Compliance
What Australia's Division 296 Tax Means for High-Balance Superannuation Funds
For superannuants with balances above AUD 3 million, Division 296 introduces steep new taxes on earnings from 1 July 2026—learn who’s affected, what you can do now, and timely governance steps.
By NomadicTax Research Team • 5-8 min read • May 2, 2026
## What Is Division 296?
Division 296 is a newly enacted tax law in Australia that applies from **1 July 2026**, targeting individuals whose Total Super Balance (TSB) exceeds **AUD 3 million**, with even larger surcharges for TSBs above **AUD 10 million**. ([dentons.com](https://www.dentons.com/en/insights/alerts/2026/march/26/ato-crackdown-on-smsfs-tops-superannuation-priorities-for-2026-and-division-296-tax-introduced?utm_source=openai))
- For super balances between AUD 3 million and AUD 10 million: **15% extra tax** on earnings above the AUD 3 million threshold. ([dentons.com](https://www.dentons.com/en/insights/alerts/2026/march/26/ato-crackdown-on-smsfs-tops-superannuation-priorities-for-2026-and-division-296-tax-introduced?utm_source=openai))
- For very large super balances (above AUD 10 million): an additional **10% surcharge** on those earnings. ([dentons.com](https://www.dentons.com/en/insights/alerts/2026/march/26/ato-crackdown-on-smsfs-tops-superannuation-priorities-for-2026-and-division-296-tax-introduced?utm_source=openai))
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## Who Will Be Affected?
- Individuals with super balances nearing or above **AUD 3 million** as of **30 June 2026** should review exposure early. ([superinformed.com.au](https://superinformed.com.au/p/division-296-tax-smsf-trustees-2026?utm_source=openai))
- Both SMSF trustees and members of retail/industry super funds are impacted. The tax applies per individual, not per fund. ([superinformed.com.au](https://superinformed.com.au/p/division-296-tax-smsf-trustees-2026?utm_source=openai))
- Super balances are indexed to CPI, so thresholds may rise over time. ([superinformed.com.au](https://superinformed.com.au/p/division-296-tax-smsf-trustees-2026?utm_source=openai))
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## How the Tax Is Calculated
- The earnings taxed are those from the portion of TSB above thresholds. For example, if your earnings are on the AUD 3.5 million balance, only earnings on the AUD 0.5 million excess get taxed. ([dentons.com](https://www.dentons.com/en/insights/alerts/2026/march/26/ato-crackdown-on-smsfs-tops-superannuation-priorities-for-2026-and-division-296-tax-introduced?utm_source=openai))
- First assessments will likely occur in **late 2027**, reflecting the income year 2026-27. ([superinformed.com.au](https://superinformed.com.au/p/division-296-tax-smsf-trustees-2026?utm_source=openai))
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## What to Do Before 30 June 2026
| Action | Purpose |
|---|---|
| Review your fund’s asset mix | Gains and earnings are taxed—shifting assets to slower-earning or capital-growth ones may reduce earnings taxed under Division 296. |
| Assess whether to reset cost bases (SMSF only) | SMSF trustees have a **once-off, irrevocable option** to reset the cost base of all fund assets as of 30 June 2026. This can reduce future capital gains exposure that feed into earnings taxed under Division 296. ([superinformed.com.au](https://superinformed.com.au/p/division-296-tax-smsf-trustees-2026?utm_source=openai)) |
| Defer contributions if near threshold | If close to AUD 3 million, delaying unconventional contributions until after 30 June may reduce exposure. |
| Keep detailed records | Accurate earnings statements, balance history and fund performance data will be essential. |
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## Governance, Reporting and Liability
- Starting with the **2025-26 financial year**, SMSFs must report new information via two new labels on the **SMSF Annual Return (SAR)**. ([ato.gov.au](https://www.ato.gov.au/api/public/content/0-bc598107-7819-44fd-a84c-9ded73fe60b1?utm_source=openai))
- Individuals will receive a **Notice of Assessment (NOA)** for Division 296 tax, payable **84 days** after the date of assessment. ([ato.gov.au](https://www.ato.gov.au/api/public/content/0-1ef514f7-8f71-4ac2-889f-6fb8d0600df6?utm_source=openai))
- If an individual doesn’t pay by due date, Commissioner can issue a **release authority** to the super fund to release funds to satisfy the debt. ([dentons.com](https://www.dentons.com/en/insights/alerts/2026/march/26/ato-crackdown-on-smsfs-tops-superannuation-priorities-for-2026-and-division-296-tax-introduced?utm_source=openai))
- Special rules for defined benefit interests; debt deferred until 21 days after first benefit payment. ([dentons.com](https://www.dentons.com/en/insights/alerts/2026/march/26/ato-crackdown-on-smsfs-tops-superannuation-priorities-for-2026-and-division-296-tax-introduced?utm_source=openai))
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## Practical Examples
- **Alice**, SMSF trustee: TSB = AUD 3.2 million. Earnings above AUD 3 million taxed 15%. She resets cost base before 30 June, reducing future earnings taxed.
- **Bob**, TSB = AUD 12 million. For portion above AUD 3 million: taxed 15%; portion above AUD 10 million taxed 25% (i.e. 15% + additional 10%) for earnings above that bracket.
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## Key Take-Away
While Division 296 represents a major tax shift for high-balance superannuation holders, **early planning** offers real opportunities. Fund managers, trustees, and members should engage now to adjust strategies, governance, contribution timing, and reporting to manage liability. With good preparation by 30 June 2026, exposure can be minimized.