Tax Planning
Planning for Super Splitting Under Division 296: Strategies for High-Balance Individuals
If your super balance may exceed the $3 million threshold from 1 July 2026, this article outlines what the Division 296 tax means—and how to minimise its impact.
By NomadicTax Research Team • 5 min read • August 18, 2026
## What Is Division 296 Tax?
From the **2026-27 financial year onwards (beginning 1 July 2026)**, Australia introduces a new tax regime where individuals with a **total super balance (TSB)** exceeding the **large super balance threshold (LSBT)**—$3 million in 2026-27—face a **15% tax on super earnings** proportionate to the amount exceeding $3 million. If the TSB exceeds the **very large super balance threshold (VLSBT)**—set at $10 million—an additional **10% tax** applies on the portion above $10 million. ([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 Likely to Be Affected?
- Long-serving executives or business owners who have accumulated large super funds (e.g. over $3 million).
- Individuals with multiple super accounts or rollover history that total a high balance.
- Those whose super earnings are generating significant investment returns.
## Practical Strategies to Mitigate the Impact
### 1. Monitor and Manage Your Total Super Balance
Track your super across all accounts—including defined benefit and overseas pensions. Avoid accumulating much above the threshold unless benefits outweigh the tax. Strategic rollovers or balancing may help.
### 2. Optimal Asset Allocation For Earnings
Given that only **earnings linked to the excess** over thresholds are taxed, shifting asset mix toward lower return/higher stability investments for the portion above thresholds may reduce taxable earnings.
### 3. Timing Large Contributions
Maximise concessional contributions while under the threshold. Consider delaying non-concessional contributions or capital gains realizations until older super balances are reduced (e.g. retire-and-draw strategies) if exceeding thresholds in coming years.
### 4. Consider Fund Design and Structuring
Explore the benefits of splitting contributions among multiple super funds, using **transition from active service** options, or partially drawing down balances in retirement phases where possible. Also consider self-managed super funds (SMSFs) vs APRA regulated funds for control over investments.
## Example Scenario
Jane has a TSB of $3.5 million at end of year; earnings on her entire balance are 7%. Under Division 296 she pays 15% on the earnings tied to the $500,000 above $3 million. Earnings on that excess are: 500,000 × 7% = $35,000 → 15% tax = $5,250. Below $3 million, earnings taxed as usual under concessional regime. If her balance grows to $10.5 million, additional 10% applies on the $500,000 above $10 million.
## Policy Risks & Eligibility Notes
- Thresholds indexed via CPI, so monitoring is needed each year. ([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 applies only to **earnings related to the excess**, not the full super balance.
- Div 296 assessments may only be issued once reporting by super funds occurs—likely in **latter half of 2027-28** for FY 2026-27. ([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))
## Take-Home Advice
- Use projections to estimate your TSB growth and identify if/when you will cross thresholds.
- Shift high yielding investments or delay gains if surplus earnings would be highly taxed.
- Consolidate accounts to reduce unneeded duplication of costs, but maintain strategic control.
- Seek financial advice regarding age, drawdowns or transition to retirement to leverage exemptions or minimize exposure.
- Stay updated on any changes to thresholds or indexing and align actions before the 1 July comparison dates.
Understanding Division 296 and its implications allows high-balance super members to make informed decisions that preserve wealth efficiently—while complying with the new taxation landscape.