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Division 296 tax now applies to individuals with higher superannuation balances, from 1 July 2026. If your total superannuation balance is near or above $3 million, the question has shifted. It is no longer what is this tax, it is what should I do about it.
The rules are more nuanced than the headline suggests. Division 296 is a personal tax liability, it is based on a specific earnings formula rather than the movement in your account, and the planning decisions you make now can change your position for years.
This article covers how Division 296 works, the parts people get wrong, and the practical steps to take if your balance is approaching or above the threshold.
If you have a specific question, jump straight to the FAQs.
• Division 296 applies from 1 July 2026. It is now live, not proposed.
• It adds tax on superannuation earnings where your total superannuation balance is over $3 million, and again over $10 million.
• It is a personal liability, not a fund tax. You can pay it personally, from your super, or a mix.
• It is based on a modified earnings formula, not the change in your account balance.
• A transitional CGT cost base adjustment is available for assets held at 30 June 2026. It is an adjustment, not a reset, and the election is irrevocable.
Division 296 adds a layer of tax on superannuation earnings where your total superannuation balance exceeds set thresholds. There are two: $3 million and $10 million.
If your balance is over $3 million, a portion of your earnings may face an extra 15% tax. If it is over $10 million, a further 10% applies to the proportion of earnings above that level.
This is not a tax on your fund. It is assessed to you as an individual, and you can pay it personally, from your superannuation, or through a combination of both.
Not sure where your balance sits against the thresholds? Talk to your Findex advisor about a Division 296 Impact Assessment.
The most common misconception is that Division 296 is based on how much your account balance moved over the year. It is not.
Earnings are worked out using a formula set out in the legislation. It starts with the fund's taxable income and adjusts for items such as contributions and pension income. In practice the calculation includes both accumulation and pension phase earnings, includes realised investment gains and income, adjusts for contributions, and includes earnings on assets that support pensions even though those are normally tax-free in the fund.
Once earnings are set, they are applied proportionally, based on how much of your balance sits above the relevant threshold.
Assume a total superannuation balance of $5 million and annual earnings of $400,000. The portion above $3 million is $2 million, which is 40% of the balance. So 40% of the earnings or $160,000 ($400,000x40/100) are subject to the additional tax of 15% = $24,000 of Division 296 tax, i.e. $160,000x15%. The tax is proportional. It does not apply to your whole balance or all your earnings.
The legislation provides a transitional capital gains tax (CGT) cost base adjustment for SMSF assets held at 30 June 2026. This is an important planning point, and it is often misunderstood.
It is not a reset. Your original cost base stays the same for normal tax purposes. Instead, a separate adjusted cost base is created for Division 296 purposes only. If you elect it, all eligible assets must be included, the election is irrevocable, and it applies whether or not your balance currently exceeds $3 million. For some people this limits future exposure. For others the benefit is less clear. This is an area where tailored advice matters.
Because Division 296 is a personal liability, it does not simply disappear on death. The calculation for the year of death is generally based on the opening balance, and earnings generated in the fund after death, including realised gains or income, may still count towards the final liability.
That creates real issues for executors. The final tax outcome may not be known at the time of death, the timing of asset sales and benefit payments can change the result, and the people who receive the benefits may not be the ones who bear the tax. Executors may need to delay finalising the estate, retain assets to cover potential liabilities, and manage the timing of realisations.
Division 296 sits across superannuation, tax and estate planning, but at its core it is a superannuation issue. The practical steps:
Get a clear read on your current total superannuation balance and how close you are to the thresholds.
Model your likely earnings under the formula, including realised gains and pension phase earnings.
Consider whether the CGT cost base adjustment election helps or hurts your position, before you decide.
Review the timing of asset sales and any planned withdrawals with your advisor.
Bring your estate planning into line with the new rules, including executor arrangements for larger balances.
1 July 2026: Division 296 applies.
30 June 2026: value date for the transitional CGT cost base adjustment election.
30 June 2027: end of the Division 296 transitional year.
Division 296 tax is an extra tax on superannuation earnings for individuals whose total superannuation balance is over $3 million. It adds 15% on the proportion of earnings above $3 million, and a further 10% above $10 million. It applies from 1 July 2026.
Only individuals whose total superannuation balance is above $3 million. The tax is proportional, so a balance just over the threshold means only a small share of earnings is affected.
Division 296 applies from 1 July 2026. The first total superannuation balance measurement date was 30 June 2026.
No, Division 296 is based on a modified earnings formula drawn from the fund's taxable income, which includes realised investment gains and income. It is not based on the movement in your account balance. Confirm how this applies to your fund with your advisor.
Earnings are worked out from the fund's taxable income and adjusted for contributions and pension income, then applied proportionally based on how much of your balance sits above the threshold. Using the example above, a $5 million balance with $400,000 of earnings has 40% of those earnings taxed.
A portion of your earnings faces the extra tax, in proportion to how far your balance is above $3 million. The practical response is to model your position, consider the cost base adjustment election, and review timing with your advisor.
Yes. Because it is a personal liability, you can choose to pay it personally, from your superannuation, or a combination. Your advisor can help you decide which suits your cash flow and strategy.
There is no single right answer. It depends on whether you have met a condition of release allowing you to access your super benefits, Withdrawing can reduce your balance below the threshold, but this will only be of benefit in the transitional year FY2026/27, but it also moves money out of the super environment, which has its own tax and estate consequences. This is a decision to model with advice, not a rule of thumb.
If your combined superannuation balance is approaching or above $3 million, or you are nearing retirement or reviewing your estate plans, now is the time to act. A Division 296 Impact Assessment shows how the rules apply to your balance and where you can manage your exposure.
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Neil Sparks is a recognised leader in the self-managed superannuation fund (SMSF) sector, bringing over 20 years of experience across superannuation strategy, technical services, and industry education. Known for his ability to simplify complex SMSF concepts, Neil has held senior roles across the industry, including National Manager - SMSF Strategy at BT Financial Group and, most recently, Head of Membership and Corporate Development at the SMSF Association.
Neil works closely with regional teams across Australia, contributing to national strategy, trustee engagement, and thought leadership in the evolving superannuation landscape.
Qualifications and Memberships:
Fellow SMSF Specialist Adviser (FSSA™) - SMSF Association
Graduate Certificate in SMSF
Currently completing Master of Financial Planning
Neil is passionate about building strong relationships, listening deeply to clients, and using his technical expertise to deliver practical, strategic solutions that support their long-term goals.
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