Division 296 is now law. From 1 July 2026, individuals whose total super balance (TSB) exceeds $3 million at the end of a financial year pay an extra 15% tax on the proportion of their super earnings that relates to the balance above $3 million, and a further 10% (25% in total) on the proportion above $10 million. The tax is calculated from the fund’s actual taxable income, so it captures realised earnings – unrealised capital gains are not taxed as they accrue. The first test date is 30 June 2027, but the decisions that matter most are being made before 30 June 2026.
Last reviewed June 2026. The enabling Acts received royal assent on 13 March 2026 and Division 296 is enacted law. Supporting regulations (valuation methods, defined benefit factors and earnings attribution detail) were still being finalised when this page was last reviewed – those items are flagged below.
Division 296 at a Glance
| Item | Position as at June 2026 |
|---|---|
| Status | Law. Passed the Senate 10 March 2026, royal assent 13 March 2026 |
| Start date | 1 July 2026 (the 2026-27 financial year) |
| First threshold | $3 million “large super balance threshold” – extra 15% on the earnings proportion above it |
| Second threshold | $10 million “very large super balance threshold” – a further 10% (25% total) on the earnings proportion above it |
| Indexation | Both thresholds indexed to CPI – the $3 million threshold in $150,000 increments, the $10 million threshold in $500,000 increments |
| What is taxed | Realised earnings (interest, dividends, rent, realised capital gains) – not unrealised gains |
| First test date | TSB at 30 June 2027 (transitional rule for the first year) |
| Who assesses it | The ATO assesses the individual personally – payable from your own money or released from super |
Division 296 was originally announced in February 2023 with a very different design – an unindexed $3 million threshold, a 1 July 2025 start and tax on unrealised gains. That design was abandoned. On 13 October 2025 the government announced the revised model, and the Treasury Laws Amendment (Building a Stronger and Fairer Super System) Bill 2026 and its Imposition Bill passed both houses in March 2026. If you read about Division 296 before October 2025, much of what you read no longer applies.
Who Is Affected by Division 296?
You are within scope if your total super balance exceeds $3 million at the relevant test time. The test looks at your combined balance across every Australian super interest you hold – SMSF, industry fund, retail fund and defined benefit interests are all aggregated. Interests in foreign super funds are excluded from the calculation.
- For 2026-27 (the first year): you are tested on your TSB at 30 June 2027 only.
- For later years: you are tested on the greater of your TSB at the start or the end of the financial year – so realising earnings and withdrawing before 30 June will not avoid the tax in those years.
A small number of people are excluded by the legislation, including recipients of structured settlement contributions (typically serious injury compensation), child recipients of death benefit pensions, and certain constitutionally protected interests. Members of non-complying funds are outside the regime. If a fund member dies during the year, specific rules apply.
Defined benefit members: your interest is brought into the calculation using valuation factors prescribed in regulations. Those regulations were still being finalised as at June 2026, so defined benefit outcomes should be treated as indicative until the final regulations and ATO guidance are released.
How Division 296 Works
Three steps determine what you pay each year.
Step 1 – the balance test. Your TSB is measured at the test time. If it does not exceed $3 million, Division 296 does not apply for that year. The thresholds are indexed to CPI, so they will rise over time.
Step 2 – your earnings. Your super fund calculates realised earnings attributable to you using normal tax concepts: interest, dividends, rent and realised capital gains, with the CGT discount and carried-forward capital losses applying as usual, and contributions excluded. Unrealised growth in asset values is not counted. If your attributed earnings for the year are negative, no Division 296 tax arises for that year.
Step 3 – the proportion. Only the slice of earnings relating to the balance above the threshold is taxed. The proportion is broadly (TSB – $3 million) / TSB, with a second calculation for any amount above $10 million. The extra tax is 15% on the first slice and 25% in total on the second.
Including the standard tax of up to 15% already paid inside the fund, the government describes the combined headline rates as roughly 30% on earnings attributable to balances between $3 million and $10 million, and 40% above $10 million. Earnings attributable to the first $3 million keep their existing concessional treatment.
A Worked Example
Anna has an SMSF and her total super balance at 30 June 2027 is $4.5 million. Her attributed realised earnings for 2026-27 are $150,000.
| Step | Calculation | Amount |
|---|---|---|
| Total super balance at 30 June 2027 | – | $4,500,000 |
| Attributed realised earnings | – | $150,000 |
| Proportion above $3 million | ($4.5m – $3m) / $4.5m | 33.33% |
| Taxable super earnings | $150,000 x 33.33% | $50,000 |
| Division 296 tax | $50,000 x 15% | $7,500 |
Anna receives an assessment from the ATO and can pay the $7,500 from her own money or elect to have it released from her super fund. Note the tax is on $50,000 of earnings, not on the whole $150,000 – and the $1.5 million above the threshold itself is never taxed, only the earnings attributed to it.
