Division 296: What the New Super Tax Means for You

Written by Steve Landers

In early March 2026, legislation known as Division 296 — or the “Div 296 tax” — was formally passed into law. It represents one of the most significant changes to Australia’s superannuation tax rules in decades, and for high-balance members, the implications are real and time-sensitive.

The good news: the final version of the legislation is considerably more considered than early drafts. The tax applies from 1 July 2026, with the first assessments landing after the 2026–27 financial year. That means there is still a meaningful window to plan.

The basics: what is Division 296?

Put simply, Division 296 is an additional tax on investment earnings inside superannuation for individuals whose Total Superannuation Balance (TSB) exceeds $3 million. It sits on top of the existing 15% tax that super funds already pay on earnings — it does not replace it.

Under the final law, there are two tiers:

30% - Combined rate on earnings above $3m threshold

40% - Combined rate on earnings above $10m threshold

1 Jul 2026 - Date the new tax takes effect

Critically, the tax applies only to the proportion of your earnings that relate to the balance above $3 million — not your entire super earnings. So, if your balance is $4 million, roughly 25% of your earnings would be subject to the additional 15% charge. The more your balance exceeds the threshold, the larger the proportion taxed.

Both the $3 million and $10 million thresholds are now indexed to inflation, which was one of the most contested issues in earlier drafts of the legislation. This means the thresholds will rise over time rather than drag more Australians into the net simply due to rising asset values.

KEY CHANGE FROM ORIGINAL DRAFT

After significant industry pushback, the government removed the controversial proposal to tax unrealised gains — paper profits on assets not yet sold. Under the final law, Division 296 applies to fund-level realised earnings only. This is particularly meaningful for SMSF trustees holding property, business premises, or other illiquid assets.

Who is affected?

The ATO will assess your TSB at 30 June each year. Your TSB captures all superannuation accounts across all funds, including pension accounts, accumulation balances, defined benefit entitlements, and any accounts you may have forgotten about.

The tax applies per individual, not per fund. Couples should consider that each partner’s balance is assessed separately — which creates both complexity and opportunity when structuring your affairs.

What does this mean for your strategy?

This is where the real work begins. Division 296 is not a crisis — but it does require careful, personalised thinking. There is no one-size-fits-all response, and the right approach depends heavily on your age, overall financial position, income needs, family structure, and long-term goals.

At a high level, the key considerations include reviewing how assets are held across different structures, understanding how your current investment mix interacts with the new earnings definition, thinking carefully about the timing of contributions and withdrawals, and stress-testing your position against projected balance growth. For SMSF trustees, liquidity planning and the timing of asset sales take on added importance.

There are also broader structural questions worth exploring — whether assets might be better positioned outside of super, whether contributions strategies remain optimal, and how the family group’s overall tax position should be balanced. For those with balances above $10 million, the calculus becomes even more nuanced.

Worth Noting

If you are approaching — but not yet at — $3 million, now is exactly the right time to model your trajectory and understand at what point Division 296 may begin to affect you. Waiting until the threshold is crossed narrows your options significantly.

The Salt Financial Group advantage

Managing large superannuation balances in this new environment demands advisers who understand the full picture — not just the super rules, but the tax law, investment strategy, estate planning implications, and the interplay between all of them.

At Salt Financial Group, we work with a select group of clients with superannuation balances of $3 million and above. Our team has deep expertise in complex SMSF structures, high-net-worth tax planning, and integrated wealth strategy. We have been tracking Division 296 closely since its earliest drafts, and our clients have been well-prepared for this moment.

We don’t believe in reactive advice. Our approach is built around understanding your complete financial picture and positioning you ahead of change — not scrambling to catch up with it.

Understand your Division 296 position

If your superannuation balance is at or approaching $3 million, a personalised review is the essential first step. Our team is ready to assess your exposure and explore the strategies that make sense for your specific circumstances. Contact Salt Financial Group today to arrange your review.