The Better Targeted Superannuation Concessions measure, commonly referred to as Division 296, is now law and will apply from 1 July 2026 (with the first year of operation being FY2026–27). 

For individuals with significant superannuation balances, it is essential to understand how the new tax operates, why it has been introduced, and the practical planning considerations that follow.

Purpose of the Tax
Division 296 aims to improve the fairness and sustainability of superannuation tax concessions. Rather than altering the system broadly, it specifically targets individuals with large super balances by increasing the tax on earnings attributable to those higher balances.

Who It Applies To — Thresholds and Rates
From 1 July 2026, Division 296 will apply to individuals whose total superannuation balance (TSB) exceeds the following thresholds:

• $3 million (large balance threshold) 
• $10 million (very large balance threshold) 

These thresholds are expected to be indexed over time.

The effective tax on superannuation earnings will be:

• Up to $3 million: No additional tax (standard 15% fund tax applies) 
• $3 million to $10 million: Additional 15% tax (total effective rate of 30%) 
• Above $10 million: Additional 25% tax (total effective rate of 40%) 

Certain individuals are excluded from Division 296, even where their balances exceed the thresholds. These include child recipients of death benefit pensions and individuals who have made structured settlement contributions arising from personal injury compensation.

In the event of death, an individual’s TSB ceases. However, from 2027–28 onwards, a Division 296 assessment may still arise for the year of death if the individual’s TSB exceeded $3 million at the start of that year. As superannuation does not form part of the estate, this outcome should be carefully considered in estate planning.

How the Tax Works
For SMSFs, Division 296 earnings are calculated based on taxable income, with adjustments for:

• Assessable contributions 
• Exempt income from pension liabilities 
• Non-arm’s length income (already taxed at 45%) 
• Income from pooled superannuation trusts 
• Certain capital gains (where a small-fund CGT election applies) 

These earnings are then allocated to members using an actuarial attribution percentage. The ATO uses this information to determine each individual’s Division 296 tax liability.

Importantly, Division 296 is a tax on the individual—not the fund. However, individuals can choose to pay the liability personally or elect to have it paid from their superannuation.

Next Steps
If your super balance is approaching—or exceeds—the relevant thresholds, now is the time to seek advice. Tailored modelling, consideration of the small-fund CGT election, and forward planning will be critical in managing cash flow, reporting obligations, and actuarial requirements.

This is also an opportunity to reassess whether superannuation remains the most effective structure for holding investment capital above the $3 million threshold, compared with alternative investment structures.

If you have any concern or question relating to Div 296 Tax, Super or estate planning, feel free to discuss with the team at Bates Cosgrave.