Division 296 Tax: Implications for Members with High Superannuation Balances

The Australian Government has announced the introduction of Division 296 tax, a new measure that applies to individuals with high superannuation balances. The tax is scheduled to commence from 1 July 2026 and will primarily affect members whose total super balance exceeds $3 million.

Although the measure is expected to impact only a small proportion of superannuation members, it represents a significant change for those with substantial balances, particularly members of self-managed superannuation funds and individuals with long-term accumulated super interests.

This article outlines how Division 296 operates, who may be affected, and key considerations for forward planning.

What is Division 296 tax?

Division 296 is an additional tax that applies where an individual’s total super balance exceeds prescribed thresholds. The tax does not apply to the entire superannuation balance. Instead, it applies only to fund earnings that are attributable to the portion of the balance above the threshold.

Key features of Division 296 include:
• it is based on total super balance, not income
• it applies only to earnings attributable to the excess balance
• it operates in addition to existing superannuation taxes

This distinguishes Division 296 from Division 293 tax, which applies to high-income earners based on concessional contributions.

Commencement date and timing

Division 296 tax is proposed to commence on 1 July 2026.
The first financial year affected will be the 2026–27 year, with assessments expected to be issued after the end of that financial year.

Members who may be affected have time to review their position and consider planning options before the commencement date.

Two-tier tax structure

Division 296 introduces a two-tier additional tax structure based on the size of a member’s total super balance.

• where total super balance is between $3 million and $10 million, an additional 15 per cent tax applies to attributed fund earnings relating to the portion above $3 million
• where total super balance exceeds $10 million, a further 10 per cent tax applies to attributed earnings on the excess above $10 million

As a result, the maximum additional tax rate under Division 296 is 25 per cent. These taxes apply in addition to the standard tax rates that already apply within superannuation funds.

Indexation of thresholds

Both the $3 million and $10 million thresholds will be indexed over time. Indexation is an important element of the design, as it reduces the likelihood of members being captured by the tax purely due to inflation or long-term investment growth.

Attributed fund earnings

Division 296 tax is calculated by reference to attributed fund earnings rather than account balances.

In broad terms, attributed fund earnings are determined by:
• comparing the opening and closing super balance for the year
• adjusting for contributions and withdrawals during the year

This approach is intended to reflect the economic growth of a member’s superannuation interest. Further technical detail is expected once final legislation is released, particularly for SMSFs and funds holding illiquid assets such as property.

Who may be affected

Division 296 is expected to affect members with higher superannuation balances, including:
• individuals with total super balances exceeding $3 million
• long-term SMSF members with significant asset growth
• members holding high-value or concentrated assets within super

Members with balances well below the $3 million threshold are unlikely to be impacted in the near term.

Planning considerations

Although Division 296 will not apply until the 2026–27 financial year, early planning remains important for members approaching the thresholds. This may include:
• monitoring total super balance over time
• reviewing asset composition and liquidity within super
• considering long-term retirement and withdrawal strategies

Professional advice can assist in ensuring superannuation arrangements remain compliant and aligned with retirement objectives.

Conclusion

Division 296 represents a material change to the taxation of high superannuation balances. While it is targeted and will affect a limited group of members, it introduces new considerations for long-term superannuation planning.

Members who may be affected should ensure they understand how the rules operate and consider the implications well before the commencement date.