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)
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)
- 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)
- All types of super funds: SMSFs and APRA-regulated funds. Super funds have reporting obligations if balances exceed LSBT. (community.ato.gov.au)
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) |
| Over $10 million | Additional 10% (making total 25%) on earnings above $10 million (community.ato.gov.au) |
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)
- Not your entire super balance is taxed—only the portion of your earnings tied to the amount above thresholds. (community.ato.gov.au)
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.