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)
- 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)
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
- 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)
- 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)
- Super funds report your relevant earnings; ATO then issues Notice of Assessment in the latter half of 2027-28. (community.ato.gov.au)
Who Pays and What Funds Must Do
- APRA-regulated funds report automatically; SMSFs report if the balance exceeds the LSBT. (community.ato.gov.au)
- 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)
- 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)
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.