Division 296: What the New Super Tax Means - and Who It Affects
- May 1
- 2 min read
You may have heard recent discussions about Division 296, often referred to as the “$3 million super tax”. Like many super changes, it has generated plenty of headlines - and a fair bit of confusion.
What Is Division 296?
Division 296 is a new tax that applies to individuals whose total superannuation balance exceeds $3 million.
From 1 July 2026, earnings attributable to the portion of your super $3m may be subject to additional tax, on top of the existing 15% tax that generally applies to earnings in super’s accumulation phase.
How the New Rules Work
The final legislation introduced a tiered system:
Balances up to $3 million: no change
Balances between $3 million and $10 million: earnings attributable to this portion may be taxed at an effective rate of up to 30%
Balances above $10 million: earnings attributable to this portion may be taxed at an effective rate of up to 40%
Both thresholds will be indexed over time, which helps ensure the tax remains targeted at higher balances rather than gradually capturing more people due to inflation.
What Changed From the Original Proposal?
One of the biggest concerns with earlier versions of Division 296 was the idea of taxing unrealised gains — essentially taxing “on paper” growth in asset values even if investments hadn’t been sold.
That proposal did not make it into the final law.
Under the rules now passed, only realised earnings are taxed. This includes income such as interest, dividends, rent, and realised capital gains. Asset values increasing on paper alone will not create a tax liability.
For SMSF trustees in particular, this removes many of the liquidity and valuation concerns raised originally.
Who Should Pay Attention?
Division 296 primarily affects:
Individuals already near or above the $3 million threshold
SMSF trustees with material balances
Death of a spouse/member (if combined balance is close to $3m)
Even if you’re not impacted today, strong investment performance over time could bring this into consideration later. We believe many more Australian’s will be affected by this rule over time.
The Bottom Line
Division 296 doesn’t change the fundamental role of super as a long‑term retirement vehicle, but it does introduce extra complexity at higher balance levels.
As with most changes, the key isn’t to react, it’s to understand how the rules apply to your situation and make informed decisions that support what’s most important to you over the long term.
If you have questions and concerns about how this may affect you in future, we encourage you to get in contact with us.
General Advice Warning - This communication has been prepared on a general advice basis only. The information has not been prepared to take into account your specific objectives, needs and financial situation. The information may not be appropriate to your individual needs and you should seek advice from your financial or tax adviser before making any investment decisions.
