What is Division 296 and Why It Matters
Effective from 1 July 2026, Australia introduces additional tax on superannuation earnings for individuals with a Total Superannuation Balance (TSB) above set thresholds under the Division 296 tax. (mcbainmccartin.com.au)
Here’s how it breaks down:
- TSB between $3 million and $10 million: an extra 15% tax on earnings attributable to amounts above $3 million. Effective tax on those earnings becomes 30%. (mcbainmccartin.com.au)
- TSB above $10 million: an extra 25% tax on earnings beyond $10 million (for a total of 40%). (mcbainmccartin.com.au)
The super fund continues paying the standard 15% tax. Division 296 adds another layer through individual assessment. (bdo.com.au)
Key Thresholds, Timing & Liability
| Threshold | Additional Tax Rate on Earnings Above Threshold | First Measurement Date |
|---|---|---|
| $3 million (to $10m) | +15% | Assessment based on TSB at 30 June 2027, for earnings in 2026-27 year (bdo.com.au) |
| Above $10 million | +25% (extra 10% beyond 15%) | Same as above (mcbainmccartin.com.au) |
The burden of paying the tax directly is on the individual, not the super fund. Notices of assessment will be issued. (bdo.com.au)
Planning Moves to Consider
Here are actionable strategies to limit your exposure:
- Reduce your super balance below $3 million: transferring out non-critical assets or withdrawing within the law (e.g., consider non-super investment options).
- Timing contributions carefully: avoid making large contributions that push TSB over thresholds before 30 June 2027 if you expect to exceed $3 million.
- Segment earnings: use lower-risk investments inside and outside super to control where high gains accumulate.
- Super splitting: if married or de facto, use spouse contributions or splitting strategies, but be mindful of their respective TSBs.
- Advance arrangements: ensure accurate reporting by funds; maintain records since TSB will be reported annually. (bdo.com.au)
Practical Example
Jane has a TSB of $4 million at 30 June 2027. Earnings in 2026-27 attributable above $3 million are $200,000. Her additional Division 296 tax = $200,000 × 15% = $30,000. On earnings beyond $10 million (if she had that much), applicable higher rate applies.
If Jane had reduced her TSB by $500,000 before the measurement date, her additional tax would only apply to $1 million of earnings above threshold, saving $7,500.
What to Do Now
- Review financial position: get updated valuations of your super balance and project growth.
- Consult a financial adviser: especially regarding asset movement, timing, retirement phase transitions.
- Communicate with super funds: ensure accurate reporting and understand fee-structures that might affect earnings.
- Record-keeping: keep documents relating to contribution history, valuations.
Bottom line: If you're close to or above the $3 million TSB threshold, planning before 30 June 2027 is critical. These changes can have substantial tax impacts and deserve attention now, not later.