Division 296 has arrived in Australia: What this means for superannuation

From 01 July 2026, where an individual's total superannuation balance exceeds AUD 3 million, the individual may be liable to pay additional tax on earnings attributable to the excess. The tax is assessed to the individual rather than the superannuation fund itself, although the liability may be satisfied either personally or by releasing funds from the superannuation fund.

Where an individual’s super balance exceeds AUD 3 million but is less than AUD 10 million, they are considered a large balance holder (LBH), and an additional 15% tax applies to the relevant portion of earnings. Where the balance exceeds AUD 10 million, the individual is considered a very large balance holder (VLBH), and a further 10% tax will apply in addition to the 15% tax that applies to LBHs.

In considering whether an individual is treated as an LBH or VLBH, their superannuation balance is assessed at the start and end of the relevant financial year. Whichever balance is higher is used for the assessment, and the individual will be subject to additional tax if the threshold is exceeded. There is an important exception in the 2026–27 financial year (as the first year of the new provisions) with the balance of superannuation accounts only being considered as of 30 June 2027. This means that should an individual’s super balance exceed AUD 3 million on 01 July 2026 but decrease below AUD 3 million by 30 June 2027, they will not be subject to the additional tax payable.

Where a self-managed superannuation fund (SMSF) holds assets that have accrued unrealised gains prior to 01 July 2026, the trustee may elect to reset the cost base of those assets to their market value as at 30 June 2026 for Division 296 purposes. This will effectively “lock in” any growth in asset value that occurred before 01 July 2026, so it will not form part of the earnings subject to Division 296 going forward. Importantly, the reset is not applied on an asset-by-asset basis at the trustee’s discretion but applies to the entire fund, meaning all assets are reset together. This “all-in” approach requires trustees to consider the position of the fund as a whole, rather than selectively applying the reset to assets with large unrealised gains. 

These rules have introduced a new significant tax burden on individuals with large super fund balances. It has also made Australian super funds far more complex to manage.

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Tony Nunes has over 25 years’ experience in providing tax advice to clients, especially on issues affecting cross-border transactions, acquisitions and restructures, and on all aspects of structuring the ownership and financing of corporations and their operations. 

Thomas Palmer-Jones has experience across both business services and tax advisory, providing him with a well-rounded and practical perspective on client matters, having built a strong foundation in financial reporting, tax compliance and client engagement before transitioning into tax consulting. He works with a range of clients and has particular experience advising on international group structuring and small business capital gains tax concessions, delivering commercially focused and practical tax solutions.