From 1 July 2026, individuals with more than $3 million in superannuation will be subject to a new additional tax under Division 296 of the Income Tax Assessment Act 1997 (ITAA 1997). This measure is part of the Federal Government’s Better Targeted Superannuation Concessions (BTSC) policy, designed to reduce tax concessions on high super balances.
Unlike earlier drafts, the final rules apply only to realised earnings, such as rental income, dividends, and actual capital gains, not paper profits. For those with SMSFs, industry fund accounts, or defined benefit entitlements, the changes introduce a two-tiered tax structure: 15% on balances over $3 million, and 25% for balances exceeding $10 million.
These thresholds will be indexed from commencement. If you’re a business owner, property investor, or high-income professional nearing these limits, now is the time to plan. Division 296 could materially impact your wealth strategy inside super.
What Is Division 296?
Division 296 is a new tax measure targeting high-balance superannuation accounts, introduced to make super tax concessions more equitable for all Australians.
Introduced as part of the 2023–24 Federal Budget, the Better Targeted Superannuation Concessions (BTSC) reform inserts Division 296 into ITAA 1997, with effect from 1 July 2026.
It applies an additional tax on individuals whose Total Superannuation Balance (TSB) exceeds $3 million at financial year end, calculated annually.
Notably, it taxes only realised earnings (such as rent or dividends), not paper gains or unrealised asset movements, an important design change from the earlier proposal.
The rules will apply across industry funds, SMSFs, and defined benefit schemes. The ATO will administer the new tax based on fund reporting.
At Blackwattle Tax, we support high-net-worth clients and SMSF trustees with restructuring, pension planning, and compliance to reduce exposure to unfavourable tax events.
Who Will Be Affected?
Only a small portion of Australians will be affected, but for those with SMSFs or large asset holdings in super, proactive review is essential.
Total Super Balance (TSB) Thresholds
Division 296 applies to individuals whose total super balance exceeds $3 million, measured at 30 June each financial year, starting from 2027.
The ATO will aggregate balances across all super accounts, including industry and retail funds, self-managed super funds (SMSFs), and defined benefit interests.
Those likely to be affected include:
- Business owners who hold commercial property or shares in their SMSF
- Medical professionals with significant concessional contributions
- Executives in generous employer-funded schemes
- Family wealth structures concentrated inside super
Treasury estimates:
- ~90,000 Australians impacted in 2026–27
- <0.5% of total super members
- <0.1% impacted by the $10 million tier
If you’re unsure whether you’re close to these limits, reviewing your super valuation policies and fund allocations is crucial ahead of 2026.
How Will the Division 296 Tax Be Calculated?
The new tax applies only to realised earnings, but its tiered structure can significantly increase effective tax rates for ultra-high balances within superannuation.
Realised Earnings Basis
Rather than taxing changes in the market value of super assets (i.e., unrealised gains), Division 296 focuses on realised, assessable income.
This includes:
- Rent from the property
- Dividends from listed shares
- Net capital gains from actual asset disposals
The fund must calculate each member’s share of the taxable income, adjusted for:
- Contributions made throughout the year
- Pension withdrawals
- Any internal allocations or exempt income streams
This attribution must follow either existing reporting mechanisms or be made on a fair and reasonable basis, supported by ATO guidance.
Two-Tier Tax Rates
Higher balances attract a higher tax rate on their proportion of realised earnings, creating a graduated system that targets the wealthiest fund members.
TSB Range | Additional Tax Rate | Total Tax on Earnings |
$0 – $3 million | 0% | 15% (existing concessional rate) |
$3M – $10 million | +15% | Up to 30% |
Over $10 million | +25% | Up to 40% |
The $3 million and $10 million thresholds will both be indexed:
- $3M cap → indexed in $150,000 increments
- $10M cap → indexed in $500,000 increments
Indexation applies from commencement: $3 million in $150,000 increments and $10 million in $500,000 increments, aligned to the Transfer Balance Cap (TBC). You can view the full policy design in the Treasury Division 296 fact sheet.
Examples of Division 296 in Practice
These examples illustrate how the new Division 296 rules apply to different types of superannuation members, highlighting the progressive impact across varying balance thresholds.
Example 1: Doctor with $4.5M in Super
A 58‑year‑old doctor has $4.5 million spread across an SMSF and an industry fund. Her combined realised earnings total $300,000 for the 2026–27 income year.
- Total Super Balance (TSB): $4.5 million
- Taxable proportion above $3M: 33.3%
- Additional Division 296 tax: $15,000
Although modest compared to total earnings, the change effectively lifts her super earnings tax rate from 15% to nearly 20%, reducing after‑tax returns.
Example 2: Property Investor with $12.9M in Super
A 55‑year‑old property investor has $12.9 million in an SMSF that holds commercial property and listed investments. The fund generates $840,000 in realised earnings that year.
