What is the Division 296 super tax and when does it start?

Division 296 imposes an extra 15% tax on super earnings attributed to the portion of your total super balance above $3 million (the Large Super Balance Threshold), starting 1 July 2026. For balances above $10 million (Very Large Super Balance Threshold), a further 10% applies. The tax applies to realised earnings only — not unrealised gains. Both thresholds are indexed to CPI.

What is Payday Super and how does it change my employer's obligations?

From 1 July 2026, employers must pay the Super Guarantee with every pay run (not quarterly), and contributions must be received by your fund within 7 business days of payday. If they miss this, they face the Superannuation Guarantee Charge. This means you can check after every pay day whether your super contribution has landed.

What is the qualifying earnings change and who does it affect?

From 1 July 2026, the SG calculation base shifts from ordinary time earnings (OTE) to qualifying earnings (QE) — a broader definition that includes commissions, salary-sacrificed amounts and some contractor payments previously excluded under OTE. Workers on high commissions or salary sacrifice arrangements may see higher SG contributions if their employer correctly updates payroll. If employers don't update their systems, they may under-calculate SG.

How do I check if my employer is paying Payday Super correctly from 1 July 2026?

Log into your super fund's app or online account within 7 business days of your first pay day after 1 July 2026. Look for an incoming contribution that matches the correct SG rate (12%) on your qualifying earnings (including commissions and salary sacrifice if applicable). If it's missing or looks low, raise it in writing with your employer's payroll team. If unresolved, notify the ATO via their online unpaid super tool.

Evidence-backed. Sourced from ATO official Division 296 and Payday Super legislation pages, Fair Work, Pitcher Partners, BDO, Morgans, Super Members Council and Treasury. General information only — not financial or tax advice. Division 296 and the qualifying earnings shift may affect your situation differently depending on your income structure, fund type and employment arrangements. Consult a licensed tax adviser or financial adviser. Last updated: June 2026.

⚡ Key Takeaways

On 1 July 2026, Canberra flips a switch on three simultaneous super changes: Division 296 imposes extra tax on large balances, Payday Super compresses the employer payment window to 7 business days per pay cycle, and the SG base shifts from ordinary time earnings (OTE) to a broader qualifying earnings (QE) definition — capturing commissions, salary-sacrificed amounts and some contractor payments that OTE missed. ^[1][4][6][5]
Division 296: Extra 15% tax on super earnings attributed to balances above $3 million (Large Super Balance Threshold), rising to an extra 25% on amounts above $10 million (Very Large Super Balance Threshold). Both thresholds are indexed to CPI. Applies to realised earnings only — the earlier controversial proposal to tax unrealised gains was dropped. ^[4][7]
Payday Super: The ATO estimated $3.4 billion in SG went unpaid in 2019–20. Super Members Council found 3.3 million Australians missed a combined $5.7 billion in super in 2022–23 — an average of $1,730 each. Payday Super is designed to fix this by making contributions visible and trackable every pay cycle. ^[9][11]
The qualifying earnings shift is the change most employers haven’t fully absorbed: the SG base expands to include commissions, salary-sacrificed amounts and some contractor payments that were excluded under the old ordinary time earnings definition. Employers who don’t update payroll systems will under-calculate SG — costing workers on complex packages. ^[5][6][10]
For most Australians, Division 296 is not an immediate issue — but it will be for those with large and growing balances within 10–15 years. The bigger immediate action is using Payday Super as a monthly audit tool and confirming your employer’s payroll is calculating SG on the right base. ^[8][13][1]

The 2026 Super Changes That Could Cost You Thousands — Payday Super, Division 296 and the Qualifying Earnings Trap

Q: Does Division 296 affect most Australians?

Not immediately. Division 296 only applies to individuals with a total super balance above $3 million — a relatively small number currently. But workers in their 40s–50s with large, fast-growing balances may approach the threshold within 10–15 years and should model the impact now with an adviser.

By The Fine Print editorial team | Last updated: June 2026 | 14 min read | ⚠️ Not financial advice

The 2026 super changes aren’t arriving one at a time — they’re hitting all at once, from the same date, with very different implications depending on your income and balance. Division 296 imposes a new tax layer on earnings above $3 million in super. Payday Super compresses the employer payment window from quarterly to 7 business days per pay cycle. And a shift in how the SG base is calculated — from ordinary time earnings to qualifying earnings — expands what counts as super-liable pay for millions of workers with commissions, salary sacrifice or complex arrangements. Get these three changes wrong (or ignore them entirely) and you could lose thousands. Get them right, and two of the three are genuine improvements to your retirement position. This guide breaks down each change, who it hits, and the three actions to take right now.

