For many Australians, superannuation has been one of the most effective long-term wealth-building structures due to its concessional tax treatment. However, from 1 July 2026, changes under Division 296 tax will reduce some of the tax advantages available to individuals with larger superannuation balances.
The introduction of Division 296 tax means individuals with superannuation balances above certain thresholds need to carefully consider how they structure their retirement savings, investments and future contributions. For the 2026–27 financial year, the first threshold is set at $3 million, with a second threshold applying at $10 million.
These thresholds will be indexed in future years.
What Is Division 296 Tax?
Division 296 is a new tax measure that applies an additional tax on earnings associated with superannuation balances above specified thresholds. The purpose of the measure is to reduce the tax concessions available to individuals with very large superannuation balances.
For the 2026–27 financial year:
- The first threshold is $3 million
- A second threshold applies at $10 million
- Thresholds will be indexed over time
The additional tax does not mean your entire superannuation balance is taxed at a higher rate once it exceeds the threshold.Instead, the tax applies only to the relevant proportion of earnings connected to the amount above the applicable threshold.
How Does Division 296 Tax Work?
Division 296 tax is calculated based on the proportion of your superannuation balance that exceeds the relevant threshold.It does not apply to your entire superannuation balance.For example, if your superannuation balance is slightly above $3 million, the additional tax applies only to the portion relating to the amount above the threshold.
The calculation considers:
- Your total superannuation balance
- The applicable threshold
- The earnings attributable to the excess amount
This means the impact can vary significantly between individuals depending on their balance, investment performance and circumstances.
Does Division 296 Tax Mean Super Is Taxed at 30%?
No. A common misunderstanding is that once your super balance exceeds $3 million, your entire superannuation balance will automatically be taxed at 30%.
This is not how Division 296 works. The additional tax applies only to the relevant proportion of earnings associated with the balance above the threshold. Your existing superannuation tax treatment continues to apply to the portion within the normal limits.
What Happens Above the $10 Million Threshold?
A higher threshold applies for individuals with very large superannuation balances.
For the 2026–27 financial year:
| Superannuation Balance | Additional Division 296 Treatment |
|---|---|
| Up to $3 million | Existing superannuation tax treatment applies |
| Between $3 million and $10 million | Additional Division 296 tax may apply |
| Above $10 million | Higher additional tax treatment may apply |
The purpose of the second threshold is to apply a higher level of taxation to extremely large superannuation balances.
How Are Earnings Calculated Under Division 296?
An important aspect of Division 296 is that the calculation is based on earnings determined under the legislation. The calculation considers changes in the value of superannuation interests and other relevant factors. For individuals with complex superannuation arrangements, including self-managed super funds (SMSFs), the calculation can become more complicated. Factors that may affect the outcome include:
- Investment income
- Capital gains
- Pension interests
- Changes in account balances
- Timing of contributions and withdrawals
Are Unrealised Gains Taxed Under Division 296?
The final Division 296 rules changed from earlier proposals. The calculation does not simply tax every unrealised increase in investment value. An increase in the value of an investment is not automatically taxed just because the market value has increased and the asset has not been sold. However, the calculation remains complex and depends on the specific circumstances of the individual.
Does Division 296 Mean Super Is No Longer Tax Effective?
No. Superannuation can still remain one of the most tax-effective investment structures available. Super continues to provide significant tax benefits, including:
- Concessional tax treatment in accumulation phase
- Potential tax-free earnings in eligible retirement-phase pensions
The introduction of Division 296 does not remove the benefits of superannuation. Instead, it changes the way individuals with very large balances need to think about future wealth accumulation.
Should You Stop Contributing to Super After Reaching $3 Million?
Not necessarily. Reaching the $3 million threshold does not automatically mean that superannuation is no longer suitable. The right strategy depends on factors such as:
- Your retirement goals
- Your investment strategy
- Your personal tax position
- Your access requirements
- Your estate planning objectives
For some individuals, continuing to use super may still provide significant advantages. For others, building wealth outside super may become an important consideration.
