If your total superannuation balance is above $3 million, a new layer of tax may apply to certain earnings attributable to the portion above that threshold. Division (Div) 296 tax applies from the 2026–27 income year, with assessments expected after the relevant earnings information has been reported to the ATO.
What is Division 296 tax?
Div 296 tax is levied directly on the individual and is separate from personal income tax and superannuation fund tax. The ATO issues the assessment, and payment is generally due within 84 days of the notice. Div 296 tax is in addition to the (up to) 15% tax that super funds pay on fund earnings in the accumulation phase.
From 2026–27, Div 296 tax applies to you if you have a large total superannuation balance (TSB) as follows: TSB up to $3 million: no Div 296 tax; TSB above $3 million: 15% Div 296 tax on earnings attributable to super balances over $3 million; and TSB above $10 million: a further 10% Div 296 tax on earnings attributable to super balances over $10 million. These thresholds are indexed to the Consumer Price Index. The $3 million threshold is indexed in $150,000 increments and the $10 million threshold in $500,000 increments. Unlike the tax on earnings paid by super funds, Div 296 tax applies to large super balances in the retirement phase as well as the accumulation phase.
Who is affected?
You may be liable for Div 296 tax if your total superannuation balance just before the start of the year, or at year end, is above $3 million and your total superannuation earnings for the year are greater than nil (although for the first year of this new tax the ATO will only look at your TSB on 30 June 2027). Your TSB generally includes Australian super interests in APRA-regulated funds, SMSFs and relevant public sector schemes, subject to valuation rules and exclusions. Foreign super interests are excluded. Certain individuals are excluded, including child recipients of a super income stream and individuals for whom a structured settlement contribution has been made in the relevant income year or any earlier income year.
How is it worked out?
There are three broad steps: your super fund calculates its Div 296 fund earnings for the whole fund for the year; the fund attributes a share of those earnings to your interest in the fund and reports the amount to the ATO; and the ATO applies a formula to work out the proportion of your TSB above each threshold and calculates the tax. Div 296 fund earnings for APRA-regulated superannuation funds are attributed by the fund trustee on a fair and reasonable basis. However, small funds, including SMSFs, must use a specific formula to calculate the member’s share of earnings, based on the average value of their interest in the fund over the year. Trustees of defined benefit and certain other superannuation interests that don’t have an account balance attributable to the beneficiary (eg lifetime income streams) use an alternative method to attribute your earnings that’s more appropriate for those particular types of superannuation interests.
Paying the tax
You can pay Div 296 tax personally, elect to release the amount from your super, or use a combination. If electing release, your application generally must be lodged within 60 days of the assessment notice. Tax attributable to a defined benefit interest is generally deferred until benefits become payable.
Next steps
Div 296 is complex, particularly for members with SMSFs, defined benefit interests or a mix of accumulation and pension accounts. Please contact our office to review your position and plan ahead.