📋 What’s in This Guide

The three changes switching on from 1 July 2026
Who gets hit — and how much
The Division 296 backlash and the Payday Super delay debate
Your three-step action plan
Frequently asked questions

The Three Changes Switching On from 1 July 2026

Change 1: Division 296 — extra tax on large super balances

What it is: Part of the Better Targeted Superannuation Concessions Acts 2026. Applies from 1 July 2026; first assessments cover 2026–27 earnings. ^[4][13]
The tax: If your Total Super Balance (TSB) exceeds the Large Super Balance Threshold (LSBT = $3 million in 2026–27), you pay an extra 15% on earnings attributable to the part above $3m — on top of the usual 15% fund earnings tax. Effective rate on earnings above $3m: 30%. ^[4][5]
Above $10 million: If your TSB exceeds the Very Large Super Balance Threshold (VLSBT = $10 million), a further 10% applies on earnings above that — effective rate on earnings above $10m: 40%. ^[4][5]
Indexation: LSBT indexed in $150,000 increments; VLSBT in $500,000 increments — both linked to CPI to reduce bracket creep. ^[4][5]
Realised earnings only: The final law dropped the earlier proposal to tax unrealised gains. Optional CGT cost-base reset is available. The tax is assessed on individuals, not the fund — though fund amounts can be released to meet the liability. ^[7][4]

Change 2: Payday Super — SG with every pay run

What it is: Employers must pay SG with every pay run — not quarterly. Contributions must be received by the employee’s fund within 7 business days of payday or the employer is liable for the Superannuation Guarantee Charge (SGC). ^[8][9]
Why it was introduced: The ATO estimated $3.4 billion in SG went unpaid in 2019–20. Super Members Council found 3.3 million Australians missed $5.7 billion in super in 2022–23, averaging $1,730 each. Payday Super is designed to make non-payment immediately visible and enforceable. ^[9][11]
For employees: You can now check after each pay day whether a contribution has landed — giving you a monthly or fortnightly audit trigger instead of a quarterly wait. ^[8][9]
ATO enforcement: Extra funding directed to the ATO for Payday Super compliance enforcement and detection of non-payment. ^[13]

Change 3: The SG base shifts from ordinary time earnings to qualifying earnings

⚠️ This is the change most Australians and employers haven’t fully absorbed.

From 1 July 2026, the SG calculation shifts from ordinary time earnings (OTE) to qualifying earnings (QE) — a broader base. ^[5][6]
QE captures payments that OTE excluded: commissions, salary-sacrificed amounts and some contractor payments. For employees on high commissions or complex packages, this can meaningfully increase how much SG must be paid each period. ^[5][6]
Employers who don’t update payroll systems or who misconfigure the new QE base will under-calculate SG — leaving affected workers short-changed every single pay cycle without either party immediately noticing. ^[10][6]
The broader QE base interacts with Payday Super’s tighter window: more complex calculations, compressed turnaround time, and higher SGC exposure for errors. ^[6][8]

Who Gets Hit — and How Much

High-balance members: Division 296’s compounding cost

For members above $3 million, Division 296 raises the effective earnings tax rate from 15% to 30% on the above-threshold portion. Over years or decades, that extra 15–25% on earnings above the thresholds — even at modest 7–8% annual returns — can cost hundreds of thousands of dollars in after-tax growth if you keep very large balances inside super rather than restructuring. BDO’s analysis illustrates that a $5 million balance with $200,000 in attributable earnings above $3m faces an extra $30,000+ in Division 296 tax per year — compounded over 10 years at even modest growth, that’s a very significant difference from the pre-2026 rules. The earlier you model this and adjust strategy, the more options you have. ^{[4][5][13][14]}

Workers with commissions or salary sacrifice: the qualifying earnings trap

Under OTE, commissions and salary-sacrificed amounts were excluded from the SG calculation base for some workers. Under QE, they’re included. This means: if you’re a sales employee earning a base salary plus significant commissions, your employer must now calculate SG on both components. If their payroll system hasn’t been updated to reflect QE rather than OTE, your super contributions will be under-calculated every pay — and with Payday Super’s 7-business-day window and heightened ATO scrutiny, any miscalculation surfaces as an SGC liability faster than under the old quarterly rules. If you’re in this category, it’s worth confirming with your payroll team before 1 July that the QE definition has been implemented correctly. ^[5][6][10]

