Compliance

Navigating Division 296 Tax: What Super Members with Large Balances Must Know

New super rules target those with total super balances above $3 million—here’s how Division 296 tax works, with real strategies you can use now.

By NomadicTax Research Team • 5-8 min read • April 24, 2026

## What is Division 296 Tax? Starting in the **2025-26 financial year**, Australia introduced the Division 296 tax under the Better Targeted Super Concessions policy. This tax applies to super earnings related to the portion of an individual’s **Total Superannuation Balance (TSB)** that *exceeds* the **large super balance threshold**, currently **$3 million**. ([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/stakeholder-relationship-groups-key-messages/smsf-auditors-professional-association-stakeholder-group/smsf-auditors-professional-association-stakeholder-group-key-messages-8-july-2025?utm_source=openai)) The tax rate is **15%**, charged directly to the individual; it is separate from both regular income tax and the tax the super fund pays. ([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/stakeholder-relationship-groups-key-messages/smsf-auditors-professional-association-stakeholder-group/smsf-auditors-professional-association-stakeholder-group-key-messages-8-july-2025?utm_source=openai)) ## Key Dates & Thresholds - The threshold of **$3 million** applies and will be indexed in increments (~$150,000 increments) for “large” balances, and a higher threshold (~$10 million) will apply for “very large” balances. ([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/stakeholder-relationship-groups-key-messages/smsf-auditors-professional-association-stakeholder-group/smsf-auditors-professional-association-stakeholder-group-key-messages-8-july-2025?utm_source=openai)) - Individuals will receive a **Notice of Assessment** for the tax, payable **84 days** after issue. If they choose, within **60 days** they can elect to withdraw from their super fund to satisfy the debt. If not, the Commissioner can issue a **release authority** to take the funds willingly. ([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/stakeholder-relationship-groups-key-messages/smsf-auditors-professional-association-stakeholder-group/smsf-auditors-professional-association-stakeholder-group-key-messages-8-july-2025?utm_source=openai)) - If the Division 296 tax relates to a **defined benefit interest** (pre-regulations) that hasn’t converted to accumulation phase, payment is deferred until **21 days after the first benefit is paid** from that interest. ([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/stakeholder-relationship-groups-key-messages/smsf-auditors-professional-association-stakeholder-group/smsf-auditors-professional-association-stakeholder-group-key-messages-8-july-2025?utm_source=openai)) ## Sector-Specific Impacts: SMSFs & Defined Benefit Funds - For **Self-Managed Super Funds (SMSFs)**, new labels will be added to the 2026 SAR (Superannuation Annual Return) so that funds supply the data needed for the Division 296 calculation. ([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/stakeholder-relationship-groups-key-messages/smsf-auditors-professional-association-stakeholder-group/smsf-auditors-professional-association-stakeholder-group-key-messages-8-july-2025?utm_source=openai)) - Defined benefit interests carry rules that alter timing: even if they exceed thresholds, taxes may not be immediately payable until benefits are accessed. ([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/stakeholder-relationship-groups-key-messages/smsf-auditors-professional-association-stakeholder-group/smsf-auditors-professional-association-stakeholder-group-key-messages-8-july-2025?utm_source=openai)) ## Practical Strategies & Actionable Advice Here’s what you can do if your super balance is above (or approaching) the $3 million threshold: **1. Timing your withdrawals or distributions** - Consider whether withdrawing from accumulation super in the debt-period is beneficial to avoid release authorities—and the associated loss of control over investments. **2. Assessing super contributions** - Be cautious about additional concessional contributions if you’re already near the threshold; earnings on excess portions will attract extra tax. **3. Review your defined benefit interests** - Understand the impact of extracting benefits; timing could defer tax or expose you to higher liabilities. **4. Monitor your SMSF reporting compliance** - Ensure your SMSF annual return (SAR) is set up with the correct new labels and accurate reporting of earnings and fund balances. Errors could lead to over tax liabilities. ([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/stakeholder-relationship-groups-key-messages/smsf-auditors-professional-association-stakeholder-group/smsf-auditors-professional-association-stakeholder-group-key-messages-8-july-2025?utm_source=openai)) **5. Tax planning avenues** - Explore transferring or restructuring super where legally permissible, or adjusting investment strategies to influence earnings (though risk-based and always with advice). ## Why It Matters - For those with high super balances, this is a **material new cost**– diverting significant portions of earnings above $3 million into higher taxed territory. - The measure aims to **target concessions** better, reducing inequity between those with modest savings and ultra-wealthy members. If your TSB crosses $3 million, or you're close, this is no time to wait. Speak with a super-specialised financial adviser to model your exposure and develop an optimized plan.