Upcoming changes for Australians with super balances above $3 million
Division 296 introduces additional tax measures for individuals with large superannuation balances. While these changes are expected to commence from 1 July 2026, now is an appropriate time to understand what the proposed legislation means and whether it may affect you.
What is Division 296?
Division 296 forms part of the Federal Government’s Building a Stronger and Fairer Super System reforms and introduces an additional tax on superannuation earnings for individuals with higher balances.
The proposed changes create two additional tax thresholds:
- Balances above $3 million — an additional 15% tax applies, resulting in an effective tax rate of 30%.
- Balances above $10 million — a further 10% tax applies, resulting in an effective tax rate of 40%.
Only the proportion of earnings attributable to balances above these thresholds will be subject to the additional tax. These thresholds will also be subject to indexation in increments of $150,000 and $500,000 respectively.
Who does Division 296 affect?
Division 296 applies to individuals whose Total Superannuation Balance (TSB) exceeds $3 million.
If your total superannuation balance is below $3 million, these changes are unlikely to affect you.
If your balance exceeds, or is likely to exceed, $3 million, it is important to understand how the new rules may impact your long-term wealth strategy.
Transitional arrangements are in place for the 2027 financial year. An individual’s TSB at 30 June 2027 will be assessed against the relevant thresholds.
This means:
- Individuals with high superannuation balances (exceeding or likely to exceed $3 million) across all phases (accumulation and retirement) may be impacted.
- Even if part of the balance is in a tax-free retirement phase, it still contributes to the TSB and may trigger the tax.
Self-Managed Super Funds (SMSFs)
SMSFs may have access to a once-off election to reset the cost base of eligible assets held on 30 June 2026 for Division 296 purposes.
This election must:
- Be made in the approved form,
- Be for all CGT assets held by the self-managed superannuation fund as at 30 June 2026, and
- Be made by the lodgement due date of the 2027 income tax return. Once a nomination is complete, it cannot be revoked and will apply to all assets and every member within the fund.
Importantly, this adjustment only affects the calculation of Division 296 liabilities and does not change the fund’s capital gains tax position for ordinary tax purposes.
Industry funds and wrap platforms
Members in industry funds and wrap platforms are not required to make any elections.
Instead, transitional concessions apply to realised capital gains between 2026 and 2030 as follows:
- 2027 financial year: 20% of actual capital gains will be taxed;
- 2028 financial year: 40% of actual capital gains will be taxed;
- 2029 financial year: 60% of actual capital gains will be taxed;
- 2030 financial year: 80% of actual capital gains will be taxed.
Superannuation fund providers will calculate the net capital gains and report the relevant amounts to the Australian Taxation Office (ATO).
The legislation takes effect on 1 July 2026, with the first assessment date being 30 June 2027. This allows time to meet with your consultants, discuss, review and plan any strategic opportunities before implementation.
How DPM can help
At DPM, we provide integrated advice across both wealth and taxation.
Your Wealth Consultant will:
- Assess how Division 296 impacts your personal circumstances,
- Review your superannuation structure and long-term objectives, and
- Help develop appropriate strategies.
Your Tax Consultant will:
- Assist with implementing agreed strategies,
- Manage any related compliance requirements, and
- Provide support with SMSF elections and reporting obligations.
If you would like to discuss your position or understand how these changes may affect you, please contact your DPM Wealth Consultant, Tax Consultant, or a member of our team.
