Article written by Sarah Davie
Associate Director & Licensed SMSF Accountant
Division 296 introduces an additional tax on earnings associated with super balances above $3 million.
The legislation forms part of the Australian Government’s Better Targeted Superannuation Concessions reforms.
Importantly, Division 296 does not tax the entire super balance. Instead, the additional tax applies only to earnings attributable to the portion of a member’s Total Super Balance above the $3 million threshold.
When does Division 296 start?
The legislation applies from 1 July 2026. The first calculations will occur for the 2026–27 financial year, with the first assessments expected during 2027–28.
How the Division 296 Tax is Calculated
Total Super Balance:
- Under $3 million – No Division 296 tax
- $3 million – $10 million – Additional 15% tax on attributable earnings
- Over $10 million – Additional 25% tax on attributable earnings
The tax is calculated using a proportional method based on a member’s Total Super Balance.
Example:
- Member Total Super Balance: $5,000,000
- Amount above $3M threshold: $2,000,000
- Annual earnings: $200,000
- Proportion above threshold: 40%
- Taxable earnings under Division 296: $80,000
- Additional tax at 15%: $12,000
Why SMSF Trustees Should Understand Division 296
Self-Managed Super Funds frequently hold long-term assets such as commercial property, business real property and concentrated investment portfolios. These assets can grow significantly over time, meaning SMSF members are more likely to exceed the $3 million threshold compared with many members of large super funds.
References;
- Australian Treasury – Better Targeted Superannuation Concessions
- Australian Taxation Office – Superannuation legislation updates
- SMSF Association – Policy commentary
- CPA Australia – Superannuation reform analysis
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*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.
