Div 296 - $3million Super Tax

The Division 296 tax legislation has now officially passed the Senate without amendment and is expected to receive formal approval from the Governor-General shortly.

Once enacted, the new rules will apply from 1 July 2026 and will impact individuals with superannuation balances exceeding $3 million.

It represents a significant change to the way large super balances are taxed and may influence long-term retirement and estate planning strategies.

Thresholds

• $3m–$10m – Effective tax rate of 30% on Division 296 earnings (15% within the fund plus a further 15% Division 296 tax on the proportion of the balance above $3m).

• Above $10m – Effective tax rate of 40% on Division 296 earnings (15% within the fund plus additional 15% Division 296 tax on the balance between $3m and $10m and then a further 10% Division 296 tax on the proportion of the balance above $10m).

  
  

Indexation

Both thresholds are proposed to be indexed to inflation, which should help reduce bracket creep over time.

Who pays the tax

The assessment is issued to the individual (not the fund). Members can elect to have the amount released from their super fund to pay the liability.

Unrealised gains

The revised proposal removes the taxation of unrealised capital gains, which was a major concern in the original version.

Timing

The start date is now proposed as 1 July 2026, with the first assessments based on balances at 30 June 2027.

Negative earnings

If Division 296 earnings are negative in a year, the assessment will be nil. Losses will no longer carry forward at the member level. Fund-level tax losses will continue to carry forward and will flow through to members’ Division 296 calculations in future years.

Total Superannuation Balance (TSB) test

The threshold will be tested against the higher of a member’s TSB at the start or end of the financial year. This reduces the effectiveness of strategies aimed at temporarily lowering balances below the threshold (subject to transitional rules in 2026–27).

If you have any questions regarding this new Div 296 tax please contact your Client Manager.