Tax Planning
Strategic Tax Planning for High-Balance Super Accounts Under Division 296
New legislation introducing higher tax rates for large super balances over $3m (and $10m) takes effect from 1 July 2026. Here’s how individuals can plan proactively to minimise impact.
By NomadicTax Research Team • 5-6 min read • February 22, 2026
## 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](https://ifpa.com.au/19-december-2025/?utm_source=openai))
- **Balances above $10 million** will be taxed at **40%** on earnings exceeding that threshold. ([ifpa.com.au](https://ifpa.com.au/19-december-2025/?utm_source=openai))
- The tax only applies to **realised earnings**—not paper or unrealised gains. ([theguardian.com](https://www.theguardian.com/australia-news/2025/oct/13/new-rules-have-been-proposed-for-your-super-heres-what-you-need-to-know?utm_source=openai))
- Both thresholds will be **indexed to inflation (CPI)**, to avoid creeping inclusion of more account holders over time. ([au.finance.yahoo.com](https://au.finance.yahoo.com/news/major-3-million-superannuation-tax-change-coming-for-aussies-in-2026-fairer-214700501.html/?utm_source=openai))
- Commencement: 1 July 2026. ([au.finance.yahoo.com](https://au.finance.yahoo.com/news/major-3-million-superannuation-tax-change-coming-for-aussies-in-2026-fairer-214700501.html/?utm_source=openai))
## 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](https://www.superannuation.asn.au/media-release/explainer-new-super-tax-legislation-introduced-to-parliament/?utm_source=openai))
## Timeline & Key Dates
- Draft legislation released: Late 2025; consultation closed January 16, 2026. ([au.finance.yahoo.com](https://au.finance.yahoo.com/news/major-3-million-superannuation-tax-change-coming-for-aussies-in-2026-fairer-214700501.html/?utm_source=openai))
- Effective from **1 July 2026**, applying to 2026-27 financial year onward. ([aph.gov.au](https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/bd/bd2526/26bd025?utm_source=openai))
- 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](https://au.finance.yahoo.com/news/major-3-million-superannuation-tax-change-coming-for-aussies-in-2026-fairer-214700501.html/?utm_source=openai))
## 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](https://www.superannuation.asn.au/media-release/explainer-new-super-tax-legislation-introduced-to-parliament/?utm_source=openai))
## 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.