What is Division 296 and Who It Hits
The Better Targeted Superannuation Concessions measure, known as Division 296, started on 1 July 2025 and applies from the 2025-26 income year onwards. It reduces tax concessions for individuals whose total superannuation balance (TSB) exceeds A$3 million at the end of an income year(ato.gov.au). Key thresholds:
- Up to A$3 million: concessional tax rate remains 15%.
- Between A$3 million and A$10 million: effective concessional rates increase to 30% on earnings.
- Above A$10 million: rate rises to 40% on earnings above that threshold.
How the New Rules Work—Dividends of Example
Suppose Jane has A$5 million in her super fund at 30 June 2025. Earnings on the first A$3 million are taxed 15%. The A$2 million above A$3m but below A$10m is taxed at 30%. Jane will be affected for all earnings above the threshold even if balances fluctuate during the year, based on the balance at year-end(au.andersen.com).
Which Funds & Situations Are Affected
- Members of APRA funds, SMSFs (Self-Managed Super Funds), and some Defined Benefit Funds, especially where assets or interests are large.(au.andersen.com)
- Defined benefit interests require valuation under specific methods outlined in exposure drafts. The calculation of earnings for such interests is being refined.(treasury.gov.au).
- Thresholds ($3m, $10m) will be indexed to CPI over time.(au.andersen.com).
Planning Strategies to Mitigate Impact
- Timing of withdrawals or rollovers: balancing amounts below threshold before 30 June to avoid exposure in that year.
- Diversification: Holding some super assets in strategies that generate lower taxable earnings or capital gains under favorable CGT rules.
- Defined benefit fund planning: Accurately value your defined benefit interests years in advance, especially if near thresholds.
- Adjusting contribution levels: Considering non-concessional vs concessional contributions to control total super balance if approaching A$3 million.
Reporting & Compliance Tips
- Keep excellent records of all super balances at 30 June annually. Funds will need to report accurately to the ATO.(au.andersen.com)
- Stay tuned for exposure draft regulations that support this legislation with precise valuation rules.(treasury.gov.au).
- Seek professional advice if your situation spans large defined benefit interests or multiple types of super interests.
Bottom Line
If you're an individual with super savings approaching or exceeding A$3 million, Division 296 is a game changer. The larger your super, the more you’ll pay. Act early:
- Assess your super balance forecasts
- Plan contributions and withdrawals around threshold dates
- Understand defined benefit valuation rules before they bite.
With the law effective from 1 July 2025, compliance kicks in immediately for 2025-26. Don’t wait to see, plan to act.