What Is Division 296 Tax?
Australia’s Division 296 tax takes effect from 1 July 2026. Under this policy, if your Total Super Balance (TSB) exceeds certain thresholds at the end of the financial year, a portion of your super fund’s earnings above those thresholds will be taxed at a higher rate. (community.ato.gov.au) There are two thresholds:
| Threshold | Rate on Earnings Above Threshold |
|---|---|
| $3,000,000 (Large Super Balance Threshold – LSBT) | Additional 15% tax on earnings above LSBT |
| $10,000,000 (Very Large Super Balance Threshold – VLSBT) | Extra 10% tax on earnings exceeding $10 million, i.e. 25% total on amounts above VLSBT |
These taxes apply only to the earnings portion of your super that directly corresponds to amounts over those thresholds—not to the full balance. (community.ato.gov.au)
Who Is Affected?
- Individuals whose total superannuation balance across all funds exceeds $3 million, as of 30 June 2027, will be impacted for the 2026-27 financial year. (community.ato.gov.au)
- Those exceeding $10 million TSB face heavier rate (15% + 10% extra = 25%) only on earnings above $10 million—in other words, super over $10 million is taxed more steeply on its returns above that mark.
Compliance & Timing
- Superannuation funds (regulated by APRA or SMSFs) will report relevant earnings to the ATO. Your fund will notify you if reporting is required. (community.ato.gov.au)
- Assessments will not be immediate. You’ll receive formal Notice of Assessment for the 2026-27 financial year in the latter half of 2027-28, once earnings data is lodged. (community.ato.gov.au)
Examples to Illustrate
- Example 1: Chloe has a total super balance of $4 million. The earnings for $1 million above the LSBT of $3 million will be taxed at an additional 15%, applied only to that $1 million portion of earnings.
- Example 2: David’s TSB is $12 million. Earnings attributed to amounts over $3 million and up to $10 million incur 15% additional tax; earnings attributable to the $2 million above $10 million incur an extra 25% (15% + an additional 10%).
Planning Strategies & Advice
- Review your current super balances—if you're near thresholds, getting close could trigger the extra taxes.
- Consider income-smoothing strategies: spreading earnings to reduce amount over thresholds where possible.
- Use tax-aware investing: ensure your fund’s investment strategy accounts for this extra layer of taxation.
- Where possible, monitor super contributions and transfers to avoid being pushed above the thresholds unnecessarily.
- Consult with a financial planner specialized in superannuation, especially if you hold multiple super accounts.
What You Should Do Now
- Check with your fund to understand how earnings are reported and when assessments will arrive.
- Keep accurate records across all super accounts.
- Consider getting professional advice if your balance is approaching LSBT or VLSBT to plan ahead.
For many, this will be a non-issue—but for those with very high super balances, this is a significant change with major implications.</n