Overview of Division 296 (Super Tax for Large Balances)
The Better Targeted Superannuation Concessions Bill 2025 introduces Division 296, a reform targeting high superannuation balances. Under the legislation:
- Balances between $3 million and $10 million will face an increased rate of 30%, up from the standard 15% concessional rate. (ifpa.com.au)
- Balances above $10 million will be taxed at 40% on earnings exceeding that threshold. (ifpa.com.au)
- The tax only applies to realised earnings—not paper or unrealised gains. (theguardian.com)
- Both thresholds will be indexed to inflation (CPI), to avoid creeping inclusion of more account holders over time. (au.finance.yahoo.com)
- Commencement: 1 July 2026. (au.finance.yahoo.com)
Actionable Planning Strategies
Here are concrete steps for those likely to be affected by Division 296:
| Strategy | What to Do | Why It Helps |
|---|---|---|
| Defer Realisation of Investments | Hold onto assets instead of selling until after annual cutoff or when earnings have run low. | Realised earnings trigger the higher tax; limiting sales reduces liability. |
| Optimize Fund Structure | Use multiple super funds or split assets among growth vs income-generating assets. | Only portion above threshold is taxed more; segregating assets may limit exposure. |
| Withdraw or Rebalance During Low Earnings Years | Consider withdrawals or asset shifts in years when realised earnings are low. | Minimises additional tax when taxable earnings are favourable. |
| Indexation Awareness | Monitor CPI changes; thresholds will adjust. Timing of growth near thresholds may shift liabilities. | Helps in predicting when balances cross thresholds. |
| Seek Professional Advice | Consult a financial planner or tax adviser who understands Division 296 design and calculations. | The law applies to APRA funds, SMSFs; calculations can be non-trivial. |
Sample Example
Joan, aged 50, holds a super balance of $3.2 million. In 2026–27, her fund earns $250,000, of which $125,000 is realised gains. Portion above $3 million is $200,000 which is 6.25% of her total balance. Realised earnings attributed to that portion = 6.25% of $125,000 = $7,812.50. Division 296 extra tax = 15% of that = approx $1,172. (superannuation.asn.au)
Timeline & Key Dates
- Draft legislation released: Late 2025; consultation closed January 16, 2026. (au.finance.yahoo.com)
- Effective from 1 July 2026, applying to 2026-27 financial year onward. (aph.gov.au)
- Low Income Super Tax Offset (LISTO) changes also coming: eligibility threshold rising from $37,000 to $45,000, maximum offset increasing from $500 to $810 from 1 July 2027. (au.finance.yahoo.com)
Risks & Considerations
- Funds with fluctuating balances may cross thresholds year to year.
- Selling assets to reduce exposure may incur capital gains tax or impact investment strategy negatively.
- SMSFs and APRA-regulated fund rules may differ in treatment—ensure you account for both.
- Legislative passage and final regulatory details (e.g., who pays the tax—fund or individual) could affect liquidity implications. (superannuation.asn.au)
Key Takeaways
- If your super balance is approaching or exceeds $3 million, Division 296 will meaningfully increase taxes starting mid-2026.
- Planning early—through structuring, asset timing, and staying on top of legislation—is essential to mitigate tax impact.
- Low-income earners will benefit from LISTO changes, so ensure eligibility information is up to date.
Tax Planning Moves: Review your super projections now; consider delaying realisation; consult with experts; rebalance asset mix; document fund balances and income types to support Division 296 calculations.