If you’ve built up a substantial superannuation balance, there’s an important change to understand from the 2026–27 financial year.
What is Division 296 Tax?
Division 296 tax is an additional tax that applies to certain superannuation earnings where an individual’s Total Superannuation Balance (TSB) is above the legislated large superannuation balance threshold. For the 2026–27 financial year, that threshold is $3 million.
There is also a second threshold of $10 million, known as the very large superannuation balance threshold.
The Basic Structure:
Total Super Balance
Up to $3 million
No additional tax.
More than $3 million
Additional 15% on relevant earnings.
More than $10 million
Additional 15% above $3 million, plus a further 10% on relevant earnings attributable to the portion above $10 million.
For balances between $3 million and $10 million, Division 296 can impose an additional 15% tax on the relevant earnings attributable to the portion above $3 million. For the portion above the $10 million very large superannuation balance threshold, a further 10% applies, meaning the Division 296 component can reach 25% on the relevant earnings attributable to that portion.
When considered alongside the ordinary 15% tax generally applying to earnings in the accumulation phase, the combined tax rate can therefore be up to 30% and 40% respectively.
Importantly, these rates do not apply to your entire super balance.
For example, having $4 million in super does not mean the whole $4 million is taxed at 30%. The tax is calculated on relevant earnings attributable to the amount above the threshold.
When Does Division 296 Tax Start?
Division 296 applies from 1 July 2026, with 2026–27 being the first affected financial year. For the first year, your Total Superannuation Balance at 30 June 2027 is used to determine whether the rules apply.
The first Division 296 assessments are expected from the ATO during 2027–28, once super funds have reported the required information.
Who is Likely to be Affected?
Division 296 is aimed at individuals with substantial superannuation savings. You may be affected if your Total Superannuation Balance is above $3 million and you have relevant superannuation earnings for the year.
This can include people with:
- Large accumulation super accounts
- Self-managed super funds (SMSFs)
- Retirement-phase pensions
- Defined benefit interests
- Multiple superannuation accounts
- A combination of different types of super interests
It is important to remember that your TSB is not necessarily the same thing as the balance shown on one particular superannuation statement.
Your Total Superannuation Balance generally considers the value of your superannuation interests across your super arrangements. The ATO has also confirmed that changes to the way super interests are valued and reported are important to the new system.
Does Division 296 Apply to Retirement-Phase Super?
Yes. One common misconception is that Division 296 only affects people who are still working and building their super.
That is not the case.
Superannuation interests in retirement phase can also be included when determining your Total Superannuation Balance. This means retirees with substantial superannuation savings need to consider Division 296 as part of their retirement planning.
For people who have moved from accumulation into pension phase, it is particularly important to understand how their pension interests are valued and how earnings are attributed under the new rules.
How is Division 296 Tax Calculated?
The calculation is more complicated than simply taking 15% of investment earnings. Broadly, the calculation involves determining your relevant superannuation earnings and then working out what proportion relates to the part of your super balance above the applicable threshold.
For example, imagine a person has:
- A Total Superannuation Balance of $4 million
- Relevant superannuation earnings of $200,000
- A $3 million large super balance threshold
The proportion of the balance above $3 million is 25%.
The Division 296 calculation therefore looks at the relevant earnings attributable to that excess portion rather than simply applying 15% to the entire $200,000.
Using this simplified example, 25% of the $200,000 relevant earnings, or $50,000, would be attributable to the portion above $3 million.
Applying the 15% Division 296 rate would produce an illustrative Division 296 liability of $7,500.
The actual statutory calculation can differ because contributions, withdrawals and other adjustments may affect the earnings and proportion calculations.
This is why calculating Division 296 tax requires more than looking at your investment return for the year. The legislation establishes specific concepts including taxable superannuation earnings, total superannuation earnings, relevant superannuation earnings and Division 296 fund earnings.
What Happens if Your Super Investments Fall?
Division 296 allows certain negative earnings to be carried forward and offset against future earnings. This recognises that super investments can rise and fall over time.
This is particularly relevant for SMSFs and members with large investment portfolios, where market fluctuations can significantly affect annual earnings.
What About Capital Gains?
Under the final Division 296 legislation, the regime generally focuses on realised earnings rather than taxing unrealised increases in asset values. This is an important change from the earlier proposal, which would have brought unrealised gains into the calculation.
For SMSFs holding assets such as shares or property, an increase in market value by itself does not generally create Division 296 earnings until the gain is realised, subject to the specific statutory calculation rules.
Important 30 June 2026 Transition Rules for SMSFs
For certain small superannuation funds, including eligible SMSFs, transitional CGT rules may be relevant for assets held at 30 June 2026.
An eligible fund may be able to make an irrevocable choice that uses the asset’s market value at 30 June 2026 in determining the Division 296 cost base for future realised gains.
This can be particularly important for SMSFs holding property, shares or other assets with substantial unrealised gains accumulated before Division 296 commenced.
Trustees should obtain advice before making any election and ensure appropriate valuation evidence is retained.
Division 296 and SMSFs
SMSF trustees may face additional reporting and record-keeping requirements under Division 296.
The ATO will use information reported through the SMSF annual return to help calculate individual liabilities.
In some cases, calculating a member’s share of fund earnings may require an actuary’s certificate, making accurate valuations and documentation particularly important.
How Will the ATO Collect Division 296 Tax?
Division 296 is a personal tax liability. The tax is not simply deducted from your super fund’s normal tax bill.
Instead, the ATO will calculate the liability and issue an assessment to the individual.
