What Is Division 296?
The Better Targeted Superannuation Concessions proposal introduces a new Division 296 tax aimed at individuals whose total superannuation balances exceed A$3 million. (au.andersen.com)
From the 2026-27 income year, the current 15% concessional rate will apply only up to a A$3 million balance. Amounts above that will face higher concessional tax rates:
- For $3 million to $10 million — effective rate up to 30%.
- For over $10 million — up to 40%. (au.andersen.com)
These tax changes will be indexed to CPI. Transitional rules will apply for both small and large funds; taxation of capital gains accrued before commencement will be treated differently. (au.andersen.com)
Who’s Likely to Be Affected
People who have:
- Long careers with high contribution and investment returns (e.g. doctors, partners in firms, senior executives).
- Previously benefitted from tax-favoured treatment of super above $3 million.
- Investment strategies within their super that generate substantial growth (e.g. private equity, property, growth assets).
Planning Strategies Before the Rules Hit
- Review your current super balance: If you're approaching or exceeding $3 million, assess whether your investment returns and contributions are structured optimally.
- Time large expenditures: Consider crushing expenses or drawing benefits before 30 June 2026, where possible.
- Split assets across accounts: Be aware that simply having multiple super accounts under the same individual won’t avoid the total balance test. Restructuring into multiple names or trusts may help but must comply with anti-avoidance rules.
- Evaluate investment asset mix: Growth vs defensive assets may be taxed differently; evaluating allocations might reduce future effective concessional rates on earnings.
- Professional advice is key: These changes are complex, and treatment of pre-commencement assets or gains depends heavily on fund type, historical acquisitions, and valuation methods.
Compliance & Reporting Impacts
- Super funds will need to provide accurate valuation reports to ensure balances are correctly measured at end of financial year.
- The ATO will promulgate guidance and exposure draft legislation—stay tuned for draft Bills to final: watch for submission deadlines. (au.andersen.com)
- Individuals may need to plan for cash flow impacts if higher tax on earnings above thresholds requires additional offsets or payments.
Example Scenario
John has a superannuation fund with current balance A$4.5 million, primarily invested in growth assets. Under the new rules:
- First A$3 million taxed at 15% concessional rate.
- The remaining A$1.5 million taxed at about 30% (on earnings attribution).
- If he shifts part of his portfolio into more defensive or income-earning assets before the thresholds apply, his effective rate on incremental earnings above $3 million may be reduced.
Key Takeaways
- If you're close to or exceeding A$3 million, now is the time to plan your portfolio, spending, and investment returns.
- Understand transitional rules and when earnings or capital gains are ‘locked in’ under old lower rates.
- Seek guidance from a financial planner or tax advisor. The rules are draft but likely to pass with adjustments.
- Keep a close eye on legislation rollout and how the ATO handles valuations and attributions to balance brackets.
Understanding these changes now can help you avoid surprises and preserve more of your hard-earned retirement savings.