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Tax Planning

Understanding Division 296: What High-Balance Super Holders Need to Know

From 1 July 2026, super account holders with high balances could face extra taxes under the new Division 296 rules—here's how it works and how to prepare.

By Nomadic Tax Institute research team · 5-8 min read · Created

What is Division 296?

Division 296 is a tax measure that takes effect from 1 July 2026, targeting individuals whose total super balance (TSB) exceeds certain thresholds. (community.ato.gov.au) Key features:

  • If your TSB exceeds the Large Super Balance Threshold (LSBT) – set at A$3 million for 2026-27 – you’ll pay an extra 15% tax on the portion of super earnings linked to the portion of your balance over that threshold. (community.ato.gov.au)
  • If your TSB exceeds the Very Large Super Balance Threshold (VLSBT) – set at A$10 million for 2026-27 – you’ll pay an additional 10% tax (on top of the first 15%) on the part of earnings over A$10 million. (community.ato.gov.au)

This is not a tax on your whole balance—only the earnings associated with the amount above each threshold.

Who is Affected?

  • Members of APRA-regulated super funds and SMSFs whose total super balance across all their funds is above the threshold. (community.ato.gov.au)
  • It applies if your TSB is over the LSBT either just before the start of the year or at the end—whichever is greater. (community.ato.gov.au)

How It’s Applied & Timeline

  • Reporting: Super funds will report relevant earnings for those over the LSBT to the ATO. SMSF trustees should anticipate increased reporting requirements. (community.ato.gov.au)
  • Assessment & Tax Notice: Division 296 tax notices for the 2026-27 year will be issued in the latter half of 2027-28. (community.ato.gov.au)
  • Indexing: Both LSBT and VLSBT may be indexed in future years, aligned with CPI. (community.ato.gov.au)

Strategies to Manage or Reduce Impact

  • Monitor your Total Super Balance (TSB) annually to see if you're likely to cross thresholds.
  • Consider rearranging contributions: where possible, shift non-super investments or reduce concessional contributions if that helps keep TSB just below thresholds. Be mindful of broader implications.
  • SMSF holders should plan fund structure and asset allocation with an eye on earnings above threshold.
  • Understand that switching super funds or benefit streams may impact how your TSB is measured.

Example Scenario

Imagine your TSB at 30 June 2027 is A$4 million, and your super fund earns 5% net returns on all assets. Earnings linked to the portion above A$3 million = A$1 million. Division 296 tax due = 15% of earnings on that A$1 million. If TSB was over A$10 million, earnings above that threshold would also incur the additional 10%.

Key Implications & Risks

  • Surprise tax bills if you aren’t tracking your TSB or earnings properly.
  • Potential cashflow strain when tax notices arrive in 2027-28.
  • For SMSFs, higher reporting burden and need for accurate member balances across all accounts.

Actionable Tips Before 30 June 2027

  1. Request a total super balance statement now.
  2. Review past year performance—estimate earnings and see how much is ‘excess’ over thresholds.
  3. Assess whether strategies like partial retirement or balance splitting help.
  4. Talk with your super fund or financial advisor about how fund fees, investment earnings, and allocations may alter tax liability under Division 296.

By understanding Division 296 now, high-balance super savers can anticipate change, plan well, and avoid unwelcome surprises down the road.

Sources

Existing article citations

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what-division-296-tax-changes-means-for-your-super-balance (community.ato.gov.au)