A new tax on large superannuation balances, known as Division 296, took effect on 1 July 2026. It adds an extra layer of tax to the earnings on the part of a person’s super that sits above $3 million, and for most Australians it will never apply.
That last point matters, because the change has been debated loudly for years and the headlines can make it sound universal. It is not. Below is a plain-English look at what Division 296 does, who it actually reaches, the big amendment that softened it, and where to confirm the detail before you act.
What Division 296 actually does
Division 296 is an additional tax on the investment earnings of very large super balances. It sits on top of the normal 15 per cent tax that already applies to earnings inside super during the accumulation phase.
The mechanics, in short: if your total superannuation balance is above $3 million at the end of the financial year, the earnings attributable to the slice above that threshold attract an extra 15 percentage points of tax, taking the effective rate on that portion to around 30 per cent. The enabling legislation, the Treasury Laws Amendment (Building a Stronger and Fairer Super System) Act 2026, received royal assent on 13 March 2026 and applies to earnings from 1 July 2026, the financial year that has just begun.
There is a second tier. Balances above $10 million face an extra 25 percentage points on the earnings attributable to that higher slice, an effective rate closer to 40 per cent. Both the $3 million and $10 million thresholds are indexed to inflation, reportedly in $150,000 and $500,000 steps respectively, so they are meant to drift upward over time rather than stay frozen.
Who it actually hits
The threshold applies to each individual, not to a couple or a household. So a couple could hold up to $6 million between two separate super balances and, on paper, sit under the line. Treasury has estimated the tax touches a small share of account holders, concentrated among people with self managed super funds and large balances built up over decades.
For the overwhelming majority of working Australians, whose balances are a long way short of $3 million, Division 296 is a policy headline rather than a personal bill. If you are still building your balance and want a sense of where you stand against the averages, our guide to how much super you should have gives the age-based benchmarks.
If your super is nowhere near $3 million, Division 296 is a headline to note, not a tax to pay. If it is close, this is the year to get advice.
The big change: unrealised gains are out
The most contested feature of the original proposal was that it would have taxed unrealised gains, the paper increase in the value of assets a fund still holds and has not sold. Critics warned that would force some funds, especially self managed funds holding property or a single large asset, to find cash for a tax bill on gains they had not actually banked.
The version that became law dropped that. Under the final rules, Division 296 applies to realised earnings only: interest, dividends, rent and actual capital gains that have been crystallised. Unrealised, on-paper gains are excluded. That is a meaningful softening for anyone with lumpy, illiquid assets inside super, and it is the single biggest difference between the scheme as first floated and the scheme that started on 1 July.
What it is worth, and what to do
The dollar impact depends entirely on your balance and how much your fund actually earns in a year, so there is no single figure that fits everyone. The tax is calculated on the earnings attributable to the balance above the threshold, not on the whole balance, which is a distinction that trips people up.
If you think you are near or over the line, a few sensible steps:
- Confirm your total super balance. This adds up all your super accounts together, not just one fund.
- Understand the calculation. The extra tax hits the earnings on the portion above $3 million, not every dollar in the fund.
- Get advice before you restructure. Moving money out of super has its own tax, timing and estate consequences, and the right answer is personal.
Self managed funds are where most of the planning happens, because trustees control the asset mix directly. Our explainer on how an SMSF works covers the basics if that is the structure you are in or considering. It can also be worth stepping back and looking at where your wealth sits overall, inside super and out, so you can weigh up the best home for your savings rather than defaulting to one bucket.
Where to confirm the figures
Division 296 is new, and the fine detail of how funds report and how the Australian Taxation Office assesses the tax will bed down over the coming year. The thresholds are indexed, the calculation is technical, and your own numbers depend on facts only your fund and your adviser hold. Treat the figures here, last checked July 2026, as general illustration rather than a precise quote. For the authoritative rules, the current thresholds and the reporting timeline, go to the Australian Taxation Office.
This article is general information only and is not personal financial, tax or legal advice. Everyone’s super, balance and circumstances differ, so consider getting advice tailored to you before acting.
The bottom line
Division 296 started on 1 July 2026 and adds an extra layer of tax to super earnings on balances above $3 million, with a steeper tier above $10 million. The version that became law is narrower than the one first proposed, because it taxes realised earnings only and leaves unrealised, on-paper gains alone. For most people it changes nothing. For the smaller group near or above the threshold, this is the year to check the numbers and get proper advice rather than react to the headline.