Superannuation vs Building Wealth Outside Super
As super balances grow, some individuals may consider whether future investments should remain inside super or be held through alternative structures.
Key considerations include:
| Consideration | Superannuation | Outside Super |
|---|---|---|
| Tax treatment | Generally concessional | Depends on structure |
| Access | Restricted until conditions of release are met | Generally greater flexibility |
| Investment options | Subject to super rules | Wider range of structures available |
| Estate planning | Specific superannuation rules apply | Depends on ownership structure |
The decision is not only about tax. Other factors, including access, flexibility and estate planning, should also be considered.
Could an Investment Company Be an Alternative?
For some individuals with significant wealth, an investment company may form part of a broader wealth strategy. An investment company may allow profits to remain within the company and be reinvested. This can be useful for individuals who:
- Are still accumulating wealth
- Do not require investment income personally each year
- Want greater control over investment capital
However, an investment company is not automatically better than super.
The structure has its own considerations, including:
- Corporate tax rates
- Administration costs
- Loss of some capital gains tax concessions
- Tax implications when extracting funds
Estate Planning Considerations
Division 296 discussions should not focus only on tax during your lifetime. Estate planning is also an important consideration for individuals with large superannuation balances. Superannuation does not automatically form part of your estate.
The outcome depends on:
- Beneficiary nominations
- Super fund rules
- Estate planning arrangements
Super Death Benefits Tax
The tax treatment of superannuation death benefits depends on who receives the benefit.
Generally:
- Payments to eligible dependants may receive concessional treatment.
- Payments to non-dependants, such as some adult children, may have different tax consequences.
For individuals with significant super balances, planning ahead can help manage potential tax outcomes for beneficiaries.
What Should High-Balance Super Members Do?
Individuals approaching or exceeding the $3 million threshold should review their overall wealth strategy. Important areas to consider include:
- Superannuation balance management
- Investment structure
- Contribution strategy
- Retirement planning
- Estate planning
The introduction of Division 296 does not mean immediate action is required for everyone. However, understanding the potential impact early can help create a more effective long-term strategy.
Final Thoughts
Division 296 tax represents a significant change for Australians with larger superannuation balances. However, it does not mean superannuation is no longer valuable. The key is understanding how the new rules interact with your personal circumstances and long-term goals. For some individuals, continuing to maximise superannuation benefits may remain the right approach. For others, combining super with investments held outside super may provide greater flexibility and control. A strategic review can help determine the most appropriate approach for your situation.
Frequently Asked Questions
Is super still tax effective after Division 296?
Yes. Superannuation can still provide significant tax advantages, even after Division 296 applies to larger balances.
Does Division 296 tax my entire super balance?
No. The additional tax applies only to the relevant proportion of earnings connected to amounts above the applicable threshold.
Does Division 296 apply from 1 July 2026?
Yes. The measure applies from the 2026–27 financial year.
Will everyone with more than $3 million in super pay Division 296 tax?
Not necessarily. The outcome depends on your balance, earnings and individual circumstances.
Should I move money out of super once I reach $3 million?
Not automatically. The decision depends on your retirement objectives, tax position, investment strategy and estate planning needs.
Is an investment company better than super?
Not always. An investment company may provide flexibility, but it also has different tax and administration considerations.
How Can We Help?
If your superannuation balance is approaching or exceeding $3 million, Camden Professionals can help review your current position and understand how the Division 296 changes may affect your broader wealth strategy. Professional advice can help you assess:
- Superannuation strategies
- Investment structures
- Retirement planning
- Estate planning considerations
Contact Camden Professionals to discuss your circumstances and explore your available options.
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.
The examples provided on this page and on this website are for illustrative purposes only.
Although every effort has been made to verify the accuracy of the information contained on this page and on this website, Camden Professionals, its officers, representatives, employees, and agents disclaim all liability except for any liability which by law cannot be excluded, for any error, inaccuracy or omission from the information contained in this website or any loss or damage suffered by any person directly or indirectly through relying on this information.
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