Division 296: Super Tax for High Balances
Starting 1 July 2026, if your superannuation balance exceeds AUD 3 million, you’ll face higher tax rates on earnings under Division 296 of the tax law:
- From $3 million to $10 million, earnings taxed at 30%.
- Above $10 million, taxed at 40%.
This is aimed at high-wealth individuals with large super balances. The extra tax starts applying automatically—including on pre-existing balances—and taxpayers should check their exposure.(pwc.com.au)
Trusts: Minimum Tax from July 2028
Discretionary trusts will face a minimum 30% tax rate on taxable income from 2028-29 onward. This is to limit income splitting or benefiting from lower bracket rates via trusts.(pwc.com.au)
Case Example: High-Net-Worth Jane and Her Trusts
Background: Jane has a self-managed super fund with $4.5 million and she operates a discretionary family trust that distributes income among beneficiaries—including some minor or low-income individuals.
Before changes: Super fund earnings taxed at concessional rates; trust distributions may be taxed at beneficiaries’ marginal rates—some quite low—thus reducing overall tax.
After changes:
- Super: For the portion of earnings above AUD 3 million, Jane’s fund will pay 30% (or 40% if above 10 million).
- Trust: If trust income is not fully distributed or beneficiaries have very low rates, trustee will pay at least 30%; distributing solely to low-rate individuals may no longer yield major tax savings.
What Structures Might Be at Risk?
- Trusts holding passive income with distributions to family members.
- Wealthy superannuation accounts beyond $3 or $10 million.
- Hybrid setups for nominal “income splitting” via trusts or beneficiaries in lower tax brackets.
Practical Steps to Consider Now
- Assess your super balance trajectory and consider whether boosting contributions earlier or distributing earnings more proactively makes sense.
- Review trust deeds and beneficiary allocations, especially how income is distributed and whether there are fixed distributions versus discretionary ones.
- Consider restructuring to fixed trusts or companies, where the 30% minimum trust tax applies later, and beneficiaries taxed directly.
- Plan for timing, since these thresholds and rates are effective from specific dates (1 July 2026 for Division 296; 2028-29 for trust minimum tax).
Compliance and Record-Keeping Tips
- Keep accurate trustee resolutions showing distributions; records of when and how income was allocated.
- Track super fund earnings separately—identify when your fund crosses the thresholds.
- Use projected income statements and forecasts to model whether the trust or super exceed thresholds, to avoid unexpected tax bills.
Conclusion: High-wealth individuals and those using trusts to manage income will see a material reshaping of their tax liabilities. Early adjustments of structure, distribution strategy, and clarity on timing will be key to minimising surprise impacts.