The passage of Division 296 superannuation tax legislation in March 2026 marks a meaningful shift in how very large superannuation balances are taxed in Australia. Applying from 1 July 2026, the measure introduces an additional personal tax for individuals whose total superannuation balance (TSB) exceeds $3 million, with higher rates applying to balances over $10 million.
While early versions of the proposal generated concern—particularly due to the intention to tax unrealised capital gains—the final legislation represents a significant redesign. Unrealised gains are now excluded, thresholds are indexed, and a second tier has been introduced for very large balances.
The key question for many affected superannuation members is no longer “Is super still worthwhile?” but rather “Do I need to do anything differently?”
What Is Division 296?
Division 296 is a personal tax, paid by individuals (not superannuation funds), and operates in addition to existing super fund tax. An election can be made for the tax to be paid from your superannuation balance similar to the existing Division 293 tax.
In practical terms, earnings on large super balances may be taxed:
- at the fund level (generally 15%, or 0% on retirementphase earnings), and
- again at the individual level under the new Division 296.
How the Tax Works
- Balances over $3 million
→ An additional 15% tax applies to the proportion of earnings attributable to the amount above $3m. - Balances over $10 million
→ A further 10% tax applies to the proportion attributable to the amount above $10m.
Both thresholds will be indexed over time.
Division 296 applies if an individual’s superannuation balance exceeds $3m at the start or end of a year (with special rules for the first year, 2026/27).
What Counts as “Earnings”?
For Division 296 purposes, earnings are not defined as changes in account balances. Instead, they are based on a modified measure of fund earnings:
Included:
- Interest, rent, dividends (including franking credits)
- Realised capital gains (after discounts)
- Earnings that would otherwise be exempt due to retirementphase pensions
Excluded:
- Unrealised capital gains
- Contributions and rollovers
- Insurance proceeds
- Nonarm’s length income
Importantly, super funds continue to be taxed exactly as they are today. Division 296 does not change fund taxation — it sits alongside it.
Capital Gains Relief – Protecting Pre2026 Growth
To prevent historical growth being caught under the new rules, the legislation includes transitional CGT relief:
- SMSFs and small APRA funds may elect to reset asset cost bases to market value at 30 June 2026 (for Division 296 purposes only).
- Large APRA funds receive a formulabased adjustment for four years.
The SMSF election is allornothing and requires careful consideration, particularly where assets are in a loss position.
Should Members Withdraw Money from Super?
The answer depends largely on balance size, tax rates outside super, and how assets are managed over time.
Balances Between $3m and $10m
For most members in this range:
- Leaving assets in super is equal or better in tax terms
- Withdrawing funds often increases total tax once personal tax (and Medicare) is considered
- Capital gains are generally taxed more favourably inside super
Balances Above $10m
Once balances exceed $10m:
- A portion of earnings may face total tax of up to 40%
- If income outside super can be taxed at around 30%, selectively reducing balances may improve longterm outcomes
However:
- The cost of moving assets (CGT) must be weighed carefully
- Higher personal tax rates outside super can eliminate any benefit
- Strategy success depends heavily on disciplined tax management
Timing Matters More Than Immediate Action
When assets are sold can be as important as where they are held.
Key considerations include:
- Managing the timing of capital gains
- Taking advantage of actuarial percentages within super
- Staging withdrawals or asset sales over time
- Coordinating superannuation decisions with estate planning
For all SMSF and Small APRA fund members:
- Review whether asset cost base adjustments to reflect market value at 30 June 2026 (for Division 296 purposes only) may be beneficial. This needs to be opted in to and applies to all fund assets.
For many highbalance members:
- Immediate action is not required
- Super remains a highly effective investment vehicle
- Thoughtful, longterm planning is more valuable than reactive changes
The optimal response typically involves measured, informed decisions over time, aligned with broader financial and estate objectives.
If you are likely to be affected, or simply want reassurance, we recommend a structured review rather than a reactive decision.
Please reach out to your local Accru Advisor if you’d like to discuss what Division 296 means for you specifically.
