Div 296 Update

The proposed Division 296 tax changes are currently before Parliament and remain subject to the legislative process, so the details are not yet final. However, as there have been some important revisions to the original proposal, we wanted to share a practical summary of what is currently on the table and what it may mean if enacted in its current form.

Thresholds

The original $3m threshold remains, with an additional $10m tier now proposed:

• $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 now 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).

The revised Division 296 tax legislation was officially introduced into the Australian Parliament on 11 February 2026 by the Treasurer as part of the Treasury Laws Amendment (Building a Stronger and Fairer Super System) Bill 2026.

It still needs to be passed by both the House of Representatives and the Senate before it becomes legislation. That means the final details may change as it progresses through the parliamentary process.

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