The upcoming Division 296 Tax proposal
Treasurer Jim Chalmers introduced the Division 296 (Superannuation Imposition Bill 2026) bill to parliament on 11 February 2026. If enacted, this bill affects individuals with high superannuation balances, and you might have questions on how this could affect you over the course of your life and career.
While the rules are not yet law, the current bill provides greater clarity around how the tax would operate. For medical professionals building significant retirement savings, understanding the potential impact of this legislation is important for long-term planning.
Here is a summary of the Division 296 proposal and what it may mean for you.
What is Division 296?
Division 296 proposes an additional tax on super earnings for individuals with high super balances from 1 July 2026.
Last year the Treasurer announced changes to the design of Division 296. The revised Bill was introduced to Parliament for debate in early February 2026.
Under the proposal:
- Balances between $3million and $10million would attract a total tax rate of 30% (i.e., an additional 15% tax on top of the standard 15% rate) on earnings and realised capital gains attributable to the portion between $3 million and $10million.
- In addition, balances above $10 million will attract a total tax rate of 40% (i.e., an additional 25% tax on top of the standard 15% rate) on earnings and realised capital gains attributable to the portion above $10 million.
Importantly:
The proposed commencement date is 1 July 2026.
The tax applies to realised earnings only (actual income and realised capital gains on sold assets).
Unrealised gains are not taxed.
The thresholds of $3 million and $10 million will be indexed to CPI.
The proposed commencement date is 1 July 2026.
How will the tax be calculated?
The additional tax is applied proportionally based on the higher of an individual’s total super balance (TSB) at the start or end of the financial year.
This approach is designed to prevent individuals from reducing their balance shortly before 30 June to avoid the tax.
In broad terms:
- Your total super balance (across all funds) is determined at both the beginning and end of the financial year.
- The higher of those two balances is used as the reference balance.
- The proportion of that reference balance above the relevant threshold(s) is calculated.
- That proportion of your super earnings and realised gains for the year is subject to the additional tax.
Where balances exceed $10 million, the earnings are effectively split into two layers:
- Earnings attributable to the portion between $3 million and $10 million — taxed at an additional 15%.
- Earnings attributable to the portion above $10 million — taxed at a total rate of 40%.
The tax will be assessed personally to the individual, although members may elect to release funds from their super fund to pay the liability.
Transitional rule for 2026–27
For the first year of operation (2026–27), a transitional rule has been proposed where the calculation may be based on the member’s TSB at 30 June 2027 only, rather than applying the higher of their opening or closing balance for the year.
If enacted in its current form, this transitional approach may provide an opportunity for individuals to reduce super balances above $3 million prior to 30 June 2027, should they wish to manage potential exposure under the new rules.
Who is likely to be affected?
While $3 million may appear to be a high threshold, it is increasingly achievable for:
- Doctors that consistently receive super guarantee contributions from their hospitals in excess of their concessional contribution caps each year,
- Specialists making regular personal contributions for over 20–30 years, or
- Practice owners with SMSFs holding business premises.
For many medical professionals, particularly those in their 40s and 50s, projected balances at retirement may exceed $3 million even without extraordinary investment returns if they have been making regular contributions to super over the last 10-20 years.
Strategic considerations
If enacted, Division 296 may influence:
- The long-term tax effectiveness of holding very large balances in super
- Super contribution strategies
- Investing under different structures outside super (i.e., personal, Trust, Company)
- Estate and intergenerational wealth planning
However, it is important to note that super remains a concessionally taxed environment, even with the proposed changes. For many doctors, super will continue to play a central role in retirement planning.
What should you do now?
At this stage, Division 296 is still proposed legislation and subject to Parliamentary process. While the current bill reflects the revised position, it has not yet been enacted.
This is an appropriate time to:
- Review your projected super balance over time
- Understand whether you are likely to exceed the $3 million threshold
- Consider your broader wealth strategy in consultation with a DPM Wealth Consultant
Our team will continue to monitor the progress of Division 296 closely and adjust our strategies (if necessary) once legislation has passed.
If you would like to discuss how these proposed changes may apply to your personal circumstances, please book in a free, no-obligation consultation with one of our expert Private Wealth team
This article contains general advice only and may not be suitable for your circumstances. Make sure you seek financial advice appropriate to your individual circumstances before making decisions.
