What You Need to Know About the Proposed Division 296
Division 296 is a proposed new tax that will apply an additional 15% tax on earnings related to the portion of your superannuation balance exceeding $3 million per person. It’s part of the government’s broader effort to ensure the super system remains equitable and sustainable.
While not yet law, it is expected to be passed with the first assessment date being 30 June 2026 and will use the balance as at 1 July 2025 to calculate the initial value for accessible growth.
This tax will only impact individuals whose total super balance (TSB) exceeds $3 million at the end of a financial year. If your balance is below that threshold, Division 296 won’t apply to you.
While it is expected that fewer than 0.5% of Australians will currently be affected by Division 296. The legislation does not provide for the cap to be increase. Therefore, it is foreseeable that in the future more Australians will be affected.
However, if you’re close to the limit or expect to exceed it in the future it’s important to start planning now.
How Will the Tax Work?
The 15% tax is calculated on the earnings attributed to the portion of your super balance above $3 million. This includes both realised and unrealised gains, which is a significant shift from how super is typically taxed.
If your super balance grows from $3.5 million to $3.8 million in a year, the growth on the $500,000 being the amount in excess of the $3 million which is not included may be subject to the additional tax.
How Can Division 296 Tax Be Paid?
If you’re assessed with a Division 296 tax liability, the Australian Taxation Office (ATO) will issue a notice of assessment after the end of the financial year. You’ll then have 84 days to pay the tax. There are three payment options available:
- Pay from Personal funds
- Release funds from Super
- Combination of both
What Should You Do Now?
If your super balance is approaching or exceeds $3 million, here are some steps to consider:
- Review your superannuation strategy with your adviser.
- Consider alternative investment vehicles outside of super.
- Understand the impact of unrealised gains on your tax liability.
- Plan for liquidity – ensure you can cover the tax if needed.
We’re Here to Help
Division 296 introduces complexity, but with the right advice, you can navigate it confidently. Our team is ready to help you:
- Assess your exposure
- Model potential tax outcomes
- Explore tax-effective strategies
Reach out to your adviser if you would like to discuss your situation.
Katrina Dhu (CFP® Professional, MFinPlan, ABFP®, CRPC®, GradDipFinPlan, ADFS(FP), DFS(FP)) is an Authorised Representative of Alman Partners Pty Ltd, Australian Financial Services Licence No: 222107.
Any information provided to you was purely factual in nature. It has not been taken into account your personal objectives, situation or needs. The information is objectively ascertainable and is not intended to imply any recommendation or opinion about a financial product. This does not constitute financial product advice under the Corporations Act 2001 (Cth). It is recommended that you obtain financial product advice before making any decision on a financial product such as a decision to purchase or invest in a financial product. Please contact us if you would like to obtain financial product advice.