Disengaged workers: the behavioural cost of ignoring Payday Super

Payday Super is designed to benefit workers — more frequent contributions, better transparency, faster detection of non-payment. But it only works as a protective mechanism if you actually check. Super Members Council modelling shows that delayed or unpaid super can easily cost tens of thousands of dollars at retirement once compounding is lost — particularly for younger workers whose super has the longest runway to grow. If you’ve never checked whether your employer is paying SG correctly, Payday Super from 1 July 2026 gives you a simple tool: log into your fund’s app within a week of payday and look for a matching contribution. If it’s not there, raise it in writing. ^[11][9][8]

The Division 296 Backlash and the Payday Super Delay Debate

Division 296 — the unrealised gains backflip: The original proposal taxed unrealised gains on balances above $3 million — meaning members could face a tax bill on paper profits from assets they hadn’t sold, including illiquid SMSF property. SMSF sector bodies, tax professionals and the Actuaries Institute mounted sustained opposition on fairness, liquidity and complexity grounds. The government backed down, and the final law taxes realised earnings only, with optional CGT cost-base resets and indexed thresholds. Cutcher & Neale, BDO and others confirm the revised design is more workable, though the structural objection — that rules are changing mid-game for people who built retirement strategies around earlier settings — remains a live debate. ^[7][14][15]
Division 296 — equity vs sovereign risk: Supporters frame Division 296 as a straightforward equity measure: very large super balances received disproportionate tax concessions under the flat 15% model, and trimming that at the margins for an extremely small number of members is fair. Critics argue it creates sovereign risk around retirement planning — if the government can change the tax treatment of super balances retrospectively at one threshold, what stops it doing so at lower thresholds in the future? This debate will run well beyond 2026. ^[14][15]
Payday Super — the “delay” debate: Business groups pushed for delayed implementation, citing payroll administration costs and cash-flow pressures, particularly for small business. Treasury consulted on implementation timing through 2025. Super Members Council countered that any delay beyond 1 July 2026 would cost workers $110 million per week in missed super — framing delay as a transfer from employees to employers. The 1 July 2026 date held. ^[11][16][9]
ATO and APRA resourcing: Budget and MYEFO documents confirmed extra ATO funding specifically for unpaid super detection and SGC enforcement under Payday Super, and signalled government intent to consult on further tightening of APRA’s performance test — making 2026 not just a rule-change year but an enforcement-uplift year. ^[13][3]

✅ Your Three-Step Action Plan

Action 1: Work out whether Division 296 is (or will become) your problem — and plan now if it is

Log into myGov and add up your total super balance across all funds. Compare it to the $3 million LSBT threshold and project whether, at your current contribution rate and expected investment returns, you’re likely to approach or breach it within 5–10 years. If you’re already above the threshold or on a trajectory to cross it, this is the moment to sit down with a licensed financial adviser and tax accountant to model the Division 296 impact on your specific situation. Questions to work through: Should you cap further concessional or non-concessional contributions to avoid rapidly growing above the threshold? Does it make sense to hold some growth assets outside super — in a discretionary family trust, for example — rather than continuing to build a super balance that will attract 30% effective earnings tax above $3m? How should the optional CGT cost-base reset be used? And how should large planned realisations inside super — like selling an SMSF property — be timed in light of the realised-earnings-only design? The sooner you model this, the more planning levers you have. ^[4][13][14]

Action 2: Use Payday Super to audit your employer from the first pay after 1 July

From your first pay day on or after 1 July 2026, check your super fund app or online account within a week and look for an incoming contribution dated to that pay cycle. The amount should reflect the correct SG rate (12% from July 2025) on your qualifying earnings — not just your base salary, but including any commissions and salary-sacrificed amounts now captured under the QE definition. If a contribution doesn’t appear within 7 business days, contact your employer in writing — email is sufficient — and ask when the contribution was made and to which fund. If you receive an unsatisfactory response or the contribution continues to be late, you can notify the ATO via the online unpaid super tool. The ATO will apply the SGC rules, which include interest and an admin component, making employers who are slow to comply face a higher cost than simply paying on time. ^{[8][9][10][11]}

Action 3: Update your super strategy for the new rules instead of assuming “she’ll be right”

Two of the three 2026 changes require you to actively update your approach — not just know the rules exist. For higher-income or older workers: revisit your salary sacrifice and investment strategy for 2026–27 onwards. What was optimal before Division 296 and the QE shift may no longer be. If your salary-sacrifice arrangement was set years ago, the QE change may mean your employer is now required to pay more SG on your package than your current salary sacrifice agreement anticipated — worth confirming with payroll before July. For typical workers: use the transparency that Payday Super creates as a cue to log into your fund every month or two, check that contributions are landing, review your investment option’s performance against APRA benchmarks (results are published each November), and move if your fund is chronically underperforming. The 2026 changes make the system stricter at the top end and more transparent for everyone — but only the workers who pay attention will benefit from the transparency. ^{[1][2][18][19]}

❓ Frequently Asked Questions

What is Division 296 and when does it start?

