Tax Planning

Navigating the Super Landscape: Understanding Australia’s New Division 296 Tax on Large Super Balances

From 1 July 2026, super balances exceeding certain thresholds will attract extra tax — here’s what taxpayers with high super balances need to know.

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

## What is Division 296 Tax? Starting **1 July 2026**, Australia introduces a **Division 296 tax** for super funds where a member’s Total Super Balance (TSB) exceeds certain thresholds.([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)) The tax applies only to **earnings corresponding to the portion of the balance above the threshold**, not the entire fund balance.([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)) ## Key Thresholds for 2026–27 - **Large Super Balance Threshold (LSBT):** \$3 million. Earnings above this threshold are taxed at **15%**.([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)) - **Very Large Super Balance Threshold (VLSBT):** \$10 million. On earnings above this, an additional **10% tax** applies.([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 This Affects - Members of **APRA-regulated funds** with balances over LSBT or VLSBT.([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)) - **SMSF (Self-Managed Super Funds)** holders should combine all super balances across funds to determine TSB and whether reporting is required.([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)) ## Important Dates and Reporting - Assessments for 2026–27 will be issued in the **latter half of financial year 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)) - Super funds are responsible for reporting relevant earnings above thresholds to the ATO.([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)) ## Actionable Strategies and Considerations - **Consolidate super funds** – multiple smaller balances may avoid LSBT • or, push for member-directed investment strategies to optimise earnings below thresholds. - **Review investment earnings mix** – if earnings are volatile or heavily growth oriented, they may push earnings above the threshold. Low yield or defensive assets may help avoid breaching thresholds. - **Timing of withdrawals** – careful planning for partial withdrawals (if applicable) in the lead up to year-end can reduce TSB. - **Record-keeping** – funds must maintain accurate records of member balances and earnings. Be aware that in future years, LSBT and VLSBT may be **indexed with CPI**.([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)) ## Example Lisa has a Total Super Balance of **\$4 million** at end of FY 2026-27. She earned \$200,000 in her super fund over the year. The \$1 million portion above LSBT is taxed at 15%. That means \$150,000 of earnings (i.e. \$200,000 × (1/4)) are taxed at 15%, translating to an effective tax of \$22,500 on that portion. The rest remains taxed under standard concessional super earnings rates. ## Bottom Line Division 296 introduces an extra layer of tax for high super balances. While it doesn’t change contributions or existing concessional rates, it **raises the bar on earnings over \$3 million**. Stakeholders—especially SMSF members—should proactively review their earnings mix, fund structure, and year-end balance to manage tax exposure successfully.