Capital Gains and the 30 June 2026 Cost Base Reset
Because Division 296 only counts realised gains, the treatment of gains that built up before the start date matters. The legislation includes transitional relief so that growth accrued before commencement is not swept in when an asset is eventually sold:
- SMSFs can opt in to a Division 296-specific cost base reset, which resets the cost base of assets held at 30 June 2026 to their market value at that date (for Division 296 purposes only – normal fund CGT is unchanged). The opt-in must be made in the approved form by the due date of the fund’s 2026-27 annual return.
- Large APRA funds instead apply a prescribed adjustment factor to their capital gains for the first four years (2026-27 to 2029-30), with the factors set by regulations that were still in draft as at June 2026.
Two practical consequences for SMSF trustees. First, 30 June 2026 market valuations carry real money consequences – they set the reset cost base, so the supporting evidence needs to be robust. Second, the opt-in is a decision, not a default: for some funds the reset is clearly beneficial, for others it needs modelling. The ATO’s approved form and final guidance were still pending as at June 2026.
What to Do Before 30 June 2026
Division 296 starts on 1 July 2026, which makes this 30 June a genuine planning deadline rather than a routine year end. Matters worth reviewing with your accountant now:
- Get serious 30 June 2026 valuations. Market valuations at this date underpin the cost base reset and the new TSB value rules. Property, private company shares and unit trusts need defensible supporting evidence, not a rolled-forward number.
- Review asset sale timing. Gains realised before 1 July 2026 sit entirely outside Division 296. For assets you intended to sell anyway, the before-or-after question can change the tax outcome materially. This cuts both ways – do not let tax alone force a sale.
- Model the cost base reset. Decide (or at least scope) whether your fund should opt in. The election deadline is the 2026-27 annual return due date, but the valuation work has to be done at 30 June 2026.
- Review balances above $3 million. If you have met a condition of release, withdrawals, recontribution to a lower-balance spouse, or holding wealth in other structures (company, family trust) may be worth comparing. Remember: the first test date is 30 June 2027, super remains concessionally taxed even with Division 296, and exit costs (CGT, transaction costs, estate planning) can outweigh the saving.
- Check liquidity. The tax is assessed personally but can be released from super. Funds heavy in property or unlisted assets should think about how a future liability would be funded.
- Update your SMSF reporting expectations. SMSFs will report new Division 296 information in the annual return from 2026-27 onwards.
None of the above is one-size-fits-all. The right move depends on your balance, your fund’s assets, your age and condition-of-release status, and your estate plans – this is exactly the modelling we do for SMSF administration and tax clients.
How the Tax Is Paid
Division 296 is a personal tax, similar in mechanics to Division 293. After funds report the required information, the ATO calculates your liability and issues an assessment to you – not to your fund. You can pay it from money outside super, or elect to release the amount from one of your super funds. Your fund’s own tax position (the up-to-15% it already pays on earnings) is unchanged.
Also in the Same Legislation: LISTO Increase
The same Acts boost the Low Income Superannuation Tax Offset from 1 July 2027: the income threshold rises from $37,000 to $45,000 and the maximum payment increases to $810. Nothing to action for Division 296 purposes, but it is part of the same package.
Frequently Asked Questions
Sources
This guide is based on the legislation and primary guidance current at June 2026:
- ATO – Better Targeted Super Concessions is law (QC106294)
- ATO – Better targeted superannuation concessions (QC105024)
- Parliament of Australia – Treasury Laws Amendment (Building a Stronger and Fairer Super System) Bill 2026
- Treasury – Building a Stronger and Fairer Super System Act 2026, draft regulations consultation
Talk to Us Before 30 June
Prime Partners is a chartered accounting firm providing fixed-fee SMSF administration and tax services from North Sydney and Orange. If your balance is near or above $3 million, we can model your Division 296 exposure, prepare defensible 30 June 2026 valuations and work through the cost base reset decision with you.
Book a Division 296 Review SMSF Administration Services
This page is general information only and is not financial or tax advice. It reflects the law and published guidance as at June 2026. Speak to us about your circumstances before acting.