The Federal Government has announced several refinements to the proposed Division 296 superannuation tax, aimed at ensuring a fairer and more practical approach for individuals with larger super balances.

Below is a summary of what’s changing, when it will start, and how it will work in practice.

What’s Changing

• The tax will now apply only to actual, realised earnings, rather than unrealised gains. This means you won’t be taxed on paper profits.

• The $3 million threshold will be indexed to inflation in $150,000 increments, in line with the transfer balance cap.

• A new $10 million threshold will be introduced, with a higher tax rate applying to balances above this level. This threshold will also be indexed in $500,000 increments.

• The start date has been delayed by one year to 1 July 2026, based on members’ total super balance as at 30 June 2027.

• The tax will extend to defined benefit pensions, ensuring consistent treatment across all types of superannuation funds.

How the Tax Will Work

Under the revised rules, the effective tax rates on superannuation earnings will depend on your total super balance:

In essence, individuals with total super balances exceeding $3 million will pay an additional tax on a portion of their super earnings, with a higher rate applied once balances exceed $10 million.

How It Will Be Calculated

1. If a member’s balance exceeds $3 million, the ATO will request the fund’s calculation of their realised earnings for that year.

2. The ATO will then determine the proportion of earnings attributable to the part of the balance above $3 million and, where relevant, $10 million.

3. The ATO will issue a tax assessment for the additional Division 296 amount, separate from the usual 15% fund tax already paid.

When It Starts

Division 296 will take effect from 1 July 2026, using members’ total super balances as at 30 June 2027.
The first tax assessments are expected to be issued in the 2027–28 financial year.