Evidence-backed. Sourced from Treasury, the ATO, and the enacted legislation. General information only — not financial advice. Consult a licensed adviser for your situation. Last updated: June 2026.
⚡ Key Takeaways
- Division 296 takes effect 1 July 2026. It imposes an additional 15% tax on the portion of super earnings attributed to balances above $3 million. [1]
- It affects approximately 80,000–100,000 Australians — about 0.5% of super fund members. The government estimates it will raise over $2 billion per year. [2]
- The original proposal (2023) included taxing unrealised gains — a highly controversial element. The final law (October 2025 redesign) taxes only realised earnings, significantly improving the fairness of the measure. [3]
- The $3 million threshold will be indexed to CPI over time, preventing it from capturing more people purely through inflation.
- A second tier applies at $10 million: an additional 10% tax (total 40%) on earnings attributed to balances above $10 million. [1]
Division 296: The $3 Million Super Tax Starting 1 July 2026 — What You Need to Know
After more than three years of debate, redesign, and two failed Senate votes, Australia’s new super tax for high balances — Division 296 — takes effect on 1 July 2026. It will impose an additional 15% tax on earnings attributed to super balances above $3 million, raising over $2 billion a year from approximately 80,000 Australians. But what is often misreported about this policy are the details: who it actually hits, how the tax is calculated, what changed from the original proposal, and whether the $10 million tier applies to you. Here is the complete picture.General information only. Not financial advice. Consult a licensed financial adviser or tax specialist for advice specific to your situation.
Table of Contents
- What is Division 296?
- Who does it actually affect?
- How the tax is calculated
- What changed from the original 2023 proposal
- The $10 million second tier
- Strategies to consider before 1 July 2026
- Frequently asked questions
What Is Division 296?
Division 296 is a new division of the Income Tax Assessment Act 1997, introduced by the Superannuation (Better Targeted Superannuation Concessions) Imposition Act. It creates an additional tax specifically targeting earnings attributed to super balances above a threshold. [1] The policy rationale is that large super balances receive a disproportionate share of the concessional tax treatment (15% rather than marginal income tax rates), and that the benefit to the highest-balance members exceeds what was intended when superannuation was established as a retirement savings system.Who Does It Actually Affect?
📊 The evidence: Treasury estimates approximately 80,000–100,000 Australians (0.5% of all super members) had Total Super Balances above $3 million as at 30 June 2025 — a figure that will grow gradually as more members approach this level. The measure is projected to raise $2 billion or more per year in revenue. [2]
To determine whether you are affected, the relevant measure is your Total Super Balance (TSB) as at 30 June each year. TSB includes all accumulation accounts, pension accounts (including TTR), and defined benefit interests (valued at a special formula). If your TSB exceeds $3 million at 30 June, Division 296 applies to that financial year.How the Tax Is Calculated
The calculation involves three steps: [1]- Calculate your “adjusted earnings” for the financial year. This is your closing TSB minus your opening TSB, adjusted for contributions and withdrawals during the year.
- Proportion the earnings to the amount above $3 million. If your TSB averages $4 million and $1 million of that is above the $3M threshold, then 25% of your adjusted earnings are subject to the additional tax.
- Apply the additional 15% tax to the proportioned amount. This is in addition to (not instead of) the standard 15% tax already paid inside the super fund.
What Changed From the Original 2023 Proposal
The original 2023 proposal was controversial because it proposed taxing earnings based on the change in total super balance, which would have captured unrealised gains — paper profits on assets like property or shares held inside super, even if those assets hadn’t been sold. Critics argued this was unfair: how do you pay a tax on a gain you haven’t yet received? [3]The October 2025 redesign addressed this concern by moving to a realised earnings model: Division 296 tax is now only triggered by earnings that have actually been realised (received). Unrealised gains do not trigger the tax. This was a significant change that improved the fairness of the measure, particularly for members with illiquid assets like direct property inside super.Other changes from the original proposal: the threshold was confirmed at $3 million (not lowered), CPI indexation was confirmed, and the start date was delayed from the original 2025 intention to 1 July 2026.The $10 Million Second Tier
An additional second tier applies to balances above $10 million: an extra 10% tax on earnings attributed to the portion above $10 million. This means the total tax on earnings attributed to balances above $10 million is 40% (15% standard + 15% Division 296 first tier + 10% second tier). [1] This affects a very small number of individuals but represents the most significant super tax concentration of any developed country.Strategies to Consider Before 1 July 2026
If your TSB is approaching or above $3 million, options worth discussing with a licensed financial adviser before the commencement date include:- Withdrawing balances above $3 million and investing outside super (where different tax treatment may apply, such as the 50% CGT discount on assets held over 12 months)
- Reviewing defined benefit pension valuations — the prescribed value for TSB purposes may differ from actual commuted values, affecting whether you exceed the threshold
- Reviewing pension drawdown rates to manage the closing TSB figure
- Considering spouse contribution splitting to move money from a high-balance member to a lower-balance spouse
Frequently Asked Questions
What is Division 296?
An additional 15% tax on super earnings attributed to Total Super Balances above $3 million, effective 1 July 2026. A second 10% tier applies above $10 million (40% total). Affects ~80,000 Australians (0.5% of super members).Does it tax unrealised gains?
No — the October 2025 redesign removed this. The enacted law taxes only realised earnings. Losses can be carried forward to offset future Division 296 liabilities.Will the $3M threshold rise with inflation?
Yes. CPI indexation is confirmed in the enacted legislation. The threshold will increase in line with inflation, preventing bracket creep from pulling in more members over time.When does it start?
1 July 2026. Originally planned for 2025, delayed during the policy redesign process.🔍 The Fine Print Verdict
Division 296 is one of the most significant super tax changes since the 2017 earnings reform — but it is also one of the most misreported. The final law is materially different from the original proposal: unrealised gains are out, CPI indexation is in, and the second tier only kicks in at $10 million. For the 99.5% of Australians with balances below $3 million, this change has no direct impact. For those approaching or above the threshold, the commencement date of 1 July 2026 makes the next few months the most important planning window.
If your TSB is above $2.5 million: consult a financial adviser now — before 1 July 2026 — to review withdrawal, splitting, and drawdown strategies.
Sources
- Superannuation (Better Targeted Superannuation Concessions) Imposition Act 2023 (as amended October 2025). legislation.gov.au
- Treasury, Costing and revenue estimates — Division 296, October 2025. treasury.gov.au
- Treasury, Better Targeted Superannuation Concessions redesign consultation — October 2025. treasury.gov.au
- ATO, Division 296 tax — guidance for individuals. ato.gov.au
Disclaimer: The Fine Print 🇦🇺 provides general financial information only. Division 296 tax has complex individual implications — always consult a licensed financial adviser and/or tax specialist for advice specific to your circumstances. Content accurate as at June 2026.