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) 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)
Key Thresholds for 2026–27
- Large Super Balance Threshold (LSBT): $3 million. Earnings above this threshold are taxed at 15%.(community.ato.gov.au)
- Very Large Super Balance Threshold (VLSBT): $10 million. On earnings above this, an additional 10% tax applies.(community.ato.gov.au)
Who This Affects
- Members of APRA-regulated funds with balances over LSBT or VLSBT.(community.ato.gov.au)
- 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)
Important Dates and Reporting
- Assessments for 2026–27 will be issued in the latter half of financial year 2027–28.(community.ato.gov.au)
- Super funds are responsible for reporting relevant earnings above thresholds to the ATO.(community.ato.gov.au)
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)
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.