21/03/2026
The Division 296 legislation has this month passed both Houses of Parliament and is waiting on final approval from the Governor-General.
This legislation is a meaningful and impactful change to how higher super balances are taxed, and there are a few moving parts to consider.
It’s worth understanding this legislation and consider your position.
Once approved by the GG, it will take effect from 1 July 2026.
Anyone with a total super balance over $3 million will be impacted.
In summary:
- Up to $3M – no change (15% in accumulation phase)
- $3M to $10M – an extra 15% on earnings
- Over $10M – an extra 10% on earnings
So if you’re in accumulation phase with more than $10M, part of your earnings could be taxed at up to 40%.
Importantly - the legislation does not include unrealised gains.
(Earnings are broadly what you’d expect in superannuation: interest, dividends, rent (SMSFs), and realised capital gains, less expenses.)
The tax will be based on the higher of your balance at 1 July or 30 June.
A key consideration here is that even if your balance drops below $3M by year-end, you may still be caught if it was over at the start.
Also worth noting – this tax is payable personally by the member/s, not by your super fund.
The “Capital gains relief” also has some complexity, in there being an option to lock in unrealised capital gains, but you can’t pick and choose assets. (It’s all in or all out.)
For SMSF’s, yes this could become quite complex.
You might have one asset with large unrealised gains and others that haven’t performed, but you still need to make a single decision across the whole portfolio.
Going forward, this also creates two capital gains calculations:
- The original cost base for normal CGT in the fund
- An adjusted cost base for Division 296 purposes
Retail and industry funds are treated differently, with transitional adjustments over the first four years.
For 2026–27, the tax will be based only on your balance at 30 June 2027.
That transitional rule gives you some time to review and adjust your strategy before it fully kicks in.
If someone passes away before 30 June 2027, no Division 296 tax applies.
But from 2027–28 onwards, the rules tighten. If your balance was over $3M at the start of the year, the tax can still apply even if it falls below that level before death. In those cases, the estate may become liable.
This means last-minute withdrawals won’t necessarily avoid the tax.
We’re still awaiting the more detailed regulations, which will clarify how some of this works in practice.
Over time, the $3M and $10M thresholds will be indexed in line with CPI.
A further complication in an already complex superannuation system.
As always, consider how this applies to your situation and seek advice where needed!
