Australia's superannuation landscape just got a major shake-up. On 10 March 2026, the Treasury Laws Amendment (Building a Stronger and Fairer Super System) Act 2026 passed the Senate and is awaiting Royal Assent — making Division 296 tax the law of the land. Starting 1 July 2026, if your total superannuation balance (TSB) exceeds $3 million, you'll face an extra layer of tax on your super earnings.
What Is Division 296 Tax?
Division 296 is an additional tax on the earnings of individuals with very large super balances. It sits *on top*of the standard 15% tax that super funds already pay on earnings in the accumulation phase. The idea is straightforward: the more super you have above the threshold, the greater the share of your earnings subject to the extra tax.
The Two-Tier Rate Structure
The legislation introduces two thresholds:
· $3 million threshold — An additional 15% tax applies to earnings attributed to the portion of your TSB above $3 million (bringing the total effective rate to 30%)
· $10 million threshold — A further 10% tax (25% Div 296 in total) applies to earnings attributed to the portion above $10 million (bringing the total rate to 40%)
Both thresholds will be indexed to CPI from the 2027–28 year onwards.
An Example
Sarah ends the 2026–27 financial year with a TSB of $4 million. Her super fund generated $200,000 in earnings for the year (dividends, interest, and realised gains).
Step 1 — Work out the taxable proportion: (% over $3m threshold)
($4m - $3m) = $1m / $4m = 25%
Step 2 — Calculate taxable super earnings:
$200,000 * 25% = $50,000
Step 3 — Apply the Division 296 tax rate:
$50,000 * 15% Div 296 Tax = $7,500
Sarah receives an assessment from the ATO and has 84 days to pay it. She can pay from her own pocket or release money directly from her super fund.
Key Things to Know
· Realised earnings only — The revised bill taxes only realised earnings (dividends, interest, rent, realised capital gains), not unrealised paper gains
· Personal tax, not fund tax — Division 296 is assessed on the individual, though it is linked to earnings inside the super fund
· Defined benefit members can have their tax deferred to a "Division 296 debt account" until they actually receive their super benefit
· Exceptions exist for child recipients of super income streams, structured settlement contributions, and temporary residents who later depart Australia
Who Is Affected?
The ATO estimates a relatively small number of Australians — those with balances well above $3 million — will be impacted. However, as the threshold is indexed (rather than set at a fixed dollar amount forever), the number of people caught will grow over time as super balances accumulate. If you're approaching the $3 million mark, now is the time to model your position with your adviser.
Disclaimer
This material has been prepared for information purposes ONLY, and is not intended to provide, and should not be relied on without Tax/Accounting/Legal/Financial/Credit advice from a relevant qualified adviser.