The Better Targeted Superannuation Concessions measure — commonly known as the Division 296 tax — is now law. It takes effect from 1 July 2026. If your total superannuation balance (TSB) is approaching or already above $3 million, here's what you need to know.
Why Has This Tax Been Introduced?
Division 296 is designed to make superannuation tax concessions fairer and more sustainable. Rather than changing the way super is taxed for everyone, the legislation targets a small group of individuals with large super balances, ensuring they contribute more tax on the portion of earnings that relates to those amounts. The broader super system remains unchanged for the vast majority of Australians.
Who Does It Apply To?
The new tax applies to individuals whose TSB exceeds the following thresholds:
- Large balance threshold: $3.0 million
- Very large balance threshold: $10.0 million
Both thresholds will be indexed over time. The first year of operation is 2026–27.
Here's how the effective tax rates stack up across each band:
| Division 296 TSB | Div 296 additional tax rate | Total effective tax on those earnings |
| Up to $3,000,000 | 0% | 15% (standard fund tax) |
| $3,000,001 – $10,000,000 | 15% | 30% (15% + 15%) |
| Above $10,000,000 | 25% | 40% (15% + 25%) |
Who Is Excluded?
Certain individuals will not be subject to Division 296 even if their TSB exceeds the thresholds. These include:
- Child recipients of death benefit pensions
- Individuals who have made structured settlement superannuation contributions following a personal injury compensation payment
What Happens When Someone Dies?
When a person dies, they no longer hold a TSB. However — outside of the first year of operation — a Division 296 tax assessment can still apply for the financial year in which they die, if their TSB exceeded $3 million at the start of that year. Given that superannuation does not form part of a deceased estate, this is an important consideration for anyone reviewing their estate plan.
How Is the Tax Calculated?
For SMSF members, the fund will calculate its Division 296 earnings. This is based on taxable income, with adjustments for:
- Assessable contributions
- Net exempt income attributable to pensions
- Any non-arm's length income (already taxed at 45%)
- Income relating to investments in a pooled superannuation trust
- Any capital gains from disposed assets, where the fund has made the relevant small-fund CGT election
An actuary then attributes these calculated earnings to each fund member using an attribution percentage. The ATO uses this information to assess the member's Division 296 tax liability.
Who Pays the Tax?
Division 296 tax is levied on the individual, not the fund. However, you have a choice — you can either:
- Pay the tax personally, or
- Elect to have the amount deducted from your nominated superannuation interest.
What Should You Do Now?
If your TSB is near — or already above — the $3 million threshold, now is the time to act. We recommend:
- Contacting your financial adviser to arrange tailored modelling of your Division 296 position
- Discussing the small-fund CGT election with your adviser to determine whether it is appropriate for your SMSF
- Reviewing your cashflow to plan for the tax liability and any associated reporting or actuarial requirements
- Reconsidering your investment structure — with the effective tax rate rising to 30% or 40% on large super balances, it is worth assessing whether holding investment capital in superannuation remains the most tax-effective strategy for amounts above the thresholds
Early planning will put you in the best position to manage both the financial and administrative implications of Division 296.
Need More Information?
If you would like to discuss how Division 296 applies to your situation, please contact our office to arrange an appointment. We're here to help you plan ahead with confidence.