Tax Planning
Strategic Tax Planning for High Super Balances Under Australia’s Division 296 Rules
With new rules starting 1 July 2025, Division 296 will target earnings on super balances over A$3 million – here’s how high-net-worth individuals can prepare and minimise added tax burdens.
By NomadicTax Research Team • 5-8 min read • November 14, 2025
## What is Division 296?
The **Better Targeted Superannuation Concessions** measure, known as Division 296, is a proposal to reduce tax concessions on future earnings for superannuation balances above **A$3 million**. From **1 July 2025**, those with super balances exceeding A$3 million will face an extra **15 % tax** on the portion of super earnings that sits above the threshold. ([ato.gov.au](https://www.ato.gov.au/about-ato/new-legislation/in-detail/superannuation/better-targeted-superannuation-concessions?utm_source=openai))
## Who is affected
- Individuals (including those in SMSFs and large APRA-regulated funds) whose **total super balance** is over A$3 million at end of the financial year. ([ato.gov.au](https://www.ato.gov.au/about-ato/new-legislation/in-detail/businesses/amending-the-tax-law-to-reduce-compliance-cost-for-general-insurers?utm_source=openai))
- Earnings over the threshold are taxed at a higher rate, but **total balance stays uncapped**. ([ato.gov.au](https://www.ato.gov.au/about-ato/new-legislation/in-detail/superannuation/better-targeted-superannuation-concessions?utm_source=openai))
## Strategies to reduce exposure
| Strategy | What you can do | Timeline / Important Notes |
|---|---|---|
| Monitor your super balance | Regularly check your total super balance so you can anticipate crossing the A$3 million threshold. | After 30 June each year. |
| Timing of earnings recognition | If funds permit, delay or spread high returns to avoid large spikes in earnings above the threshold. | Depends on investment vehicles – consult with fund. |
| Reducing taxable earnings | Shift earnings into tax-free or less taxed segments if available (e.g., taxed super phase with tax-free income streams). | Requires structuring and fund-specific rules. |
| Split contributions or restructure fund balances | Use splits between different members or use non-concessional contributions to minimise differential rates across earning brackets. | Must respect contribution caps and rules to avoid penalties. |
| Consider partial rollovers or commutations | For certain legacy products, there are now relaxed commutation pathways. Full commutation is allowed under specific conditions in legacy retirement products. ([ato.gov.au](https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/super/withdrawing-and-using-your-super/relaxed-commutation-rules-for-legacy-retirement-products?utm_source=openai)) |
## Examples
- **Example 1**: Emma has a balance of A$3.5 million. Only the earnings associated with the A$500,000 above threshold will be taxed at 15 %. So if her earnings rate is 5 %, only the returns on that A$500,000 attract the extra tax.
- **Example 2**: Jason holds his super in a legacy product which he can commute under new relaxed rules. He commutes some early to an accumulation phase or lump sum, reducing earnings exposure. But must account for **transfer balance cap** effects. ([ato.gov.au](https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/super/withdrawing-and-using-your-super/relaxed-commutation-rules-for-legacy-retirement-products?utm_source=openai))
## Actionable steps now
1. **Engage with your super fund** to get your current balance and estimate projected earnings.
2. Get tailored **financial advice** to plan fund allocations, potential commutations, or restructure moving forward.
3. Ensure compliance with **contribution caps**, especially when dealing with reserves allocations – note from **7 December 2024**, reserves count differently towards concessional vs non-concessional caps. ([ato.gov.au](https://www.ato.gov.au/tax-and-super-professionals/for-superannuation-professionals/apra-regulated-funds/fund-reporting-protocols/contributions-reporting-protocol/types-of-contributions-to-report/changes-to-reserve-allocations?utm_source=openai))
4. Monitor law-making progress – Division 296 bills were introduced but **not yet law by some stages**. ([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/special-purpose-working-groups-key-messages/better-targeted-superannuation-concessions-working-group/better-targeted-superannuation-concessions-working-group-key-messages-20-march-2025?utm_source=openai))
## Risks and caveats
- Penalties for excess contributions if you miscalculate caps.
- Treatment of **pension reserve allocations** post-commutation can affect which cap applies.
- Super funds may have trustee or deed rules limiting immediate commutation; you may need to amend fund rules.
- Be mindful of social security / transfer balance cap impacts when taking lump sums or changing income streams.
By planning ahead and understanding the structure of the new concession rules, individuals with high super balances can legitimately manage their tax exposure without falling foul of legislative traps.