Tax Planning
Understanding the $3 Million Super Balance Tax (Division 296): Who It Affects and How to Plan
From 1 July 2026 an extra Division 296 tax may apply if your total super balance is over $3 million – this guide breaks down who’s affected, how it’s calculated, and what you can do now.
By NomadicTax Research Team • 5-8 min read • July 21, 2026
## What is Division 296 tax?
As of **1 July 2026**, Australia introduces *Division 296 tax*, targeting superannuation balances above certain thresholds. It means extra tax on **earnings linked** to the part of your super balance exceeding $3 million (the **Large Super Balance Threshold, LSBT**), and an additional 10% tax on earnings above $10 million (the **Very Large Super Balance Threshold, VLSBT**) for the 2026-27 financial year. ([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 might be affected?
- Individuals with **total super balances (TSB)** greater than **$3 million** at the end of the financial year. ([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))
- Those exceeding **$10 million**, who will pay extra tax on the portion above that in addition to what applies 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))
- All types of super funds: SMSFs and APRA-regulated funds. Super funds have reporting obligations if balances exceed LSBT. ([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))
## How the tax is computed
| Threshold | Tax rate applied to *earnings* above threshold |
|--|--|
| Over $3 million up to $10 million | 15% on earnings exceeding $3 million and up to $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)) |
| Over $10 million | Additional 10% (making total 25%) on earnings 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)) |
A few key points:
- **Both end-of-year balance and just before the start of the year** will be considered; the greater of the two determines if you're above LSBT in future years. ([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))
- Not your entire super balance is taxed—only the portion of your **earnings** tied to the amount above thresholds. ([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 you can do to plan ahead
**1. Keep close track of your total super across funds.** If you have multiple super accounts, consolidate or monitor whether combined balances are creeping above the thresholds.
**2. Timing of contributions and withdrawals.** Since earnings are taxed above thresholds, managing when you invest or draw down may help mitigate earnings subject to Division 296 tax.
**3. Investment choices.** Earnings affected include earning rates within the super fund’s assets. Reviewing how much your super fund earns could influence after-tax returns.
**4. Seek professional advice.** Especially for those nearing thresholds, a tax advisor or financial planner can analyse your super projections.
## Examples
- **Sam** ends FY 2026-27 with $3.5 million in super. Only the earnings portion that corresponds to $500,000 above the LSBT is taxed at 15%.
- **Alex** ends with $12 million. He pays 15% on earnings linked to the $7 million between $3–10 million, **and** 25% (15% + 10%) on earnings above $10 million.
## Key takeaways
- Division 296 starts 1 July 2026.
- Only **earnings**, not entire balances, are taxed above thresholds.
- Balances of **$3 million and $10 million** are the critical thresholds.
- Planning involves tracking balances, timing contributions, and understanding fund earnings.
By staying informed and proactive, you can legally manage your super affairs to reduce tax exposure under Division 296.