What is Division 296, and who needs to keep track of it?
Division 296 is a new tax on Australia’s very large superannuation balances.
From 1st July 2026, individuals with Total superannuation balances (TSB) above $3 million will have to pay an additional tax on the earnings attributable to the portion of their balance above that threshold.
Let’s simplify the rule.
If an individual has a Total Super Balance of $4 million
He earns $200,000 per year
The portion of the super balance above $3 million is $1 million, which is also 25% of the total balance.
So the earnings attributable to the excess balance are $200,000 × 25%, or $50,000.
Division 296 tax is 15% of $50,000, which is $7500 of additional tax
How was the rule when it was proposed?
When the division was introduced, it included taxing unrealised gains and did not index the threshold to inflation.
After much review and industry feedback, the legislation was revised to focus only on realised gains, a $ 10 million threshold was introduced, and the thresholds were indexed.
The newly proposed Division 296 tax
- The earnings on the portion of a super balance above $3 million and up to $10 million will be taxed at 30% (additional 15% to the existing concessional rate taxed to the superannuation fund and 15% of Division 296 tax).
- Above the super balance of $10 million, the earnings are taxed at 40%, which includes the existing 15% consessional rate taxed to the superannuation fund and 25% of Division 296 tax on earnings on the proportion of member balances exceeding $10 million.
- The thresholds are indexed, which means the value of the threshold increases alongside inflation.
- The revised approach doesn’t tax unrealised gains, and only taxes the earnings that have been realised.
What are accountants looking closely at?
The new Division 296 changes affect
- High-net-worth individuals
- SMSF members
- Retirement planning strategies
- Asset allocation decisions
- Estate planning
It is believed that Division 296 will affect a portion of Australians. But the new rule adds reporting, calculation, and client communication responsibilities.
Outsourcing your back-office tasks helps you in effective
- Gathering and reconciling client data
- Review super balances
- Prepare documentation
- Support reporting and compliance processes
- Free up advisers to focus on strategic client conversations.