The ATO has explained that the Division 296 assessment is separate from tax paid by the superannuation fund and that an individual can generally either pay the liability personally or elect to have money released from superannuation to help pay it.
Once an assessment is issued, the liability is generally due 84 days after the date of the notice of assessment.
If you want to use your super to help pay the liability, the release election generally needs to be made within 60 days of the assessment.
That makes it important not to ignore a Division 296 assessment if you receive one.
Can You Pay Division 296 Tax From Your Super?
Yes. Eligible individuals can generally choose to pay the tax personally or release money from their super to cover the liability.
However, withdrawing from super reduces the amount available for retirement, so consider the decision as part of your overall retirement strategy.
What About Defined Benefit Pensions?
Division 296 can apply to defined benefit interests, but special valuation and payment rules apply.
In some cases, payment may be deferred until the benefit becomes payable. Professional advice can help determine how the rules apply to your situation.
Are There Exemptions?
Some limited exemptions apply, including for certain child recipients of super income streams and structured settlement contributions.
Special transitional rules may also apply in the event of death during 2026–27.
What Does Division 296 Mean for Your Retirement Strategy?
For someone approaching $3 million in super, Division 296 adds another consideration to retirement planning.
That doesn’t necessarily mean you should rush to withdraw money or change your investment strategy.
Instead, the new tax should be considered alongside:
- Contribution strategies
- Investment returns
- Retirement timing
- Pension strategies
- SMSF structures
- Asset allocation
- Estate planning
- Superannuation tax concessions
- Cash-flow requirements
- Personal tax circumstances
It is also important not to make decisions based solely on the $3 million threshold.
Superannuation remains a highly concessional retirement structure, and the tax treatment of investment earnings inside super can still be attractive compared with investing outside super.
The right strategy depends on your individual circumstances.
What Should You Do If Your Super Is Approaching $3 Million?
If your super is approaching $3 million, review your position now rather than waiting for an ATO assessment.
Check your Total Superannuation Balance, keep SMSF valuations and records up to date, and consider how future contributions, investment returns and pension withdrawals could affect your balance.
It’s also a good time to review your estate planning.
Importantly, Division 296 does not require you to reduce your super below $3 million. It changes the tax treatment of certain earnings associated with large super balances.
The ATO’s Role in Division 296
The ATO will calculate Division 296 liabilities using information reported by super funds and SMSFs.
Funds and trustees therefore have additional reporting responsibilities under the new rules.
Planning Ahead for Division 296
If you have, or expect to have, more than $3 million in super, consider how Division 296 fits into your investment, retirement, tax and estate planning strategy.
The $3 million and $10 million thresholds are also subject to indexation over time.
If you have a large super balance, speak with your accountant or financial adviser about how Division 296 may affect your retirement strategy.
At Camden Professionals, together with Investax Group, we work with SMSF trustees and members to understand how superannuation tax changes such as Division 296 may affect their tax, retirement and estate planning.
Where financial advice is required, we can work alongside your licensed financial adviser.
Division 296 is complex, and individual outcomes depend on your circumstances.
This article should not be relied upon as personal financial or tax advice.
Division 296 Tax FAQs
Is Division 296 a Tax on My Entire Super Balance?
No. Division 296 is an additional tax on relevant superannuation earnings attributable to the portion of your balance above the applicable threshold.
When Does Division 296 Start?
Division 296 applies from 1 July 2026, with the first affected financial year being 2026–27.
First assessments are expected in the 2027–28 income year.
Is the Division 296 Threshold $3 Million?
Yes. The large superannuation balance threshold is $3 million for 2026–27.
It is subject to indexation in later years.
What Happens Above $10 Million?
A further 10% Division 296 tax applies to the relevant earnings attributable to the portion above the $10 million very large superannuation balance threshold.
This means the additional Division 296 component can reach 25% for the relevant portion above $10 million.
Does Division 296 Apply to SMSFs?
Yes. Division 296 can apply to SMSF members as well as members of APRA-regulated funds and people with defined benefit interests.
Can I Pay Division 296 Tax From My Super?
Generally, yes.
Eligible individuals can elect to have money released from super to help pay the liability, subject to the relevant time limits.
Does Division 296 Mean I Should Keep My Super Below $3 Million?
Not necessarily.
Reaching $3 million does not mean you have to withdraw your super.
The appropriate strategy depends on your investment, retirement, tax and estate planning circumstances.
Sources
- Australian Taxation Office (ATO) – Division 296 administrative and reporting information, including assessment, payment and release arrangements.
- Australian Government – Income Tax Assessment (1997 Act) Amendment (Building a Stronger and Fairer Super System and Other Measures) Regulations 2026, providing supporting valuation and calculation rules.
- Australian Parliament – Parliamentary Bills Digest explaining the purpose and tiered structure of Division 296.
- Australian Government Actuary / Commonwealth Superannuation Corporation – current explanation of Division 296 and its application from 1 July 2026.
How Can We Help?
If you have any questions or would like further information, please feel free to give our office on 08 9221 5522 or via email – info@camdenprofessionals.com.au or arrange a time for a meeting so we can discuss your requirements in more detail.
General Advice Warning
The material on this page and on this website has been prepared for general information purposes only and not as specific advice to any person.
Any advice contained on this page and on this website is General Advice and does not consider any person’s particular investment objectives, financial situation and particular needs.
Before making an investment decision based on this advice you should consider, with or without the assistance of a securities adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances.
In addition, the examples provided on this page and on this website are for illustrative purposes only.
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