Tax Planning
Tax on Super Earnings Over $3 Million: What High-balance Members Must Know
As of 1 July 2026, members with total super balances (TSB) over $3 million face extra taxation on earnings above that threshold—and a steeper rate kicks in above $10 million.
By NomadicTax Research Team • 5-8 min read • August 10, 2026
## Division 296: New Top-Up Tax on Super Earnings for High Balance Members
Starting **1 July 2026**, income from super investments above certain thresholds may be taxed at higher rates under **Division 296** of the Income Tax Assessment Act.([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))
- **Large Super Balance Threshold (LSBT)** is set at **$3 million** for 2026-27.
- **Very Large Super Balance Threshold (VLSBT)** is set at **$10 million** for 2026-27.([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))
### What the tax looks like
| Total Super Balance | Rate on Earnings Above Threshold |
|-----------------------|-------------------------------|
| Over $3 million but ≤ $10 million | **15%** on the earnings linked to the portion above $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))|
| Above $10 million | **25% total** (15% plus additional 10%) on the portion above $10 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))|
### Who is affected
- Members with multiple super accounts may find their **combined balance** pushes them into the extra tax zone. SMSFs (self-managed super funds) and APRA-regulated member funds both report balances.([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))
- If just prior to the start or end of the year you're above LSBT or VLSBT, you’ll use the **higher of the two balances** for calculating tax.([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))
### Timing and reporting
- Notice of assessments under Division 296 will be issued in the **latter half of 2027-28**, once super funds have reported relevant earnings.([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))
- Thresholds will be indexed in future years in line with inflation.([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))
## Strategic Considerations and Planning Tips
- **Review all super accounts** to calculate your true TSB. Even a forgotten account could trigger the 15% top-up.
- **Weigh risk vs reward of earnings**: If most growth is currently inside super, consider whether moving some assets out (outside super) might reduce exposure, taking into account external tax effects.
- **Timing contributions**: Contributions that push you over LSBT may carry higher tax liability. For high-net-worth individuals, splitting contributions across years may be useful.
- **Fund selection** may impact future earnings distributions—look for funds that can manage taxable earnings with strategies like smoothing or tax offsets. SMSFs offer flexibility, but require rigorous record-keeping.
### Example scenario
Alex has total super balances of $4 million. His investment earnings in the 2026-27 year are $200,000. Under Division 296:
- The portion over **$3 million** is **$1 million**.
- 15% only applies to earnings attributed to that $1 million.
- If 25% attributable to that $1 million’s investment yields $50,000, only that earnings portion is taxed at 15%. The rest of earnings stay taxed as per standard rules.
## What's Not Changing
- These additional rates **do not apply** to the entire super balance—just earnings above the thresholds.
- Existing concessional (pre-tax) and non-concessional (after-tax) contribution caps remain relevant and unchanged by this measure.
**Conclusion**: Individuals with high super balances must factor in Division 296 when planning contributions and fund investment strategies. Consult financial advisers for personalised structuring.