$3 Million Super Tax Explained
A clear guide for SMSF trustees and investors about how the new tax may affect super balances above $3 million
Quick Summary – $3 Million Super Tax
The $3 million super tax (Division 296) introduces an additional tax on earnings associated with super balances above $3 million.
> Starts 1July 2026
> First Assessment 30 June 2027
> Applies across all super funds including SMSFs
> Additional 15% tax on earnings above $3 million
What is the $3 millon Super tax?
Known as 'Division 296', the new legislation introduces an additional tax on earnings associated with super balances exceeding $3 million.
When Does the $3 Million Super Tax Start?
The legislation begins from 1 July 2026.
The first year the tax may apply is the 2026–27 financial year, based on balances at 30 June 2027.
This means SMSF trustees have a limited window to review their structures before the rules fully take effect.
Key Dates
30 June 2026 – Asset Valuation Reference Date
1 July 2026 – $3 Million Super Tax Begins
30 June 2027 – First Balance Test
Who will pay the $3 million super tax (Division 296)?
The new tax targets individuals with Total Superannuation a greater than $3 million, it’s important to note the tax applies per individual (not per fund) AND across all superannuation interests.
Government estimates suggest fewer than 1% of Australians with super will be impacted by Division 296.
However, the tax may affect certain groups more frequently, particularly:
• SMSF trustees with super balances exceeding $3m
• Business owners with property in super
• Long-term investors with significant capital growth
How will the $3 Million Super Tax be calculated?
No Change
Additional 15% on earnings above threshold
Additional 25% on earnings
The new superannuation tax applies to earnings attributable to the portion of a member’s Total Super Balance above $3 million. Earnings may include interest, dividends, rental income and realised capital gains.
The tax applies proportionally. Only the portion above threshold in affected.
For Example:
If an SMSF member has $5 million in super, the portion above the threshold is $2 million.
If earnings on that portion are $100,000, the additional tax may be $15,000.
Does the $3 Million Super Tax Apply to SMSFs?
Yes. The tax applies regardless of the type of super fund.
SMSF may require more planning and there are many opportunities that should be considered before 30th June 2026.
Understanding how the $3 million super tax, Division 296, works in practice can help trustees assess potential exposure.
Perfect for:
> SMSF commercial property funds
> Couples with uneven super balances
> Long-term property investments
The 30 June 2026 Asset Reset - A Key Planning Opportunity
The legislation introduces a one-off opportunity to reset asset values. SMSF trustees may elect to reset the cost base of assets to market value at 30 June 2026. This can significantly affect the tax payable on future capital gains. Because of this, accurate asset valuations may become critical for SMSFs holding property or large portfolios.
Read the top Five Myths about the $3 million superannuation tax HERE
$3 Million Super Tax Calculator - Estimate Your Exposure
Many SMSF trustees want to understand whether the $3 million super tax will actually affect them. A simple way to start is by estimating the potential tax based on your current super balance and expected earnings.
You can use our calculator to estimate:
• The portion of your super above the $3 million threshold
• Potential earnings on that amount
• The estimated additional tax that may apply
Strategies SMSF Trustees Are Considering
The key question is no longer simply whether to invest through super. Instead, investors are increasingly asking:
“How should assets be structured across super and personal investments?”
This is where coordinated tax and financial advice becomes important. Each strategy must be considered carefully based on individual circumstances.
Trustees approaching the $3 million threshold should review their strategy, with many investors are now considering:
> Balancing super between spouses
> Reviewing asset location inside and outside super
> Contribution planning
> Timing asset disposals
> Estate planning considerations
Watch the Webinar:
The $3 million super tax explained
Meet our expert – Sarah Davie, Associate Director
Sarah lead the Rogerson Kenny SMSF department. With over 25 years SMSF experience, Sarah is an authority in the space of SMSF and a licensed SMSF Advisor.
Join Rogerson Kenny’s Sarah Davie as she explains the new $3 million super tax (Division 296) in this practical webinar. Learn who may be affected, how the rules work, and the planning considerations SMSF trustees may wish to review before 30 June 2026.
Should You Move Assets Out Of Super Because Of The $3 Million Super Tax?
This is one of the most common questions being asked by SMSF trustees. In many cases, superannuation may still remain tax effective, even with the additional tax.
However, the introduction of the $3 million super tax means some investors may wish to review:
• Asset location inside and outside super
• Future contribution strategies
• Estate planning implications
• Long-term investment structures
Any decisions should be made carefully and with professional advice.
Real Stories from our Valued Clients.
Frequently Asked Questions
What is Division 296 tax?
Division 296 tax is an additional tax on earnings associated with superannuation balances exceeding $3 million.
It applies only to the portion of super earnings that relate to the balance above the $3 million threshold, rather than the entire super balance.
The reform is part of the Australian Government’s plan to reduce superannuation tax concessions for individuals with very large balances, while maintaining the tax benefits of super for the majority of Australians.
Who will be affected by Division 296 tax?
Government estimates suggest that fewer than 1% of Australians with superannuation will be affected by Division 296.
However, the tax may more commonly affect:
- SMSF trustees
- Business owners holding commercial property inside super
- Long-term investors with significant capital growth
- Individuals whose Total Super Balance exceeds $3 million
Most Australians will not reach this threshold, meaning the reform impacts only a small portion of super holders.
When does Division 296 start?
Division 296 is scheduled to commence on 1 July 2026.
From that date, individuals with super balances above $3 million may become subject to the additional tax on earnings associated with the portion above the threshold.
Does Division 296 apply to SMSFs?
Yes. Division 296 applies to all superannuation funds, including:
- Self-Managed Super Funds (SMSFs)
- Industry funds
- Retail super funds
The tax is not specifically targeted at SMSFs, but SMSF members may be more likely to reach the $3 million threshold because they often hold large property or investment assets within their fund.
How is Division 296 tax calculated?
Division 296 tax is calculated by identifying the proportion of super earnings attributable to the amount above the $3 million threshold.
Example:
– Total super balance: $5,000,000
– Amount above threshold: $2,000,000
– Annual earnings: $200,000
Calculation:
– Portion above threshold = 40%
– Taxable earnings = $80,000
– Additional tax (15%) = $12,000
The tax only applies to earnings related to the excess balance, not the entire super fund.
What happens if my super balance exceeds $3 million?
If your Total Super Balance exceeds $3 million, you may be required to pay Division 296 tax on the earnings attributable to the amount above the threshold.
Important points:
– The entire balance is not taxed
– Only the proportion of earnings linked to the excess amount is taxed
– The additional tax rate is 15%
Individuals below the threshold will not be affected by this tax.
Do SMSFs need to sell assets to pay Division 296 tax?
No. SMSFs will not automatically be required to sell assets to pay Division 296 tax.
Trustees may have several options to meet the tax obligation, including:
– Paying the tax personally
– Paying the tax from superannuation funds
– Managing fund liquidity over time
While some funds with illiquid assets (such as property) may need to plan ahead, the legislation does not force SMSFs to sell assets.
Is super still tax effective after Division 296?
Yes. Superannuation remains one of the most tax-effective investment structures in Australia, even after the introduction of Division 296.
Key reasons include:
– The tax only affects balances above $3 million
– The majority of Australians will not be impacted
– Super still offers concessional tax rates on earnings and contributions
For most investors, superannuation will continue to play a central role in long-term retirement planning.