- Proportion above $3M: 76.74%
- Proportion above $10M: 22.48%
- Additional Division 296 tax: $115,581
This equates to an effective rate of 25% on income above $10 million. For investors holding property inside super, this significantly alters liquidity and exit planning assumptions.
Planning tip: SMSF trustees should reassess cash‑flow forecasts and asset valuation methods before 2026. Our Virtual CFO services can assist in modelling these future obligations.
What Happens if You Hold Property or Illiquid Assets?
For SMSFs holding direct property, unlisted investments or private equity, Division 296 introduces new liquidity challenges that may require proactive restructuring or asset reallocation.
Many SMSFs rely on rental income or capital appreciation from property to build retirement wealth. Under the new rules:
- Tax applies to realised income only, not unrealised property value changes.
- CGT events, such as selling or transferring property, will trigger the Division 296 liability.
- Liquidity management becomes critical since funds may owe tax without receiving immediate cash proceeds.
These rules may also affect pension phase balances, death benefit tax outcomes, and estate equalisation strategies for multi‑member SMSFs.
Learn more about structuring property in or outside super to protect cash flow and manage exposure.
Can You Reduce Exposure to Division 296?
There’s no opt‑out provision, but early planning can significantly reduce exposure. Strategic rebalancing and structure reviews can help manage thresholds before the 2026 start date.
Practical strategies include:
- Spouse contribution splitting: Share super balances to remain under the $3M cap per individual.
- Withdraw and recontribute strategies: Move funds out of super, then recontribute to rebalance ownership.
- Asset reallocation: Shift future growth assets into family trusts or company structures outside super.
- Liquidity planning: Maintain sufficient cash reserves within the SMSF to meet potential tax obligations.
- Timing disposals: Plan CGT events or large asset sales across financial years for efficiency.
At Blackwattle Tax, our Chartered Accountants design structuring and exit strategies that help clients manage exposure to new legislative thresholds while preserving long‑term wealth.
How Division 296 Interacts with Existing Super Tax Rules
Understanding how Division 296 layers onto existing super tax rates is essential for planning. The new rules increase effective tax rates without changing underlying concessional fund structures.
Super Phase | Current Tax Rate | With Division 296 |
Accumulation (<$3M TSB) | 15% | 15% |
Pension (within cap) | 0% | 0% |
TSB $3M–$10M | 15% + 15% | 30% total |
TSB >$10M | 15% + 25% | 40% total |
Although still concessional relative to personal marginal rates, these increases could materially impact retirement projections, investment mix decisions, and pension sustainability for high‑balance members.
Treasury and the ATO are still consulting on:
- Application of the ⅓ Capital Gains Tax (CGT) discount for complying super funds.
- Treatment of capital losses and offsets across income years.
- Earnings attribution within defined benefit schemes and public sector plans.
What Should You Do Before 30 June 2027?
With the first Total Super Balance test occurring on 30 June 2027, high-net-worth individuals have roughly 18 months to assess and restructure superannuation strategies.
Before the reforms take effect:
- Review your total super balance across all funds, including SMSFs and industry accounts.
- Ensure SMSF valuations are accurate, consistent, and follow ATO guidelines for market value.
- Consider liquidity triggers, especially if your SMSF holds commercial property or large CGT assets.
- Map out withdrawal or re-contribution strategies to shift super balances across family members.
- Reassess whether certain assets belong inside super or are better held in family trusts or private companies.
At Blackwattle Tax, we advise SMSF trustees, medical professionals, and business owners on super restructuring, tax deferral, and asset protection. Planning before 2027 could preserve years of concessional tax benefits.
Why This Matters More Than You Think
Division 296 doesn’t just introduce an additional tax, it changes the strategic value of holding wealth inside superannuation for high-balance members.
This isn’t about compliance, it’s about future-proofing your retirement strategy. With two tax tiers, earnings attribution rules, and valuation complexity, these changes will reshape how SMSFs operate.
For business owners and professionals holding appreciating assets inside super, the time to review your structure is now, not when the first tax assessment arrives in 2028.
Need guidance? Book a free 30-minute consultation with a Blackwattle Chartered Accountant to assess your exposure and start planning your next move.
Disclaimer: This article provides general information only and does not constitute legal or tax advice. For personalised guidance, please consult a registered tax agent.
Schedule a FREE 30-minute consultation today to discover how we can help you make strategic decisions and streamline your business operations.
Stay informed and empowered by subscribing to our monthly newsletter, where you’ll receive valuable insights on business advice, investment tips, and strategic tax planning.
Disclaimer: We endeavour to make sure the information provided in this guidance is up to date and accurate. Please note, that the information is only intended to be a guide, with a general overview of information. This guidance is not a comprehensive document and should not be interpreted as legal advice or tax advice. The information is general in nature. You should seek the assistance of a professional opinion for any legal and tax issues related to your personal circumstances.