Update (July 2026): Division 296 legislation has now passed Parliament and is scheduled to commence from 1 July 2026. This article was written before the legislation was enacted and has been retained for background information. For the latest position, including how the enacted legislation may affect individuals with larger superannuation balances, please read our latest article:
Division 296 superannuation tax reform – latest update.
This article was originally published when Division 296 was proposed. The legislation has now passed and the current position is outlined in our latest update.
What is Division 296?
Division 296 introduces an additional 15% tax on a portion of annual superannuation earnings for individuals whose total superannuation balance (TSB) exceeds $3 million at 30 June each year.
This additional tax applies to all superannuation accounts held by an individual including self-managed super funds (SMSFs), industry funds, retail funds and certain defined benefit pensions.
When will Division 296 apply?
Division 296 is scheduled to commence from 1 July 2026 and first applies to the 2026-27 financial year, with the first assessments expected during 2027-28.
Who could be affected?
Division 296 targets individuals with a total superannuation balance above $3 million at 30 June.
The $3 million threshold is not currently indexed. As a result, more individuals may become subject to the measure over time as superannuation balances grow through investment returns and contributions.
Q: Will I pay Division 296 tax if my super balance is under $3 million?
A: No. If your TSB is below $3 million on 30 June, Division 296 will not apply for that year.
How will the Division 296 tax be calculated?
Division 296 uses a legislated formula that compares an individual’s total superannuation balance at the beginning and end of the financial year, adjusted for contributions and withdrawals.
In simplified terms, the calculation:
- determines whether an individual’s total superannuation balance exceeds $3 million;
- calculates Division 296 earnings using the legislated formula;
- determines the proportion of the balance above the threshold; and
- applies the additional 15% tax to that proportion of earnings.
Please refer to: Division 296 superannuation tax reform – latest update.
Q: Does Division 296 tax unrealised gains?
A: Yes. Division 296 may apply to growth in asset values even if the assets are not sold, which can create cash flow challenges for SMSFs holding property or other illiquid investments.
Additional considerations
- Tax on unrealised gains
Growth in asset value may be taxed even without a sale. The impact will depend on an individual’s circumstances, investment structure and broader retirement strategy.
- No refunds for losses
Where Division 296 earnings are negative for a year, the legislation provides a mechanism for losses to be carried forward and taken into account in future Division 296 calculations.
- Individual-level tax
The Division 296 tax is assessed per individual, not per fund. Individuals can choose to pay personally or release funds from superannuation. Remember to seek expert wealth management advice, including considering implications for superannuation compliance factors, in order to manage your transactions for maximum tax effectiveness, and within the bounds of tax law.
Q: How will Division 296 affect SMSFs?
A: SMSFs across Australia will be affected. People with concentrated assets such as property in areas such as Blackburn and other Melbourne suburbs could face liquidity pressures, as unrealised gains may still attract tax under Division 296. Trustees may need to review asset structures and cash flow planning with a superannuation or wealth management advisor.
What you can do now
- Review your total superannuation balance.
- Review investment strategy and liquidity.
- Ensure asset valuations are current.
- Consider how the changes fit within your broader retirement planning.
- Seek advice before making significant changes.
Please refer to: Division 296 superannuation tax guide.
Division 296 checklist
- Estimate your total superannuation balance at 30 June each year
- Consider how future contributions, withdrawals or defined benefit pensions may impact your balance
- Review your investment strategy and liquidity
- Keep asset valuations accurate and documented
- Book a meeting with your accountant or advisor for tailored advice
Key points to remember
- Division 296 has now been enacted.
- The additional tax applies only where an individual’s total superannuation balance exceeds $3 million.
- The tax applies only to earnings attributable to the portion above the threshold.
- The broader implications will depend on individual circumstances.
Plan ahead with LDB
Division 296 represents a significant change to Australia’s superannuation tax system, but its impact will vary depending on individual circumstances.
If you would like to discuss how the legislation may affect your position, LDB’s superannuation, tax and wealth specialists can help you understand the implications as part of your broader financial strategy.
For a detailed explanation of how Division 296 works, read our complete Division 296 guide.
Our team is based in Blackburn, Melbourne, and we work with clients across Victoria and Australia. Whether you need an SMSF accountant, a tax advisor, or support with retirement planning, we’re here to assist.
