Article written by Sarah Davie
Associate Director & Licensed SMSF Accountant
$3 million super tax introduces an additional tax on earnings associated with super balances above $3 million.
The tax applies from 1 July 2026 and affects the portion of earnings attributable to the balance above this threshold. While most Australians will not be affected, SMSF trustees and high-balance investors may see additional tax applied to part of their super earnings.
Understanding the $3 million super tax calculation
$3 million super tax does not tax the entire super balance. Instead, it applies to earnings associated with the portion of the balance above $3 million.
The calculation generally follows four steps:
1. Determine your Total Super Balance (TSB).
2. Identify the portion above $3 million.
3. Calculate the proportion of earnings attributable to that amount.
4. Apply the additional Division 296 tax rate.
$3 million super tax calculator – example scenarios
Example 1 – Super balance of $3.5 million
Total super balance: $3,500,000
Amount above threshold: $500,000
Annual super earnings: $150,000
Proportion above threshold: approximately 14%
Taxable earnings under Division 296: $21,000
Additional tax (15%): $3,150
Example 2 – Super balance of $5 million
Total super balance: $5,000,000
Amount above threshold: $2,000,000
Annual super earnings: $200,000
Proportion above threshold: 40%
Taxable earnings under Division 296: $80,000
Additional tax (15%): $12,000
Example 3 – Super balance of $8 million
Total super balance: $8,000,000
Amount above threshold: $5,000,000
Annual super earnings: $320,000
Proportion above threshold: 62.5%
Taxable earnings under Division 296: $200,000
Additional tax (15%): $30,000
Disclaimer: This article is general information only and does not take into account your personal circumstances. Always seek professional advice before making financial decisions.
Why SMSF Trustees Should Pay Attention
$3 million super tax may have a greater impact on Self-Managed Super Funds (SMSFs) than other superannuation structures. SMSFs commonly hold assets such as commercial property, business real property and concentrated equity portfolios. These investments can generate significant capital growth and earnings, which increases the likelihood that balances exceed the $3 million threshold.
Strategies Trustees Are Reviewing
Advisers are currently reviewing several strategies with clients in response to $3 million super tax:
- Spouse super balance equalisation
- Contribution strategies
- Asset timing decisions
- Long‑term retirement structuring
The objective is not necessarily to avoid $3 million super tax entirely, but to ensure superannuation remains optimised within the broader wealth strategy.
Important Consideration
Even with $3 million super tax applied, superannuation generally remains one of the most tax-effective investment structures available in Australia. For many investors, the key planning question becomes how much wealth should remain inside super compared with investments held outside the super environment.
FAQs
What is Division 296 tax?
Division 296 introduces an additional tax on earnings associated with super balances above $3 million.
How is Division 296 tax calculated?
The tax is calculated by determining the proportion of earnings associated with the portion of the super balance above $3 million and applying the additional tax rate.
Does Division 296 apply to SMSFs?
Yes. Division 296 applies to individuals across all super funds, including SMSFs.
When does Division 296 start?
Division 296 applies from 1 July 2026.
Do SMSFs need to sell assets to pay the tax?
No. The tax is assessed to the individual and can be paid personally or through a release from super.
References
Australian Treasury – Better Targeted Superannuation Concessions
Australian Taxation Office – Superannuation legislation updates
SMSF Association – Policy commentary and industry guidance
CPA Australia – Superannuation tax reform analysis
Chartered Accountants Australia and New Zealand – Professional submissions on super reforms
Still got questions?
Our highly experienced and local SMSF team can walk you through the process and help you understand
whether a SMSF loan for property is a viable option for you.
Book a Free SMSF Strategy Session with Rogerson Kenny’s SMSF specialists today.
Or call us on (03) 9802 2533 to talk through your options.
*Disclaimer: This article is general information only and does not take into account your personal circumstances. Always seek professional advice before making financial decisions.*
Sarah Davie is an Associate Director and Licensed SMSF Accountant at Rogerson Kenny Business Accountants. She specialises in Self-Managed Super Funds and advises trustees on compliance, strategy and superannuation legislation.
