What is Division 296?
From 1 July 2026 the Treasury Laws Amendment (Building a Stronger and Fairer Super System) Act 2026 introduces Division 296 — a new tax regime targeting superannuation earnings for individuals with Total Superannuation Balances (TSBs) above AU$3 million. (dentons.com)
- For earnings attributable to balances between AU$3 million and AU$10 million, an additional 15% tax applies (bringing the total effective rate on these earnings to 30%).
- For earnings attributable to balances above AU$10 million, an additional 25% tax applies (total effective rate 40%). (ords.com.au)
- Unrealised gains are not taxed; only earnings realized through dividends, interest, rent, or sales of assets. (egu.au)
- Both thresholds will be CPI-indexed, in increments of AU$150,000 (for the AU$3M threshold) and AU$500,000 (for the AU$10M threshold). (egu.au)
Who is affected?
- Individuals with TSBs over AU$3 million, whether in SMSFs or industry funds. (ords.com.au)
- First assessments will be after the income year ending 30 June 2027; the tax becomes payable from 1 July 2026 onward. (ords.com.au)
What must trustees and individuals do?—Planning steps before 30 June 2026
| Area | Actionable insight |
|---|---|
| Asset review | Identify unrealised gains within the fund. Consider whether to sell or restructure assets before 30 June to manage upcoming tax exposure. (egu.au) |
| CGT cost base reset election | Funds can elect to reset cost bases of directly held CGT assets to values as at 30 June 2026. This limits the future taxable earnings under the new regime. Irrevocable election must align with SMSF Annual Return for 2026-27. (accurium.com.au) |
| Liquidity planning | Prepare to meet potential tax liabilities without forced asset sales, especially for illiquid assets (e.g. property). Ensure sufficient cash flow. (egu.au) |
| Contribution strategy | Reconsider employer contributions and internal rollovers in light of the thresholds and how they affect taxable portion proportionately. |
| Estate planning & spousal balancing | Couples can consider whether balancing TSB across partners can reduce exposure if both retain under-threshold balances. |
Examples
- Joan, with a TSB of AU$3.2 million, fund earnings of AU$250,000 (realised portion AU$125,000). She has AU$200,000 in the excess bucket (above the AU$3M base). Approximately 6.25% of earnings are attributable to that bucket → additional 15% tax on that portion only. (egu.au)
Key Takeaways
- Division 296 is law; enacted early March 2026. (accurium.com.au)
- Thresholds start 1 July 2026, first assessments after 30 June 2027. (ords.com.au)
- Now is the crucial time for planning — elections, restructuring, and reviewing investment composition should be done before 30 June 2026 to optimize outcomes.
Recommended Actions:
- Audit your current super fund balances across all accounts. 2. Review proposed CGT asset holdings and make election if beneficial. 3. Confirm anticipated fund returns and model Division 296 exposure. 4. Consult SMSF advisers for compliance and reporting obligations.
By taking action now, trustees and high-net-worth individuals can avoid unnecessary tax burdens and maintain flexibility under the new rules.