Division 296: Now Enacted
March 23, 2026
Australia’s new Division 296 tax will reshape how high-balance superannuation members plan their fut...
The passage of Division 296 through Parliament marks an important development in the taxation of larger superannuation balances in Australia. From 1 July 2026, an additional tax will apply to a portion of superannuation earnings where an individual’s total superannuation balance exceeds $3 million.
For many superannuation members particularly those with self managed superannuation funds, the new law introduces an additional layer of tax administration rather than a change to the underlying operation of superannuation itself.
The measure does not alter contribution caps, pension rules, preservation conditions or transfer balance cap settings. Instead, it creates a separate tax assessment framework linked to total superannuation balances and annual movement in those balances.
What Division 296 Is Designed to Do
Division 296 introduces an additional tax on earnings attributable to superannuation balances above $3 million.
The policy intent is to reduce the concessional tax treatment applying to larger balances while maintaining existing superannuation settings for balances below that level. The threshold applies at an individual level rather than at fund level. This means a member’s total superannuation position is considered across all super interests held in Australia, including balances in:
A person holding multiple superannuation accounts will therefore be assessed based on their combined total superannuation balance. Members whose balances remain below $3 million will not be affected by the new tax.
Commencement of the New Rules
The legislation has now passed both Houses of Parliament and is scheduled to commence from 1 July 2026.
The first practical application of the tax will arise after the end of the 2026–27 financial year, once total superannuation balances and annual movement in balances can be measured for the first full year of operation. This gives trustees and advisers a defined period to review likely exposure before the first assessment period begins.
How the Tax Is Calculated
Unlike conventional income tax calculations, Division 296 does not simply apply tax to taxable income reported by a superannuation fund.
Instead, the legislation uses a balance based method that compares:
with adjustments made for:
This produces an earnings figure for Division 296 purposes. Once this earnings figure is established, only the proportion linked to the balance above $3 million becomes subject to additional tax.
That proportion is taxed at an additional 15%. Because earnings in accumulation phase are already generally taxed at 15% within superannuation, the affected portion may effectively reach a total tax rate of 30%.
The additional tax is therefore not applied to the full balance, nor to all earnings generated by the fund. It applies only to the relevant portion linked to the excess above the threshold.
Assessment Is Issued to the Individual
A significant feature of Division 296 is that the tax liability belongs to the individual rather than the superannuation fund itself. The Australian Taxation Office will issue an assessment directly to the member once the relevant financial year is processed.
The individual may then decide whether to:
This differs from standard superannuation taxation where tax is usually paid directly by the fund.
Implications for Self Managed Superannuation Funds
For SMSFs, the practical importance of Division 296 lies largely in year end reporting accuracy. Because total superannuation balance is central to the calculation, trustees will need reliable year end figures for:
This becomes particularly relevant where an SMSF holds assets that do not have readily available market values, including:
Accurate valuation has always been important for SMSF compliance, but under Division 296 it will also directly influence tax calculations at member level.
Why Investment Timing May Matter More
The balance based nature of Division 296 means investment decisions may have different tax consequences depending on when gains arise.
For SMSFs with concentrated investments, a significant asset sale in a single year may produce a larger movement in total super balance than ordinary recurring earnings. This means that for some trustees, timing of realised gains may become more relevant than under existing superannuation tax settings.
This is particularly important where funds hold:
Interaction With Existing Superannuation Rules
Division 296 does not replace existing superannuation taxation rules. It sits alongside the existing framework. This means existing rules remain unchanged in relation to:
For most superannuation members, the broader superannuation framework remains unchanged.
Practical Review Areas Before Commencement
Although the first assessments remain some time away, higher balance members may wish to begin reviewing:
For many trustees, no immediate structural change may be necessary. The value lies in understanding future exposure rather than reacting prematurely.
CIB Perspective
For affected members, Division 296 introduces an additional layer of planning rather than a reason to reconsider superannuation itself. Superannuation continues to offer long term tax advantages even where additional tax applies.
The key is understanding how individual balances and investment decisions interact with the new framework. The commencement of Division 296 from 1 July 2026 means the current financial year provides an opportunity for trustees and advisers to review likely future outcomes under the new law.
For SMSFs, early attention to valuation, balance reporting and investment planning will support better decision making once the first year begins.
If you would like to review whether Division 296 may affect your superannuation position, our Superannuation Services team at CIB Accountants & Advisers can assist with tailored modelling and planning.
Your goals deserve clear financial direction. Whether you are growing a business or protecting your personal wealth, our advisers are here to guide you with practical strategies that deliver results.
