What is Division 296 (Better Targeted Super Concessions)?
Australia’s government has introduced Better Targeted Superannuation Concessions, formalised through Division 296 of the Income Tax Assessment Act, targeting individuals with total super balances above $3 million at the end of the 2025–26 financial year. Individuals above this threshold will be taxed 15% on the proportion of earnings attributable to the amount above $3 million. (ato.gov.au)
Key Dates & Who Is Affected
- Effective from financial year 1 July 2025 onwards. (ato.gov.au)
- Applies to anyone whose total superannuation balance at 30 June 2025 exceeds $3 million. (ato.gov.au)
- Funds impacted include SMSFs, large retail or industry funds, and defined benefit funds. (ato.gov.au)
Reporting & Compliance Requirements
- Super funds (excluding SMSFs) must report additional information via bulk data exchange by using Online Services for Business. (ato.gov.au)
- For SMSFs, new labels on the SMSF annual return will collect the required information starting from the 2026 financial year. (ato.gov.au)
- Successor fund transfers (SFTs) between 1 July 2025 and Royal Assent need modifications in reporting—funds and transfers must match the protocols. (ato.gov.au)
Practical Examples
- Susan has $5 million in super at 30 June 2025. Under Division 296, only the earnings attributable to $2 million (over $3 million threshold) are taxed at 15%. The first $3 million of her balance earns earnings taxed under existing concessional settings.
- John holds a defined benefit interest and his fund calculates his total super balance with special valuation methods; these valuation changes are now part of Div 296’s operating setup. Funds are raising concerns about such valuation complexities. (ato.gov.au)
What Funds Should Do Now
- Update record-systems to identify balances over $3 million, including defined benefit portions.
- Provide super fund members with clear communication about how Division 296 works and how it may affect them.
- Ensure data exchange compliance: non-SMSFs via bulk data exchange, SMSFs via the right labels.
- Watch for final guidance from ATO and Treasury as some details are still in development.
Strategic Planning Tips
- Individuals near the threshold may review whether contributions or rollovers just before 30 June 2025 might push them over the threshold—though rules about timing and valuations may limit options.
- Funds may need to plan for operational changes: system updates, training, and member communication before Tax Time 2026.
Takeaway: Division 296 introduces a new layer of tax for super balances above $3 million, effective from 1 July 2025. Both individuals and super funds need to update practices to comply with reporting and valuation requirements ahead of that date.