Division 296 Super Tax: What’s Changed and What It Means for You

What Is Division 296?

Division 296 is a proposed tax measure designed to reduce superannuation tax concessions for individuals with total super balances (TSB) exceeding $3 million. It introduces additional tax rates on earnings above certain thresholds:

• 15% additional tax on earnings on member balances above $3 million
• 25% additional tax on earnings on member balances above $10 million

These rates are in addition to the standard 15% tax already paid by super funds on earnings.

What’s Changed?

The October 2025 update brought several key refinements:

• Unrealised gains removed: The tax will now apply only to realised income, such as interest, dividends, and realised capital gains, not paper increases in asset values.
• Two-tier tax structure introduced:
  • 15% on earnings on member balances above $3 million
  • 25% on earnings on member balances above $10 million
• Indexation added: Both thresholds will be indexed to inflation, reducing the risk of bracket creep.
• Start date deferred: The new regime will commence from 1 July 2026, with the first applicable income year being 2026–27.
• CGT reset anticipated: Superannuation assets are likely to be valued as at 30 June 2026 to establish the starting point for earnings calculations under Division 296. This reset is particularly relevant for SMSFs holding property, private equity, or other manually valued assets.

What Does This Mean for You?

For most Australians, there’s no immediate impact. If your super balance is below $3 million, you won’t be affected. However, if your balance is above this threshold, or you expect it to be in future, there are a few different strategies you could consider.

• Super Equalisation: Rebalancing super between spouses to stay below thresholds.
• Valuation Timing: Revaluing unlisted assets before 30 June 2026 to manage future earnings calculations.
• Structuring Alternatives: Considering family trusts or investment bonds for high-growth assets.

What Should You Do Now?

Our advice remains consistent: don’t act prematurely. The legislation is not yet law, and further refinements are possible. Acting too soon could lead to unintended tax consequences.

Division 296 represents a significant shift in the superannuation landscape, and one of the most important planning opportunities is the valuation of your superannuation assets at 30 June 2026. This valuation will form the basis for calculating earnings under the new tax rules. For SMSFs holding property, private equity, or other manually valued assets, reviewing your valuation methodology ahead of this date may help manage future tax exposure.

To better understand what the proposed changes could mean for you, speak with your adviser about your projected super balance and review your asset structures along with your estate planning strategies.