The New Super Tax on Large Balances Is Now Law — Here’s How It Works
What is Division 296?
Division 296 is an additional tax on the taxable earnings of superannuation balances above $3 million. Formally known as the Building a Stronger and Fairer Super System Act 2026, the legislation received Royal Assent on 13 March 2026 — making it law. The tax applies from 1 July 2026. The rate is an additional 15% on earnings attributable to the portion of a balance between $3 million and $10 million, rising to an additional 25% for earnings above $10 million. Both thresholds are indexed to wage growth.
How the tax is calculated
The tax does not apply to the entire balance above $3 million — it applies to the proportional taxable earnings attributable to that excess. Under the final legislation, earnings are calculated on a realised basis. Growth in the value of super fund assets is only counted as taxable earnings when a gain is actually realised through a disposal. This is a significant change from the original draft of Division 296, which would have taxed unrealised gains — the final law does not.
What this means for SMSF members with illiquid assets
For members of self-managed super funds holding illiquid assets such as property or unlisted investments, the realised-earnings basis in the final law is an important change from the original proposal: Division 296 does not tax paper gains, only earnings actually realised — interest, rent, and gains on assets the fund has sold. The law also gives funds a one-off option to reset their assets’ cost base to market value as at 30 June 2026 for Division 296 purposes, quarantining the growth built up beforehand. You do not need to make this decision yourself — we will assess it and make the election on your behalf where it benefits your fund
Who is affected?
Fewer than 1% of Australians currently have a super balance above $3 million. However, for those who do — particularly those with significant property holdings, unlisted assets, or defined benefit interests — the implications can be material. Both the $3 million and $10 million thresholds are indexed to wage growth, meaning they will rise over time. Members with balances approaching either threshold now should review their position as a matter of priority.
What to consider before 30 June
If your super balance is approaching or exceeds $3 million, the days before 30 June are an important window. Your accountant and financial adviser can help you review the structure of your SMSF, the types of assets held, and whether any strategy adjustments make sense in advance of the tax applying from 1 July.
Division 296 is now law — if your super balance is approaching or above $3 million, contact us as soon as possible so we can review your position before the new financial year begins.
