Overview
From the 2026-27 income year (1 July 2026), Australian taxpayers whose Total Super Balance (TSB) exceeds $3 million at the end of the year will be subject to what is officially known as Division 296 tax. For those exceeding $10 million, a higher rate applies to earnings above that level. This policy aims at equity by reducing generous tax concessions on very large super balances. (community.ato.gov.au)
Key Rules & Rates
| Balance Level | Tax Rate on Earnings above Threshold |
|---|---|
| Above $3 million up to $10 million | 15% additional tax |
| Above $10 million | 15% on earnings above $3 m, plus 10% on earnings above $10 m |
| Additional details: |
- Only the earnings linked to the portion of the balance exceeding the threshold are taxed — not the entire super balance. (community.ato.gov.au)
- Super funds will report relevant earnings; individuals receive a Notice of Assessment. Liability is separate from income tax. (community.ato.gov.au)
- For SMSFs, new labels are added to the SMSF Annual Return to facilitate reporting. (community.ato.gov.au)
Who is Affected & Exemptions
- APRA funds and Self-Managed Super Funds (SMSFs) with member balances over thresholds.
- Fund members whose benefits include defined benefits may have deferred liabilities.
- Death- and estate-related balances are addressed in transitional rules.
- Thresholds may be indexed in future years. (community.ato.gov.au)
Example Scenarios
Example 1 — $5 million balance:
- TSB = $5 million at year-end
- Earnings over $3 million portion (say earnings 8% on $2 million = $160,000) taxed @ 15% → $24,000 tax liability.
Example 2 — $12 million balance:
- Earnings between $3-10 million taxed @15%, and earnings above $10 million taxed additional 10%.
- If earnings at 8%: first $7 million over threshold → $560,000 @ 15%, then $2 million over $10 million → $160,000 @ 25% (15 + 10) etc.
Planning & Actionable Tips
- Track your total super balance across multiple funds to understand where you stand.
- Consider withdrawing or consolidating super where possible (but be aware of preservation rules and potential tax/fees).
- Account for these changes when doing long-term retirement or estate planning.
- Super funds should promptly adapt systems to report earnings and threshold excesses.
Conclusion
Division 296 is relatively novel in Australian tax policy, targeting high super balances rather than standard income streams. If your super balance edges near or above these thresholds, early awareness and action are essential.