A significant shift in Australia’s superannuation system is on the horizon, with Division 296 set to take effect from 1 July 2026. While it will only affect a relatively small number of individuals, the impact for those within scope can be considerable – making forward planning essential.
What is Division 296?
Division 296 introduces an additional tax layer on higher superannuation balances, specifically:
- An extra 15% tax on earnings relating to the portion of your super balance above $3 million
- A further 10% tax (bringing the total to 25%) on earnings relating to balances above $10 million
This sits on top of the existing superannuation tax system and increases the effective tax rate for high-balance individuals.
How are “super earnings” calculated?
A key feature of Division 296 is how earnings are defined and calculated.
Broadly, your super earnings represent your share of the taxable investment income generated within your super fund during the year. This typically includes:
- Dividends
- Rental income
- Interest
- Capital gains on assets that have been sold
Importantly, unrealised gains (assets that have increased in value but haven’t been sold) are generally not included in this specific calculation of fund earnings – but they may still influence outcomes under the broader Division 296 framework.
The calculation process
The calculation of your Division 296 earnings generally follows three steps:
1. Fund-level calculation
Each super fund calculates its “Division 296 fund earnings”, starting with taxable income from its tax return and applying relevant adjustments.
2. Allocation to members
Your share of these earnings is then determined based on your interest in the fund (your account balance).
3. Aggregation across funds
If you have multiple super accounts, the earnings attributed to you from each fund are combined.
How is the additional tax calculated?
There are two tiers of additional tax, depending on your total super balance:
- Balances above $3 million
Additional tax =
15% × proportion of your balance above $3 million × your super earnings
- Balances above $10 million
Additional tax =
An extra 10% × proportion of your balance above $10 million × your super earnings
For Division 296 purposes, your “super balance” refers to your Total Superannuation Balance (TSB) – essentially the combined value of all your super interests.
Who will be affected?
The measure is expected to impact approximately 80,000 Australians, primarily those with larger super balances. Many of those affected may have:
- Self-managed super funds (SMSFs)
- Investments in property or private assets
- Long-term growth-focused strategies
Why this matters now
Although the changes commence from July 2026, waiting may limit your options.
Division 296 introduces complexity, particularly around:
- The way earnings are measured
- Exposure to additional tax liabilities
- Cash flow considerations where tax applies without realised income
Planning opportunities to consider
For those nearing or exceeding the thresholds, proactive planning is critical. Depending on your situation, strategies may include:
- Reviewing your super balance position and projections
- Assessing the structure and tax efficiency of your investments
- Considering asset reallocation between super and non-super environments
- Planning for liquidity to fund potential tax liabilities
- Aligning your long-term wealth and estate planning strategy
Next Steps
If your super balance is approaching or exceeds $3 million, now is the time to act. Early advice can help position you effectively and reduce the potential impact of these changes.
Want to understand how Division 296 affects you?
Our team can help you review your position and identify tailored strategies to support your long-term financial goals.
Disclaimer
This article is intended to provide general information only and does not constitute financial, taxation or legal advice. The information contained herein is based on current legislation and our understanding at the time of writing, which may be subject to change.
You should not act solely on the basis of this information. We recommend seeking personalised advice from a qualified financial adviser and/or tax professional to ensure any strategies are appropriate to your individual circumstances.