Tax Planning
Strategic Super Moves Before Division 296: What Australians Need to Know
With the new Division 296 tax coming into force from 1 July 2026, high-superbalance holders must plan ahead to manage tax on excess super earnings. This article breaks down the rules, thresholds, and smart actions you can take now.
By NomadicTax Research Team • 5-8 min read • April 29, 2026
## Understanding Division 296: High Super, Higher Tax
From **1 July 2026**, Australia introduces Division 296 in the Income Tax Assessment Act 1997 targeting individuals with **total superannuation balances (TSB)** above **$3 million**. Earnings on amounts from $3 million to $10 million will face an additional **15% tax**, meaning earnings are taxed at a **nominal 30%** (15% fund tax + 15% additional). For balances over $10 million, the extra tax rises to **25%**, bringing the nominal rate to **40%**. ([aph.gov.au](https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/bd/bd2526/26bd048?utm_source=openai))
### What Counts as Earnings and Balance
- The **TSB** includes all super interests (APRA funds, SMSFs, etc.) with values determined by regulations or, absent those, by their withdrawal benefit. ([aph.gov.au](https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/bd/bd2526/26bd048?utm_source=openai))
- **Taxable superannuation earnings (TSE)** include realised earnings like interest, dividends (grossed-up for franking credits), rent, and realised capital gains. Unrealised gains are *not* taxed under this regime. ([aph.gov.au](https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/bd/bd2526/26bd048?utm_source=openai))
- Transitional rules: for 2026-27, liability is based only on the **balance at end of year (30 June 2027)**; contribution timing and withdrawals beforehand can affect future exposure. ([aph.gov.au](https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/bd/bd2526/26bd048?utm_source=openai))
## ACTIONS to Consider Before 1 July 2026
| Goal | Example Strategy | Considerations |
|------|------------------|-----------------|
| Stay below first threshold | Plan withdrawals or pension payments to drop TSB below $3 million at 30 June 2027 — e.g. convert portion into retirement income stream, or shift certain assets out of super. | Beware of restrictions on access; must comply with age and condition rules; consider timing and market volatility. |
| Use cost-base reset election (SMSFs) | Small super funds can elect to reset asset cost bases to market value at 30 June 2026 to reduce future CGT when realising gains. | The election must be applied **to all assets** in the fund and is irrevocable; if market values fall, resetting might increase CGT on disposal. ([aph.gov.au](https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/bd/bd2526/26bd048?utm_source=openai)) |
| Shift growth into exempt or excluded funds | Certain interests (e.g. some defined-benefit or constitutionally protected funds, etc.) may be excluded from Division 296 or have different methods for attribution. | Such exclusions are narrow; seek specialist advice to verify applicability. ([aph.gov.au](https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/bd/bd2526/26bd048?utm_source=openai)) |
## Longer-term Planning Beyond 2026-27
- The **LISTO** changes: from 1 July 2027, the upper income threshold rises to $45,000 (from $37,000), and maximum offset amount to $810. Low earners should ensure they meet eligible criteria. ([aph.gov.au](https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/bd/bd2526/26bd048?utm_source=openai))
- Super funds and trustees will need solid record keeping to attribute earnings, calculate TSE, and report TSB accurately. SMSFs particularly will need actuarial or valuation certificates for defined benefit interests. ([aph.gov.au](https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/bd/bd2526/26bd048?utm_source=openai))
- Consider investment mix inside super to balance high-growth assets (which may produce realised gains or income) versus more stable or income generating assets that may blend differently under TSE rules.
## Real-world Example
> **Case**: Jane has $5.5 million TSB on 30 June 2026, split between her SMSF and an APRA fund. Without action, starting 1 July 2026, only her portion over $3 million ($2.5 million) faces the extra tax on earnings. If she sells off $1 million worth of shares before 30 June 2027 and draws down some super income, she may be able to reduce TSB to ~$4.5 million, reducing earnings taxed at higher rate in that transition year.
## Summary Checklist
- Review your total super balances across ALL funds by 30 June 2027.
- Consider withdrawals or pensions where possible before threshold breach.
- For SMSFs, decide on cost base reset strategy by fund return deadline.
- Monitor how earnings are attributed—look out for exposure draft regulations.
- Get professional tax & financial advice to avoid unintended consequences.
**Key takeaway:** Division 296 is law from 1 July 2026 and represents one of the most significant super changes in decades. But strategic planning ahead—especially in the transition year—can help reduce tax liability and preserve wealth.