Division 296 Super Tax Explained: the New Tax on Super Balances Over $3 Million

The tax applies only if your total super balance is above the large super balance threshold, which is 3 million dollars for the 2026 to 2027 year. The threshold is per person, so a couple can hold up to 6 million dollars between two separate balances before either is affected. The Australian Government has said the change is aimed at a small share of people with the largest balances. If your total super balance stays under 3 million dollars, Division 296 does not apply to you.

Division 296 was first announced in February 2023 with a start date of 1 July 2025. That version taxed unrealised gains, meaning paper increases in value before an asset was sold, and did not index the threshold. After consultation the Government announced revised rules on 13 October 2025. The final law works differently in three ways. It removes unrealised gains from the calculation, so only realised earnings count. It indexes the thresholds to inflation. It adds a second, higher threshold at 10 million dollars. The start date moved to 1 July 2026.

The ATO starts from your total super balance reference amount. For the 2026 to 2027 year this is your balance at 30 June 2027. From 2027 to 2028 onwards it is the greater of your balance just before the start of the year and your balance at the end of the year. The ATO then works out the proportion of that balance above the threshold, multiplies it by the earnings your fund reports for the year to get your taxable super earnings, and applies 15 percent, plus a further 10 percent on any part above the very large threshold. Your fund calculates and reports your relevant super earnings. The ATO issues the assessment to you.

Example only. A person has a total super balance of 4 million dollars on 30 June 2027. Their fund reports 100,000 dollars of relevant earnings for the year. The part of the balance above 3 million dollars is one quarter of 4 million, so 25 percent. Taxable super earnings are 25 percent of 100,000 dollars, which is 25,000 dollars. Division 296 tax is 15 percent of 25,000 dollars, which is 3,750 dollars. Source: ATO worked example.

Example only. A person has a total super balance of 12 million dollars and their fund reports 500,000 dollars of earnings. The part above 3 million dollars is 75 percent, so 375,000 dollars of earnings is taxed at 15 percent, which is 56,250 dollars. The part above 10 million dollars is 16.67 percent, so 83,350 dollars of earnings is taxed at a further 10 percent, which is 8,335 dollars. The Division 296 tax for the year is 64,585 dollars. Source: ATO worked example.

The assessment is issued to you as an individual, not to your fund. You can pay it from your own money, or ask for the amount to be released from your super to cover it. It sits on top of the tax your fund already pays on its earnings.

The 2026 to 2027 year is transitional, so only your balance at 30 June 2027 is tested. From 2027 to 2028 the greater of your start of year and end of year balance is used, so moving money out late in a year may not remove a liability if your starting balance was already above the threshold. If your earnings for a year are nil, the assessment is nil.

Self-managed super funds have a one-off, optional choice in the legislation to reset the cost base of the fund's CGT assets to their market value at 30 June 2026, for Division 296 purposes only. This keeps growth that built up before 1 July 2026 out of the Division 296 earnings calculation in later years. The choice is all or nothing across the fund's eligible assets, cannot be undone, and does not change the fund's ordinary capital gains tax position. It is made through the fund's 2026 to 2027 annual return. Whether it helps depends on the fund's assets, so trustees usually model it with their accountant. The ATO has detailed guidance for self-managed super funds.

Does Division 296 tax my whole super balance?

No. It applies only to the proportion of your earnings that relates to the part of your balance above the threshold.

Does it tax unrealised gains?

The final law does not. Only realised earnings count. Taxing unrealised gains was in the original 2023 proposal and was removed in the revised rules.

Is the 3 million dollar threshold indexed?

Yes. It moves with CPI in 150,000 dollar steps. The 10 million dollar threshold moves in 500,000 dollar steps.

What about a couple with 6 million dollars combined?

The threshold is per person. Two people each under 3 million dollars are not affected, even if their combined balance is 6 million dollars.

When is the first assessment?

For the 2026 to 2027 year, based on your balance at 30 June 2027, after your fund reports your earnings to the ATO.

Who pays the tax?

You do, personally. You can pay from your own funds or have the amount released from super.