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

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 15% tax on top of the ordinary 15% rate that already applies inside super — bringing the rate to 30% — and a further 10% applies to the earnings attributable to the portion above $10 million, bringing it to 40%. 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 is law: the Treasury Laws Amendment (Building a Stronger and Fairer Super System) Act 2026 (Act No. 8 of 2026) and the Superannuation (Building a Stronger and Fairer Super System) Imposition Act 2026 (Act No. 9 of 2026) were both assented to on 13 March 2026, and the tax applies from the 2026–27 income year (from 1 July 2026).

The operative provisions are in Division 296 of the *Income Tax Assessment Act 1997* (inserted by Act No. 8 of 2026) and the Imposition Act, which sets the rates. Confirm current figures against legislation.gov.au and the ATO before relying on them.

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.

Under section 296-40 of the Income Tax Assessment Act 1997, you have taxable superannuation earnings for an income year if:

• Your total superannuation balance just before the start of the year, or at the end of the year, is greater than the large superannuation balance threshold ($3,000,000 for 2026–27, indexed annually from 2027–28); and
• Your total superannuation earnings for the year are greater than nil.

You are generally out of scope if your TSB is below the threshold both just before the start of the year and at the end of the year, even if your fund earned strong returns. The Act also provides exceptions, for example for child recipients of superannuation income streams. 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:

1. Determining your total superannuation earnings for the year — the total of your relevant superannuation earnings across each of your superannuation interests. These are worked out by reference to "Division 296 fund earnings", which for most funds starts from the fund's taxable income or tax loss for the year (adjusted for assessable contributions and net exempt current pension income), rather than from unrealised movements in asset values.
2. Working out the proportion above the threshold — a percentage is calculated by reference to how far your TSB reference amount (the greater of your balance just before the start of the year and at the end of the year) exceeds the threshold, so a person just over the line is taxed on a small fraction of their earnings, not all of them.
3. Applying the rate to the resulting taxable superannuation earnings (15%), plus a further 10% on the very large superannuation balance earnings component, which is worked out the same way against the $10,000,000 threshold.

The original 2023 proposal attracted sustained criticism for capturing unrealised gains on assets that had not been sold. The enacted design is built on fund taxable income, which narrows the earnings base. The formulas and adjustments (including the treatment of loss years and transitional CGT adjustments for the first years) are technical; confirm the exact method in Division 296 of the Income Tax Assessment Act 1997 and the ATO guidance for your assessment year.

Key thresholds and indexation

The figures below are from the enacted legislation (Income Tax Assessment Act 1997 ss 296-30 and 296-35, and the Imposition Act s 5).

Two points deserve emphasis:

• Indexation changes who is affected over time. The Act notes that annual indexation does not necessarily increase the amount of a threshold (see s 960-285), so confirm the figure for the year you are assessing.
• There are two tiers. Earnings attributable to the portion of your balance above $10,000,000 attract the extra 10% in addition to the 15%.

When it starts and how it is paid

Division 296 applies from 1 July 2026, meaning the first assessable year is the 2026–27 income year (the Imposition Act commenced on 1 April 2026). The tax is assessed after year end, once the data the ATO needs is available.

Practical features of the payment mechanism:

• The liability is the individual's, not the fund's.
• The Act includes a release authority mechanism ("release authority lump sum"), under which super can be released to meet the liability; confirm the detail with the ATO.
• Because the first assessment relates to the 2026–27 year, the earliest assessments will follow that year, not the start date itself.

The tax is current law, but the first cashflow impact lands after 30 June 2027. Confirm assessment and payment timing on the ATO website.

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 annually from 2027–28; 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 enacted design differs (notably it is built on fund taxable income rather than unrealised gains, and has a second tier at $10 million). 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.