When does Division 296 start?

It is scheduled to apply from 1 July 2026, so the first assessable year is 2026-27. Because it is assessed after year end once funds report their data, the earliest assessments follow the 2026-27 reporting cycle rather than the start date itself.

Does Division 296 tax my entire super balance?

No. It taxes only the earnings attributable to the portion of your total superannuation balance above the threshold. Someone just over $3 million is taxed on a small fraction of their earnings, not on the whole balance.

Is the $3 million threshold indexed?

The Government has indicated the thresholds are to be indexed, so the figure rises over time and the group of people affected changes year to year. Confirm the current operative figure with the ATO, as indexed amounts move.

Who pays the Division 296 tax bill?

The ATO assesses the individual, not the super fund. Affected individuals can generally choose to pay the liability personally or elect to release funds from super to cover it, using a release mechanism similar to the one used for excess contributions.

Division 296: the new 30% tax on super balances over $3 million

Division 296 super tax explained: a 30% additional rate on earnings tied to super balances over $3 million, who it affects, thresholds, timing and what to do.

What Division 296 is, in one paragraph

Division 296 is an additional tax on the superannuation earnings of individuals with very large balances. In broad terms, where a person's total superannuation balance sits above $3 million, the earnings attributable to the portion above that threshold attract an extra rate of tax on top of the ordinary 15% rate that already applies inside super — bringing the effective rate to around 30%, with a higher tier proposed for the largest balances. It is levied on the individual personally, not on the fund, and is assessed by the Australian Taxation Office using data funds already report. The measure was passed by Parliament in 2026 and is scheduled to apply from 1 July 2026 (the 2026–27 financial year onward).

The primary source is the Commonwealth legislation enacted via the *Treasury Laws Amendment (Building a Stronger and Fairer Super System)* package and the related imposition Act. Always confirm the operative provisions and current figures against legislation.gov.au and the ATO before relying on them, as the final design was revised during passage.

Who Division 296 applies to

Division 296 is narrow by design. It is aimed at individuals — including members of self-managed super funds (SMSFs) and APRA-regulated funds — whose total superannuation balance (TSB) exceeds the relevant threshold at the test point for the year.

You are generally in scope if:

Your total superannuation balance is above $3 million (the threshold the Government has indicated will be indexed over time); and
Your superannuation has positive earnings for the year attributable to the amount above the threshold.

You are generally out of scope if your TSB sits below the threshold for the full year, even if your fund earned strong returns. The tax does not apply to the whole balance — only to the earnings that relate to the portion above the threshold.

TSB is a person-level concept that aggregates interests across all your funds. People with balances spread across multiple funds, or with large defined-benefit interests, should pay particular attention to how their TSB is calculated, because the test looks at the combined figure rather than any single account.

This obligation sits alongside, and is distinct from, the broader super stronger member outcomes duties that apply to funds and trustees. Division 296 is a tax on members; member-outcomes obligations regulate how funds are run. For wider context on superannuation and revenue measures, see the tax topic hub.

How the tax is calculated

The mechanics matter, because Division 296 does not simply tax your balance. It taxes earnings attributable to the part of your balance over the threshold.

At a high level, the calculation involves:

Determining your earnings for the year — broadly, the movement in your total superannuation balance over the period, adjusted for contributions and withdrawals so that money you put in or take out is not mistaken for investment growth.
Working out the proportion above the threshold — only the slice of your balance over the threshold is in scope, so a person just over the line is taxed on a small fraction of their earnings, not all of them.
Applying the additional rate to that proportion of earnings.

A significant change during the bill's passage was the move toward taxing realised earnings rather than unrealised gains. The original 2023 proposal attracted sustained criticism for capturing paper gains on assets that had not been sold. The revised, enacted design narrows the earnings base. Because the precise earnings formula and the treatment of negative earnings (carry-forward of losses) are technical and were amended late, confirm the exact method with the ATO guidance for your assessment year.

Key thresholds and indexation

The headline figures, as enacted following revision, are summarised below. Treat these as a guide and verify the current operative numbers, as thresholds are indexed and may move.

Feature	Indicative position (verify with the ATO/legislation)
Primary balance threshold	$3 million
Additional rate above the primary threshold	around 30% effective (the extra Division 296 component on top of 15%)
Higher tier for very large balances	a higher rate (a second, higher tier was introduced for the largest balances)
Indexation	the thresholds are to be indexed, so they rise over time

Two points deserve emphasis:

Indexation changes who is affected over time. Because the threshold is indexed, the cohort captured in 2026–27 will differ from later years. Do not assume a fixed dollar figure permanently.
A second tier exists. The revised design adds a higher rate for the largest balances. The exact second threshold and rate should be checked directly against the legislation rather than relied on from memory.

When it starts and how it is paid

Division 296 is scheduled to apply from 1 July 2026, meaning the first assessable year is 2026–27. The tax is assessed after year end, once funds have reported the data the ATO needs.

Practical features of the payment mechanism:

The ATO issues an assessment to the individual, not the fund.
Individuals can generally choose to pay personally or release funds from super to meet the liability, using a release mechanism similar to that used for excess contributions.
Because the first assessment relates to the 2026–27 year, the earliest notices will follow that year's reporting cycle, not the start date itself.

Given the timing, the obligation is current law to plan for now, but the first cashflow impact lands after 30 June 2027. Confirm assessment and payment timing on the ATO website closer to your assessment.

What to do now

For affected individuals and their advisers, the sensible steps are preparatory rather than reactive:

Establish your current total superannuation balance across all funds, including defined-benefit interests, so you know whether you are near the threshold.
Model your likely position for 2026–27 and beyond, factoring in expected earnings, contributions and any planned withdrawals.
Review asset composition, particularly illiquid assets in SMSFs (such as direct property), since meeting a future liability may require liquidity planning.
Document valuations carefully. SMSFs must value assets at market value each year; robust valuations matter more when balances sit near a tax line.
Coordinate with your accountant or licensed adviser before acting — restructuring super for tax reasons can trigger other consequences (contribution caps, transfer balance cap, CGT).

This explainer is general information about a regulatory obligation, not personal financial advice.

Common pitfalls

Assuming it taxes your whole balance. It does not. Only earnings on the portion above the threshold are in scope.
Treating the threshold as permanent. It is indexed; the figure that applies in a given year may differ.
Forgetting TSB is aggregated. Multiple accounts and defined-benefit interests combine. People who feel "under the limit" in one fund can still exceed it overall.
Relying on the original 2023 proposal. The design was revised during passage (notably toward realised earnings and a tiered structure). Older commentary may describe rules that did not become law.
Confusing fund-level and member-level duties. Division 296 is a member tax; it is separate from trustee obligations such as super stronger member outcomes.
Quoting a precise second-tier threshold or rate from memory. Because the higher tier was added late, verify the exact number against the legislation and ATO guidance rather than secondary summaries.