Tax Planning
Super Over $3 Million? Understanding the New Division 296 Tax in Australia
If your total super balance exceeds $3 million, a new tax regime from 1 July 2026 changes how super earnings are taxed above that threshold.
By NomadicTax Research Team • 5-8 min read • August 19, 2026
## What Is Division 296 Tax and Who's Affected?
From 1 July 2026, Australia’s superannuation tax regime introduced **Division 296**, imposing an extra tax on the *earnings* portion of your super balance if your **Total Super Balance (TSB)** exceeds certain thresholds. The thresholds are:
- **Large Super Balance Threshold (LSBT)**: $3 million. Earnings above this are taxed at an additional **15%**. ([community.ato.gov.au](https://community.ato.gov.au/s/article/a07Mo00001w0qcO/what-division-296-tax-changes-means-for-your-super-balance?utm_source=openai))
- **Very Large Super Balance Threshold (VLSBT)**: $10 million. Earnings above this threshold are taxed at an additional **10%** (on top of the first threshold tax). ([community.ato.gov.au](https://community.ato.gov.au/s/article/a07Mo00001w0qcO/what-division-296-tax-changes-means-for-your-super-balance?utm_source=openai))
Only the earnings portion tied to what’s *above* each threshold incurs the additional tax. The rest of your super grows under the usual tax rates.
## How It's Calculated
1. **Determine your TSB** at both just before the start of the financial year and at 30 June—ATO uses the *greater* of the two. ([community.ato.gov.au](https://community.ato.gov.au/s/article/a07Mo00001w0qcO/what-division-296-tax-changes-means-for-your-super-balance?utm_source=openai))
2. If TSB > $3M (LSBT), portion of *earnings* over that amount taxed at +15%. If TSB > $10M (VLSBT), portion over $10M taxed with further +10%. ([community.ato.gov.au](https://community.ato.gov.au/s/article/a07Mo00001w0qcO/what-division-296-tax-changes-means-for-your-super-balance?utm_source=openai))
3. Super funds report your relevant earnings; ATO then issues **Notice of Assessment** in the latter half of 2027-28. ([community.ato.gov.au](https://community.ato.gov.au/s/article/a07Mo00001w0qcO/what-division-296-tax-changes-means-for-your-super-balance?utm_source=openai))
## Who Pays and What Funds Must Do
- **APRA-regulated funds** report automatically; SMSFs report if the balance exceeds the LSBT. ([community.ato.gov.au](https://community.ato.gov.au/s/article/a07Mo00001w0qcO/what-division-296-tax-changes-means-for-your-super-balance?utm_source=openai))
- Members should ensure all their super funds are aware of total balances to avoid discrepancies. For example, multiple funds’ balances are aggregated under TSB. ([community.ato.gov.au](https://community.ato.gov.au/s/article/a07Mo00001w0qcO/what-division-296-tax-changes-means-for-your-super-balance?utm_source=openai))
- Exemptions include individuals who die before end of year, child recipients of a super income stream, or certain structured settlement situations. ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/sites/default/files/2026-02/PLS_working_group_key_outcomes_20_January_2026.pdf?utm_source=openai))
## Practical Example
| Person | TSB at start/end FY2026-27 | Earned Super Earnings in FY2026-27 | Additional Tax Due Under Division 296 |
|--------|----------------------------|-------------------------------|-----------------------------------------|
| Alice | $4.5 million | $200,000 | 15% on $1.5M above LSBT → apply 15% only to that portion of earnings proportional to 1.5M/4.5M, so $200,000 × (1.5 / 4.5) = $66,667 → **$10,000 additional tax** |
| Bob | $11 million | $300,000 | LSBT portion: $7M ($3-10M) taxed extra 15%; above VLSBT ($1M) taxed extra 25% involving stacking—i.e. 15% on $7M, and 25% on $1M portion. Apply to earnings proportionally. |
## Actionable Insights
- **Monitor your TSB**: especially if you’re approaching or already above $3M—the extra tax kicks in only above thresholds.
- **Consider earnings distribution**: investing within super cautiously; understand how asset growth generates “earnings”.
- **Coordinate across multiple super funds**: avoid surprises by consolidating or tracking balances across SMSFs and retail funds.
- **Review your retirement withdrawal strategy**: Division 296 applies while funds hold earnings; timing of withdrawing or converting income streams may affect taxation.
- **Seek professional advice**: high-balance super holders will benefit from tailored guidance.
Division 296 changes the incentive structure for large super balances: you’ll want to know exactly where you stand before 30 June each year. It’s not just the balance—it’s the earnings on the excess that count.