Entity Setup
Superannuation Entity Setup and Strategy Under Division 296 Tax
How the new Division 296 rules impact large super balances and entity setup—when to restructure, split balances, or rethink your retirement planning.
By NomadicTax Research Team • 5-8 min read • July 23, 2026
## 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](https://community.ato.gov.au/s/article/a07Mo00001w0qcO/what-division-296-tax-changes-means-for-your-super-balance?utm_source=openai))
- 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
1. **Check your projected super balance**: if likely over $3 million or near $10 million, forecast your earnings and tax implications.
2. **Transfer splitting and stacking**: explore spouse splits, successor fund transfers, to manage exposures.
3. **Review fund performance and fees**: higher TSB means more earnings taxed—net return matters more.
4. **Reassess investment asset allocation**: earnings generation versus capital growth; dividends, shares, property—they impact earnings differently.
5. **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.