Extra 15% tax on super earnings above a $3m balance threshold from 1 July 2026; 25% on amounts above $10m. Realised earnings only. Both thresholds indexed to CPI. ^[4][5][7]

What is Payday Super?

From 1 July 2026, employers must pay SG with every pay run; contributions must land in your fund within 7 business days. Late payment triggers the Superannuation Guarantee Charge. ^[8][9]

What is the qualifying earnings change?

The SG base shifts from ordinary time earnings (OTE) to qualifying earnings (QE) — capturing commissions, salary sacrifice and some contractor payments previously excluded. Workers on those pay types may receive higher SG if employers update correctly. ^[5][6]

Does Division 296 affect most Australians?

Not immediately — only those above $3m TSB. But those in their 40s–50s with large balances should model whether they’ll drift into scope within 10–15 years. ^[4][13]

How do I check if my employer is paying Payday Super correctly?

Log into your super fund’s app within 7 business days of your first July pay day and check for a matching contribution. If missing, contact payroll in writing — then notify the ATO if unresolved. ^[8][9][11]

⚖️ The Fine Print Verdict

In 2026, Canberra isn’t making one super change — it’s making three at once, and they interact. Division 296 reshapes the tax economics of large balances. Payday Super compresses the employer payment window and, for the first time, makes non-payment immediately visible to members. The qualifying earnings shift expands the SG base in a way many employers haven’t fully implemented. Two of these changes are net positives for most Australians: more frequent contributions and a broader SG base should improve retirement outcomes over time. One is negative for those with large balances: Division 296 raises effective tax rates significantly on earnings above $3 million, and the earlier controversy over unrealised gains — now resolved — showed the government is willing to change super’s tax treatment in ways that affect long-standing planning assumptions. The common thread across all three is the same as it always is with super: the system gives you more information and more tools than ever before, but only rewards the people who actually use them. The 3.3 million Australians who missed $5.7 billion in super payments in 2022–23 didn’t lose it because the law was bad — they lost it because no one was checking. From 1 July, you have a new reason to check every pay cycle.

👉 Check your TSB for Division 296 exposure. Confirm your employer’s payroll is calculating SG on the new qualifying earnings base. Then set a calendar reminder to check your super fund within a week of every pay day from July — every single time.

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📚 Sources & References

SuperGuide, “Superannuation changes and rules that apply in the current year,” superguide.com.au
Clean Slate, “Superannuation tax changes 2026,” cleanslate.net.au
Pitcher Partners, “Federal Budget 2026-27: superannuation unchanged but ripple effects remain,” pitcher.com.au (2026)
ATO, “Better targeted superannuation concessions — Division 296,” ato.gov.au
BLG Business Advisors, “Payday Super: super contributions must align with wage payments,” blgba.com.au
BLG Business Advisors, “Qualifying earnings and SG base change 2026,” blgba.com.au
Perpetual, “Division 296 super tax,” perpetual.com.au
ATO, “About Payday Super — in detail,” ato.gov.au
Fair Work, “Payday Super: new rules starting 1 July 2026,” fairwork.gov.au
Morgans, “Your Wealth: first half 2026,” morgans.com.au (2026)
Super Members Council, “Let’s get this done: time to pass Payday Super laws,” medianet.com.au (2025)
Treasury Minister, “Introducing Payday Super,” ministers.treasury.gov.au
ATO, “Latest news on tax law and policy,” ato.gov.au
BDO, “Understanding the new Division 296 superannuation tax changes,” bdo.com.au
Cutcher & Neale, “Division 296 super tax passed,” cutcher.com.au
Treasury, “Consultation on Payday Super implementation,” treasury.gov.au/consultation/c2025-627396
LinkedIn/Daniel Demirci, “From 1 July 2026 Australia’s superannuation — Division 296,” linkedin.com (2026)
APRA, “APRA releases 2024 superannuation performance test results,” apra.gov.au (2024)
APRA, “APRA releases 2025 superannuation performance test results and product data,” apra.gov.au (2025)

This article is general information only and does not constitute financial or tax advice. Division 296, the qualifying earnings shift and Payday Super may affect your situation differently depending on your income structure, employment arrangement and fund type. Consult a licensed tax adviser or financial adviser for personalised guidance. Information is current as at June 2026, based on ATO official legislation pages, Fair Work, Treasury, Super Members Council and independent adviser analysis. The Fine Print 🇦🇺 is not affiliated with the ATO, APRA, Fair Work or any fund or adviser mentioned.

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