Tax Planning
Navigating the New Super Tax If Your Balance Exceeds $3 Million
Discover how Division 296 tax works from 1 July 2026 and what high-balance superannuation account holders need to plan for—actionable tips to stay ahead.
By NomadicTax Research Team • 5-8 min read • August 20, 2026
## Understanding Division 296 Tax
Starting **1 July 2026**, individuals with a **total super balance (TSB)** above **$3 million** will face the **Division 296 tax**, an additional layer of taxes on super earnings above thresholds. If your TSB exceeds **$10 million**, an **extra 10% tax** applies on earnings above that very high threshold. ([community.ato.gov.au](https://community.ato.gov.au/s/article/a07Mo00001w0qcO/what-division-296-tax-changes-means-for-your-super-balance?utm_source=openai))
This tax applies **only to earnings associated with the portion of your TSB above those thresholds**, not on the entire balance. Assessment will be done **after your super fund reports earnings** over the 2026-27 financial year. Notifications will be sent during 2027-28. ([community.ato.gov.au](https://community.ato.gov.au/s/article/a07Mo00001w0qcO/what-division-296-tax-changes-means-for-your-super-balance?utm_source=openai))
## Who Is Affected & Impacts
- Members of **APRA-regulated super funds** and **SMSFs** where the balance at end of the year is over $3 million.
- **83%+** of people will likely be unaffected, since high TSBs are rare outside elite professionals, long-career high earners or long-term rolled-over funds.
**Effects include:**
- Lower net returns in super due to additional 15% tax on earnings above $3M; 25% (15% + extra 10%) if above $10M.
- **Reporting burden** on super funds and members to calculate earnings proportionally. SMSFs must alert fund trustees and report relevant earnings. ([community.ato.gov.au](https://community.ato.gov.au/s/article/a07Mo00001w0qcO/what-division-296-tax-changes-means-for-your-super-balance?utm_source=openai))
## Tax Planning Strategies
- **Balance splitting across spouses:** Where one partner has a high super balance, consider strategies to distribute investments or contributions such that each balance stays under $3M.
- **Concessional vs non-concessional contributions planning:** Reducing further contributions if already near or above $3M may avoid pushing more earnings into taxed thresholds.
- **Investment mix adjustments:** Consider lower-earning or more tax-efficient investments within super for balances above thresholds.
- **Withdrawal where possible:** Though there's limited access to super funds before retirement, schemes such as transitioning to retirement may help optimize earnings and withdrawals.
## Practical Example
Suppose Maya has a SMSF with **TSB = AUD 4.5 million** at 30 June 2027. Her fund’s earnings for the year are AUD 200,000.
- First AUD 3M of balance: earnings on this portion taxed normally (max 15%).
- Remaining AUD 1.5M: earnings tied to that portion (pro rata of total earnings) taxed at **15%** under Division 296.
If TSB had been **AUD 11 million**, the portion above AUD 10 million would incur **2nd-tier rate (25%)** on associated earnings. ([community.ato.gov.au](https://community.ato.gov.au/s/article/a07Mo00001w0qcO/what-division-296-tax-changes-means-for-your-super-balance?utm_source=openai))
## Compliance & Reporting Tips
- Ensure your super fund reports **relevant earnings** for the TSB over $3M to the ATO. SMSFs must track balances inclusive of all super accounts. ([community.ato.gov.au](https://community.ato.gov.au/s/article/a07Mo00001w0qcO/what-division-296-tax-changes-means-for-your-super-balance?utm_source=openai))
- Keep accurate records of contributions, earnings, and account balances throughout year.
- Seek expert advice when approaching or exceeding thresholds to optimize tax, contributions, and withdrawals.
## Conclusion
Division 296 tax introduces a new tax layer for high balance super accounts. While many will be unaffected, those with balances above **$3 million** should plan early with strategies to reduce exposure and ensure compliance. Understanding this rule is essential to avoid surprises during 2027-2028 assessments.