Tax Planning
Navigating the New Division 296 Tax: High Super Balances and You
If your super balance is over AUD 3 million, the new Division 296 tax rules will affect you — here’s how to calculate, prepare and minimise the impact.
By NomadicTax Research Team • 5-8 min read • April 28, 2026
## Overview of Division 296 Tax
From the **income year starting 1 July 2025**, individuals whose **Total Superannuation Balance (TSB)** exceeds **AUD 3 million** face an additional tax on the portion of earnings over that threshold under **Division 296**. ([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 thresholds and tax rates:
| TSB Range | Tax Rate on Earnings Over Threshold |
|---|---|
| Over AUD 3 million to AUD 10 million | **+15%** tax on those earnings above AUD 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)) |
| Over AUD 10 million | An additional **+10%** (making total added tax on very large balances) over AUD 10 million ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/sites/default/files/2026-02/PLS_working_group_key_outcomes_20_January_2026.pdf?utm_source=openai)) |
## Who Is Affected?
- Individuals (including SMSF members) with super balances above the thresholds described.
- Defined benefit interest holders who haven't commuted their benefits; their Division 296 obligations are deferred until they access the benefits. ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/sites/default/files/2026-02/PLS_working_group_key_outcomes_20_January_2026.pdf?utm_source=openai))
- Children receiving super income streams and recipients of structured settlements for personal injury have specific exemptions. ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/sites/default/files/2026-02/PLS_working_group_key_outcomes_20_January_2026.pdf?utm_source=openai))
## Calculating Your Liability
1. Determine your **Total Superannuation Balance (TSB)** as at the end of the previous financial year.
2. Identify earnings attributable to the portion over the threshold.
3. Use the prescribed tax rate (+15% or +25% depending on TSB level) on those earnings.
4. You'll receive a Notice of Assessment (NOA). Liability is payable **84 days** after the NOA date. Alternatively, you may elect to release funds from your super fund (within 60 days) to pay the amount. ([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))
## How to Mitigate or Plan Ahead
- Consider restructuring contributions or managing investment earnings to avoid excess growth beyond thresholds.
- Review investment mix and where income is realised – realise less gains where possible in high-earning years.
- If you hold defined benefit interests, assess whether commuting is suitable, as earnings tax may be deferred until benefit is taken.
- Ensure your Superannuation Funds are compliant in reporting TSB correctly. SMSFs must report additional labels on their annual return starting 2026. ([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))
## Case Study: Alice vs Bob
- **Alice** has a balance of **$3.5 million**. Her fund earns **$200,000** in net earnings. Earnings over the threshold ($500,000 over threshold) are taxed at +15%, so Alice pays **0.15 × $200,000 = $30,000** extra tax. NOA issued; due in 84 days.
- **Bob** has $11 million. For earnings over $10 million, additional +25% applies. If earnings are $800,000, for the first $7 million over the 3 million threshold, tax at +15%; on the amount over $10 million, additional +10% atop that.
## Action Plan
- Check your latest TSB and fund earnings projections.
- Seek financial advice if your super balance is near a threshold.
- Update & monitor your super fund contributions and investment strategies.
- Be ready for your NOA, know payment options and deadlines.
Understanding Division 296 is crucial for anyone with high super balances. Getting ahead now can save significant extra tax down the road.