What is Division 296 Tax?
From 1 July 2026, an additional tax applies to super earnings for individuals whose Total Super Balance (TSB) exceeds certain thresholds. Here's how it works:
- If your TSB is over $3 million at the end of a financial year, earnings on the portion above $3 million will be taxed at 15%.
- If your TSB is over $10 million (the Very Large Super Balance Threshold), you'll pay an additional 10% on earnings above that.
These earnings are not your entire super balance—only the portion that exceeds the threshold attracts the extra tax. (community.ato.gov.au)
Who's Impacted?
- Individuals with mid to high super balances, especially those close to or exceeding the $3 million threshold.
- SMSF members, high earners, or those with large concessional contributions.
Example
Sarah has a super fund with a TSB of $5 million at 30 June 2027. Of that, $2 million are earnings over the $3 million threshold. If those $2 million of earnings grew by $200,000 in that year, $200,000 will be taxed 15%, leading to $30,000 in extra tax. If part of that sum pushes past $10 million, the portion above that incur an additional 10% tax. (community.ato.gov.au)
How to Plan Ahead: Actionable Strategies
- Monitor your TSB: Track your balance throughout the year to know whether you'll cross thresholds.
- Manage contributions carefully: Timing of contributions can affect your year-end balance. Spreading out contributions or adjusting them may help.
- Review investment returns: Lower-risk assets may yield lower earnings but reduce tax exposure.
- Tax offsets & deductions: Explore whether any super fund fees, earnings, or transition-to-retirement income streams offer offsets or relief.
- Get professional advice: Especially if you are close to or over thresholds, a financial adviser or tax professional can model outcomes.
Practical Tips for Different Types of Taxpayers
| Situation | Tip |
|---|---|
| SMSF members with $2.5m to $3.5m balances | Defer or moderate non-urgent contributions until after the balance dips below thresholds, or split contributions over financial years if possible. |
| Retirees | Consider whether preserving capital rather than maximising growth may reduce tax on earnings. |
| Young high-earning professionals | Use salary sacrifice, and review investment mix, but also account for potential future Division 296 exposure. |
Conclusion
Division 296 introduces extra taxation for earnings on super balances above $3 million (and heavier tax past $10 million). Knowing how and when it applies empowers you to structure your super contributions, investments, and overall tax-planning more effectively. Stay ahead of these changes to avoid surprises once assessments begin in 2027-28.
Tax Home: Australia Category: Tax Planning Author: NomadicTax Research Team Read Time: 6 min