What is Division 296 tax?
Australia’s Parliament passed the Treasury Laws Amendment (Building a Stronger and Fairer Super System) Act 2026, which introduces Division 296 into the Income Tax Assessment Act 1997. It takes effect from 1 July 2026, applying additional tax on super earnings for individuals whose total super balance exceeds $3 million. (aph.gov.au)
How rates stack up
- TSB up to $3 million: no change—standard super earnings tax remains.
- TSB between $3 million and $10 million: earnings attributable to this portion will incur an extra 15% tax, making the combined tax 30% on those earnings. (egu.au)
- TSB above $10 million: earnings over that threshold incur another 10% on top, resulting in a 40% rate on that portion. (egu.au)
Key features and planning windows
- Only realised earnings are taxed—unrealised capital gains (paper gains) are excluded. (egu.au)
- Thresholds ($3m and $10m) will be indexed to CPI to prevent bracket creep. (egu.au)
- Assessment notices will be issued in late 2027–28 after earnings are reported. (community.ato.gov.au)
Who is likely impacted?
- High-net-worth individuals, self-managed superannuation fund (SMSF) members, business owners who have significantly grown their super assets.
- Example: You hold $4 million across super accounts, with $1 million exceeding the $3 million threshold. Earnings on that $1 million will first be taxed at existing fund rate (15%), then additional 15%, totalling 30%. (egu.au)
Actionable strategies before 1 July 2026
- Evaluate realised vs unrealised gains: Where possible, consider disposing of assets or rebalancing your portfolio before earnings accumulate under the new thresholds.
- Use cost base reset elections available for super funds as at 30 June 2026, to reduce exposure from historical gains. (egu.au)
- Compare keeping super vs withdrawing or restructuring: For balance portions over $3 million, determine whether retaining inside super—with higher tax but still potentially lower than personal income tax—is optimal based on your marginal rate.
- Seek professional advice: Advice is crucial around realising assets, structuring super investment, and coordinating with retirement and estate planning.
Long-term implications
- Super will remain attractive for many, but the tax advantages for large balances are eroded. Social contributions to inequality debates likely assured.
- Monitoring of one's total super balance across all accounts becomes essential.
- Contributions, withdrawals, and fund structuring must be coordinated with new rules.
Summary: If your total super balance is heading past the $3 million mark, now’s the time to plan. With the first Division 296 tax assessments expected in 2027–28, review your holdings, realise gains strategically, and consult a financial adviser to minimize your tax exposure under the new rules.