Tax Planning
Strategies for High-Balance Superannuation: Prepping for Division 296 Windfalls
For Australians with superannuation balances above $3 million, the upcoming Division 296 tax on earnings demands proactive planning—learn how to mitigate its impact now.
By NomadicTax Research Team • 5-8 min read • November 23, 2025
## What is Division 296 and Why It Matters
Starting 1 July 2025, individuals with a **total superannuation balance (TSB) exceeding $3 million** will face a **15% tax on future earnings** above this threshold. This measure—known as the Better Targeted Superannuation Concessions policy—doesn't cap your super, but it does change the tax rate on the earnings portion over $3 million. ([ato.gov.au](https://www.ato.gov.au/about-ato/new-legislation/in-detail/superannuation/better-targeted-superannuation-concessions?utm_source=openai))
## Who's Affected & How It’s Administered
- Individuals whose super balance on **30 June of the financial year 2025** exceeds $3 million will be liable. ([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/stakeholder-relationship-groups-key-messages/superannuation-administration-group/superannuation-administration-group-key-messages-17-june-2025?utm_source=openai))
- If liable, the ATO will issue you a **Division 296 Notice of Assessment (NOA)**. You have **84 days** to pay. Alternatively, you can elect to withdraw funds from your super fund within 60 days to settle the debt. ([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/stakeholder-relationship-groups-key-messages/smsf-auditors-professional-association-stakeholder-group/smsf-auditors-professional-association-stakeholder-group-key-messages-8-july-2025?utm_source=openai))
- For those with interests in a defined benefit fund in accumulation phase, debt may be deferred until 21 days after first benefit payment. ([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/stakeholder-relationship-groups-key-messages/smsf-auditors-professional-association-stakeholder-group/smsf-auditors-professional-association-stakeholder-group-key-messages-8-july-2025?utm_source=openai))
## Planning Tactics: How to Minimize Division 296 Impact
Here are practical steps you might consider:
### 1. Monitor your super balance closely
- As 30 June 2025 is the benchmark date, check whether your account will exceed $3 million.
- If you’ll be just over, consider withdrawals or consolidations before that date (if rules and your situation allow).
### 2. Adjust investment strategy toward lower-earning segments
- Since **only earnings** above the balance threshold are taxed at 15%, structuring part of your super into lower-risk, lower-return assets could reduce earnings and hence tax.
- Example: shifting some capital to bonds or cash-like assets inside super may reduce elevated earnings from equities.
### 3. Utilize carried forward negative earnings
- If in a given year your fund’s basic earnings are negative, you may carry those forward to offset future taxable earnings above the threshold. ([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/stakeholder-relationship-groups-key-messages/smsf-auditors-professional-association-stakeholder-group/smsf-auditors-professional-association-stakeholder-group-key-messages-8-july-2025?utm_source=openai))
### 4. Maximise contributions before threshold breach (if relevant)
- For those near the threshold, using concessional or non-concessional contribution caps where possible before crossing may preserve more tax-efficient growth under the $3 million. But avoid contributions that push you well over the limit unnecessarily.
### 5. Structural strategies & defined benefit interests
- If part of your super is defined benefit based, understand how that interest will be valued for Division 296 purposes. The ATO has flagged stakeholder concerns about valuation complexities in this area. ([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/stakeholder-relationship-groups-key-messages/superannuation-administration-group/superannuation-administration-group-key-messages-17-june-2025?utm_source=openai))
## Action Plan Before 30 June 2025
| Timeframe | What to Do |
|---|---|
| **Now–6 months out** | Assess your current super balance and projections; consult with a financial adviser or tax professional. |
| **If crossing the threshold** | Consider partial withdrawals, rebalancing your portfolio, or changing future contribution plans. |
| **By deadline (30 June 2025)** | Ensure valuation standards and reporting are in place for super funds and SMSFs. |
## Example Case
**Sarah**, aged 55, has $3.2 million in super, with $500,000 in high-growth equities and the rest in diversified assets earning ~5% annually. Under Division 296, earnings from the **$200,000 above the threshold** would be taxed at 15% instead of the usual rates applied to earnings below. If those high-growth assets were reduced or repositioned before 30 June, her earnings above the threshold could drop significantly, saving thousands annually.
## Final Thoughts
Division 296 represents a shift—one that doesn’t punish balances per se but taxes earnings over a high threshold. With advance planning, you can manage your super’s structure and contributions to reduce exposure. Start discussions with your super fund, tax advisor and consider asset allocation strategies now to preserve after-tax growth.