Division 296: Overview & Who’s Affected
Effective 1 July 2026, a new tax measure known as Division 296 comes into effect. It imposes additional taxes on earnings in superannuation funds for individuals whose Total Superannuation Balance (TSB) exceeds $3 million. (community.ato.gov.au)
- Earnings on the portion of your balance over $3 million are taxed at 15%.
- If your TSB is over $10 million, an additional 10% tax applies only to the portion above $10 million.
Entity Setup & Structure Implications
- For those nearing thresholds, structuring multiple accounts alone doesn’t avoid TSB aggregation rules—ATO rolls up balances across funds.
- Self-Managed Super Funds (SMSFs) or corporate super arrangements may need to reassess whether consolidations or benefit splitting are advisable.
- Pension phase strategies: keep in mind that many earnings continue to be tested under Division 296, even if in retirement status.
Example Scenarios
- Margaret has a TSB of $4 million. Under Division 296, the $1 million above the $3 million threshold has earnings taxed at 15%. Her earnings on the first $3 million remain under normal concessional tax rates.
- PSF Trust which has various members totalling over $10 million in TSB: earnings above the $10 million threshold face an extra 10% tax (so combined 25% if applicable).
Strategic Actions Before & After 1 July 2026
- Check your projected super balance: if likely over $3 million or near $10 million, forecast your earnings and tax implications.
- Transfer splitting and stacking: explore spouse splits, successor fund transfers, to manage exposures.
- Review fund performance and fees: higher TSB means more earnings taxed—net return matters more.
- Reassess investment asset allocation: earnings generation versus capital growth; dividends, shares, property—they impact earnings differently.
- Seek advice for phased transitions: if restructuring or withdrawals are planned, timing around 1 July 2026 could impact outcomes.
Broader Impacts & Considerations
- The incentive is stronger for very high super balances to diversify, de-leverage, or plan for effective distribution.
- Super funds and trustees need robust systems to track TSB, earnings, external transfers, and reporting obligations.
- Division 296 complements broader reforms like CGT changes and negative gearing limits—together they shift the tax-advantage landscape.
For those with large wealth in super, the countdown has begun: careful structuring, accurate forecasting, and professional advice will be your best tools to navigate this era of change.