 million.
-
Raj, with a $10.5 million balance, pays 15% on earnings over $3 million, plus an extra 10% on earnings above $10 million.
What Employers, Funds, and SMSFs Need to Do
- Super funds must report relevant super earnings to ATO to support assessments. SMSFs must assess if TSB exceeds LSBT. (community.ato.gov.au)
- Individuals should track balances across all super accounts.
- Tax advisors need updated modelling tools and client advice reflecting the Division 296 tax liability.
Bigger Picture: Why This Matters
- Aims to target larger super balances, balancing fairness in the tax system.
- Reflects pressure to return “bracket creep” via cuts elsewhere while ensuring those with significant wealth contribute more.
- Indexing of thresholds in future years expected, meaning adjustments needed over time. (community.ato.gov.au)
Bottom line: If you're expecting your super balance to exceed $3 million at year-end, this is your cue to plan ahead—both to understand your potential tax liability and to explore structural moves that may help you manage exposure.