What is Division 296?
Division 296 is a newly introduced superannuation tax effective from 1 July 2026, which may apply if your Total Super Balance (TSB) exceeds AU$3 million at the end of a financial year. (community.ato.gov.au)
- If your TSB is above $3 million but less than $10 million, you pay 15% tax on super earnings attributable to the portion of your balance above $3 million. (community.ato.gov.au)
- For balances above $10 million, there is an additional 10% tax (so earnings on the excess over $10 million will incur 25% total tax). (community.ato.gov.au)
Who Is Affected and When?
- Applies to TR 2026-27 for assessment; however, the first year to which this tax applies is the 2025-26 financial year. (ato.gov.au)
- Notice of Assessment will come in latter half of 2027-28 once earnings are reported by the super fund. (community.ato.gov.au)
Practical Impacts & Examples
- Alex has a super balance of $4 million. The $1 million over the threshold will have its earnings taxed at 15%. If that excess earns $50,000, $7,500 tax becomes due.
- Beth, with a $12 million TSB, will pay 15% on the portion between $3–10 million, and 25% on any earnings above $10 million. Earnings above $10 million thus attract this higher rate.
Mitigation Strategies
- Monitor your super balance as year-end approaches. If you expect to exceed thresholds, consider:
- Timing withdrawals, where possible and permitted;
- Assessing investment options to possibly reduce earnings in high-earning segments of your fund;
- Discussing with your super fund whether defined benefit interests or accumulation interests affect timing of debt liability. The tax on defined benefit interest earnings may be deferred until pension or benefit payments begin. (ato.gov.au)
Compliance and Reporting Requirements
- Super funds (both APRA-regulated and SMSFs) must report relevant earnings exceeding the LSBT (large super balance threshold) via new labels in the SMSF Annual Return. (community.ato.gov.au)
- Individuals will receive a Notice of Assessment (NOA), due 84 days after its issue. They can elect to pay directly or apply for a release of funds within 60 days. If not paid, Commissioner can issue release authority to super funds. (softwaredevelopers.ato.gov.au)
Key Takeaways
- Division 296 won’t slash your entire super & tax approach, only the earnings above the thresholds.
- The tax is individual-based, separate from fund level tax.
- High super balances need proactive management—start planning now to minimize surprises when assessments are issued.