What is Division 296?
Division 296 is a new regime introduced under the Treasury Laws Amendment (Building a Stronger and Fairer Super System) Bill 2026. (aph.gov.au) This measure limits tax concessions on superannuation for individuals with Total Superannuation Balances (TSB) exceeding A$3 million, effective from the 2025-26 financial year. (ato.gov.au) Specifically, earnings attributable to the excess above A$3 million will be taxed at 15%. (ato.gov.au)
Implication: Who Is Affected and When
- Applies to individuals whose super balance exceeds A$3 million at 30 June 2026 and beyond. (ato.gov.au)
- Only affects earnings on the portion above A$3 million; the principal amount below remains under standard concessional taxation.
- This rule does not impose a cap on how much can be contributed or held in super—just changes how earnings are taxed when balances exceed the threshold. (aph.gov.au)
Effective Dates & Interaction with LISTO
- Division 296 tax becomes effective from the 2025-26 year onwards. (ato.gov.au)
- The Low Income Super Tax Offset (LISTO) thresholds are being raised: income threshold goes from A$37,000 to A$45,000, and the maximum offset increases from A$500 to A$810, effective 1 July 2027. (aph.gov.au)
Actionable Strategies for High-Balance Super Members
1. Monitor Your Total Super Balance
Ensure you track your super balance at 30 June each year. If projected to exceed A$3 million, plan your contributions and investment strategy accordingly.
2. Consider Investment Selection Within Super
Earnings on conservative or lower-return assets might still breach the threshold—so aligning your higher-risk investments to years where the excess is minimal may help.
3. Time Withdrawals or Roll-overs
While super access rules are strict, consider whether combining pensions or using transition-to-retirement mechanisms can reduce taxable earnings above A$3 million. Seek expert advice.
4. Use LISTO Increases
Those with modest super balances and income still qualify for the boosted LISTO from 2027, enhancing after-tax returns for lower-income earners.
Compliance and Reporting Requirements
- Super funds, SMSFs included, will need to report balances and earnings relative to TSB thresholds.
- Consistency in valuation at 30 June will be critical—members should ensure their super funds have accurate asset valuations.
These changes reset the playing field for large-balance super members, increasing tax on earnings over large thresholds—but also enhancing support for those with lower balances.