From 1 July 2026, individuals with large superannuation balances may be subject to an additional tax under Division 296.
For the 2026 – 27 financial year, the large super balance threshold is $3 million. The tax applies to the proportion of an individual’s superannuation earnings associated with the amount above the threshold.ato.gov
What is Division 296 tax?
Division 296 is a tax on certain individuals with large total super balances. It is intended to reduce the tax concessions available on superannuation balances above the legislated threshold.
The tax is separate from the normal tax treatment that applies within a super fund. It is assessed to the individual rather than simply being deducted automatically from the SMSF or super account.
Who may be affected?
You may need to consider Division 296 if your total super balance is above $3 million at the relevant measurement time.
This may apply to individuals with:
- Large SMSF balances.
- Multiple superannuation accounts.
- Significant investment or business property held through super.
- High-growth investment portfolios.
- Super balances that increase substantially during the year.
A balance exceeding $3 million does not mean the entire balance is taxed at an additional 15%. The calculation generally focuses on the proportion of earnings connected with the amount above the threshold.
How does the calculation work?
The Division 296 calculation considers changes in an individual’s total super balance, adjusted for certain contributions and withdrawals.
In simplified terms, the calculation looks at:
- The individual’s total super balance at the beginning of the year.
- The balance at the end of the year.
- Contributions made during the year.
- Withdrawals or benefits paid during the year.
- The proportion of earnings linked to the amount above the $3 million threshold.
The tax rate is an additional 15% on the relevant proportion of earnings. The rules can be complex, particularly where a member has an SMSF holding property or other assets that are not frequently traded.
What happens if an SMSF owns property?
Property valuations may become increasingly important for members affected by Division 296.
For example, an SMSF owning commercial property may experience a significant increase in value even if the property has not been sold. That increase may affect the fund’s year-end balance and therefore the member’s Division 296 position.
Trustees should ensure property valuations are supportable and reflect market conditions. The ATO’s guidance identifies factors such as comparable sales, recent arm’s-length transactions, independent property appraisals and improvements made to the property.ato
Is the tax paid from super?
Division 296 tax is generally due 84 days after the ATO issues a notice of assessment. An individual may pay the liability personally or elect to release money from one or more super funds to pay it.
The release election generally needs to be made within 60 days after the notice of assessment is issued.ato.gov
This means members should consider liquidity before investing heavily in assets that are difficult to sell, such as property.
What should SMSF members do?
Members with large super balances should:
- Monitor their total super balance across all funds.
- Review the fund’s investment strategy.
- Consider liquidity and future tax liabilities.
- Keep property valuations up to date.
- Review contribution and pension strategies.
- Understand how unrealised gains may affect the calculation.
- Obtain advice before restructuring or withdrawing assets.
Plan before the assessment arrives
Division 296 adds another layer to superannuation and retirement planning. The most effective response is not necessarily to sell investments or withdraw super. Instead, members should assess their overall position, cash-flow needs, investment objectives and tax exposure.
Agilis CA can help business owners and SMSF members understand how Division 296 may affect their retirement strategy and investment structure.
Have a super balance approaching or exceeding $3 million? Contact Agilis CA for tailored tax and superannuation advice
