Division 296 ($3 Million Super Tax) Is Now Law: What It Means for You
The Australian Government’s proposed changes to superannuation taxation for high-balance accounts have now officially passed into law. Known as Division 296, the reforms introduce an additional tax on earnings linked to super balances above $3 million.
While these changes will initially affect a smaller group of Australians, particularly SMSF members and high-net-worth individuals, they represent a significant shift in the long-term direction of Australia’s superannuation system.
In this article, we break down:
What the new law means
Who may be affected
Key implementation dates
How Division 296 differs from Division 293
Planning considerations moving forward
What Is Division 296?
Division 296 introduces an additional personal tax on superannuation earnings for individuals whose total super balance exceeds $3 million.
The legislation passed Parliament in March 2026 and takes effect from 1 July 2026, with the first assessments based on balances as at 30 June 2027.
Importantly, the new rules do not place a cap on how much an individual can hold in superannuation. Instead, they reduce the concessional tax treatment on earnings attributable to balances above the relevant thresholds.
Key Features of Division 296
How the Tax Works
Division 296 applies an additional layer of tax based on the proportion of a person’s super balance that exceeds the applicable thresholds.
The key takeaway is that only the portion of earnings linked to balances above the thresholds will attract the higher tax rates.
Division 293 vs Division 296
Many Australians confuse Division 293 and Division 296, however the two measures target very different areas of the superannuation system.
The Key Difference
Division 293 applies additional tax to concessional super contributions for high-income earners.
Division 296 applies additional tax to investment earnings generated by high super balances.
What Changed From the Original Proposal?
The final legislation is less aggressive than the original proposal announced by the Government.
These changes provide greater certainty and reduce some of the concerns previously raised around taxing paper gains and bracket creep.
What Does This Mean for Clients?
1. Limited Immediate Impact
Initially, the changes are expected to primarily affect:
SMSF members
Professionals and business owners
Retirees with significant super balances
2. Long-Term “Bracket Creep”
Even if you are not currently affected, the indexed thresholds may not keep pace with long-term investment growth, meaning more Australians could eventually fall within the new rules over time.
3. Super Remains Tax Effective — But Less So at Higher Balances
Superannuation will continue to provide valuable tax advantages, however the concessional benefits reduce as balances increase beyond the thresholds.
Planning Considerations
With the new laws taking effect from 1 July 2026 and the first assessments beginning from 30 June 2027 balances, early planning will be important for individuals approaching or exceeding the $3 million threshold.
Areas worth reviewing may include:
Overall superannuation balances
Investment structures
Contribution strategies
Estate planning considerations
Alternative investment vehicles outside super
Every client situation is different, and proactive advice will become increasingly important as these reforms begin to apply.
Final Thoughts
Division 296 marks one of the most significant superannuation taxation reforms in recent years. While the measures are targeted at higher-balance accounts, they signal a broader shift toward limiting tax concessions within the superannuation system.
If you are nearing, or already above, the $3 million super threshold, now is the time to start reviewing your position and considering your long-term strategy.
At Strategem Financial Services, our team can help you understand how these changes may affect your circumstances and assist with proactive planning moving forward.
We are here to help
If you need further advice, please do not hesitate to contact our office on (03) 5445 4777 and one of our Accountants & Advisors are available to support you.
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If you have any concerns or general questions, or would like to learn more about superannuation and tax planning, book a chat today.
