TThe Federal Government has announced major amendments to the proposed Division 296 superannuation tax regime – changes that represent a significant shift from the original model. These reforms are intended to reduce tax concessions on very high superannuation balances, but in a more practical and fairer way than previously proposed.

Once legislated from 1 July 2026, Division 296 will apply additional tax to fund earnings where a member’s total superannuation balance exceeds set thresholds.

Why the change?

The original policy proposed an additional 15% tax on super balances above $3 million. However, it included two key concerns:

tax would apply to unrealised capital gains, and
the $3 million threshold was not indexed.

Both issues have now been addressed. The Government has shifted to a more workable framework that aligns with long-standing tax principles and better reflects industry feedback.

What’s changed?

The updates announced by the Treasurer include four major improvements:

The start date has been deferred to 1 July 2026
The $3 million threshold will now be indexed
A second higher threshold has been introduced at $10 million
The tax will apply only to realised earnings, not unrealised gains.

The Government has stated it “worked through the issues and found a better way” – and for many members, these changes represent a far more balanced approach to the original proposal.

What are the new tax rates?

Under the updated Division 296 model, earnings within a superannuation account will be taxed at progressive rates based on your Total Super Balance:

Earnings on balances up to $3 million will continue to be taxed at 15%.
Earnings on the portion of a balance between $3 million and $10 million will be taxed at a higher rate of 30%.
Earnings on any amount above $10 million will attract a top marginal rate of 40%.

Importantly, both the $3 million and $10 million thresholds will be indexed in line with the Transfer Balance Cap. This ensures the system adjusts over time and avoids the bracket creep that would otherwise occur as superannuation balances grow.

Who may be affected?

Division 296 will apply to individuals who have more than $3 million across all Australian superannuation accounts, including:

SMSFs
industry and retail funds
certain defined benefit pensions

Trustees will report taxable earnings in a similar way to existing income tax rules, meaning the calculation burden shifts away from the ATO and onto super funds.

One consultation issue remains open:

Will realised earnings include only gains that accrue and are realised after 1 July 2026, or all gains realised after that date regardless of when they accrued?

Further draft legislation is expected to clarify this point.

When does it start?

If enacted, the new rules will commence on 1 July 2026, with the first balance test performed at 30 June 2027 and the first assessments issued in 2027–28.

Draft legislation has not yet been released, and further consultation is expected.

What you should do now

There is no need to make immediate changes or restructure your superannuation. However, there are sensible actions to consider ahead of 1 July 2026:

Review your total super balance and future contributions strategy
Ensure valuations and fund records are up-to-date (particularly for SMSFs)
Consider implications for retirement planning, estate planning and liquidity
Seek advice before withdrawing or restructuring asset

The general principle remains:

Superannuation continues to be a highly tax-effective environment for long-term wealth.

Final thoughts

Division 296 is one of the most significant reforms to high-balance super in recent years. The updated proposal is a more balanced and workable approach: it removes the controversial tax on unrealised gains, introduces indexation and provides more time for planning.

As legislation progresses, we will continue to share updates and practical insights on the changes and what they mean for individuals with larger superannuation balances.

If you have questions about how Division 296 may affect your superannuation, please contact Resolve on 02 6147 6741 or via hello@resolve-advisory.com.au.

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Division 296: Key Changes to the Proposed $3 Million Super Tax