After more than three years in development, Division 296 tax is now law and will commence from 1 July 2026. The new regime imposes an additional 15% tax on earnings relating to superannuation balances above $3 million, with a further 10% applying to earnings on balances above $10 million. Both thresholds will be indexed over time, helping to preserve their value against inflation.
While this tax is aimed at high-balance super members, it’s worth understanding even if you’re not currently affected, as balances can grow and the rules may impact you down the track.
A few things worth flagging:
Timing matters: The portion of your earnings subject to Division 296 depends on your total super balance at both the start and end of the financial year, with the higher of the two used in the calculation. This means if your balance rises above $3 million during the year and stays there, you could remain in scope for that year and the following one, even if you take steps to bring it down. A transitional rule softens this for 2026–27, by looking only at your balance at 30 June 2027 rather than both ends of the year. This allows a planning window for anyone considering withdrawing or restructuring to manage their exposure. Decisions made well before the deadline will give you far more flexibility than a last-minute scramble.
SMSF trustees may need to act for CGT relief: Self-managed super funds can elect for a form of relief that effectively protects capital growth accrued before the tax begins, but this isn’t automatic. It requires a formal election with the fund’s 2027 annual return, and it applies to the whole fund, not asset by asset. Trustees holding growth assets should start thinking about this now, well ahead of the lodgement deadline.
Death and estate planning implications: The tax can still apply in the year someone dies, and depending on how benefits are distributed, the liability can fall to the executor at the estate level rather than the beneficiaries who actually received the super. This has real consequences for estate planning, reversionary pension arrangements, and even who agrees to act as executor for a wealthy estate.
These are just some of the complexities, while there are further nuances around contributions, balance calculations, and payment timing that you may need to consider.
If you have a total super balance approaching $3 million, or you’re involved in administering an SMSF or an estate that might be affected, now is the time to review your position. Please do not hesitate to contact us or book a meeting with one of our expert advisers to discuss how Division 296 may apply to your circumstances and what planning options are available before key deadlines arrive.