Division 296 introduces an additional tax on earnings attributable to super balances above $3 million, with a higher tier at $10 million.
11 March, 2026
DIV296 explained: If you’re under the threshold
First Financial Team
The team at First Financial is committed to helping you understand important legislative changes not just when they happen, but how they may affect your financial journey, especially your superannuation.
One of the most talked-about reforms in super tax is Division 296, often called the new super tax, and while much of the focus has been on high-balance accounts, it’s equally important for clients with balances under the threshold to know how it works, what won’t apply to them, and how to plan.
What is Division 296 tax?
Division 296 is a tax measure introduced into Australian superannuation law. Its purpose is to apply an additional tax on earnings for individuals with large super balances, specifically those exceeding a threshold amount. The legislation will commence on 1 July 2026, with the first assessments to apply on 30 June 2027.
Under the latest proposals:
There are two thresholds:
• $3 million: Earnings on the balance above this amount are subject to extra tax.
• $10 million: A higher tier attracting a higher rate.
The tax applies to realised earnings and income, not to unrealised gains, simplifying the assessment of actual performance.
“Division 296 is designed to impact high super balances, but understanding how it works is essential for everyone planning ahead.”
My super is under the $3M threshold. What does this mean for me?
You will not pay Division 296 tax if your total superannuation balance (TSB) is below the $3 million threshold at the assessment date. That’s because Division 296 tax only applies to earnings attributable to the portion of your super balance above the threshold, and if there isn’t any portion above that level, the tax doesn’t apply.
It’s an additional layer of certainty for many retirees, professionals and investors with modest or moderate super balances.
Key questions clients are asking about DIV296
Q: “So if I have $2 million in super, do I need to worry about this new tax?”
A: No, currently, if your total super balance is below $3 million, Division 296 tax won’t apply to your earnings. However, it’s still important to monitor your balance and earnings to ensure you stay under the threshold if that aligns with your goals.
Q: “Does this change the tax I already pay on my super earnings?”
A: No. The existing tax on super earnings, usually 15% in the accumulation phase, continues as normal for most people. Division 296 is an additional layer targeted at higher balances. If your balance is under $3 million, your current tax treatment remains unchanged.
Q: “What if I’m close to $3 million?”
A: If you’re within striking distance of $3 million, this is where planning matters. We will look at your projected growth, contributions, potential earnings and strategic withdrawals to help keep you under the threshold if that’s part of your objectives.
Q: “Does this affect my retirement income or pension phase?”
A: If your balance is below $3 million, Division 296 has no direct effect on your pension income tax. Pension phase earnings are generally tax-free, and Division 296 won’t create a new tax simply because you are drawing down. Our focus will be on maximising efficient transitions to retirement while keeping your long-term outcomes on track.
“Even if you’re under the $3 million threshold today, proactive planning can help ensure you stay in control tomorrow.”
Why planning matters, even if you’re below the threshold
Even though Division 296 doesn’t apply to you now, there are strong reasons to talk about it sooner rather than later:
- Your super may grow over time. Compound returns, additional contributions, inheritance or transfers may push your balance toward the threshold. We will model your likely future balance, so you’re not caught off guard.
- Earnings patterns matter. The tax applies to earnings components that exceed the threshold. Understanding how growth vs income affects future liability can inform your investment strategy.
- Legislative details are still evolving. While tax won’t apply to those under $3M, draft legislation continues to be refined. Keeping up to date ensures you don’t miss changes that could affect planning timelines or reporting obligations.
Here are proactive areas we recommend discussing:
- Know your total super balance (TSB): TSB includes all super accounts, so it’s crucial we include every fund you hold in calculations.
- Balance projection and risk planning: We model how your balance is expected to grow with your chosen investment strategy.
- Contribution timing: You may strategically time or cap concessional and non-concessional contributions to manage your projected balance over future fiscal years.
- Estate planning implications: While Division 296 won’t apply to balances under $3M, how your super is structured at death may have tax consequences; we will help align this with your broader legacy goals.
Division 296 is a significant super tax reform, and while it’s designed to affect high-balance accounts, its implementation underscores the importance of forward-looking financial planning. Our financial advisors at First Financial are here to provide expert guidance and help you make sense of legislative changes that may affect your retirement planning. If you are in any doubt, contact one of our team today.
The team at First Financial comprises financial experts who help hundreds of Australians retire well and make informed, intelligent financial decisions. We cover everything from retirement and financial advice, investment and wealth management, superannuation and SMSF, insurance, tax, aged care, legal and lending services. Contact us for holistic, well-rounded financial management strategies.
Key Takeaways
If your Total Super Balance is under $3 million at the assessment date, the new tax does not apply and your current super tax treatment remains unchanged.
Monitoring your balance over time is important, as investment growth, contributions or inheritances may move you closer to the threshold.
Forward-looking financial planning, including balance projections and contribution strategies, can help you stay aligned with your long-term retirement goals.
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FAQs
What is Division 296 tax?
Division 296 is a proposed additional tax on superannuation earnings for individuals with very large balances. It is scheduled to commence from 1 July 2026, with first assessments likely at 30 June 2027. The tax only applies to earnings attributable to balances above the specified thresholds.
Does Division 296 affect me if my super balance is under $3 million?
No, if your Total Super Balance (TSB) is below $3 million at the assessment date, Division 296 does not apply to you. The additional tax only applies to the portion of your balance above the threshold. If there is no excess, there is no extra tax.
Will this change the tax I already pay on my super earnings?
No, the existing tax settings remain the same for balances under $3 million. Earnings in the accumulation phase are generally taxed at 15%, and this does not change under Division 296. The new measure is an additional layer aimed at higher balances only.
What are the two Division 296 thresholds?
Under the latest proposal, there is a $3 million threshold where additional tax applies to earnings above that amount. A higher tier applies at $10 million, attracting a higher rate. These thresholds determine whether any extra tax is payable.
What if my super balance is close to $3 million?
If you are approaching the threshold, forward planning becomes important. Projected growth, future contributions and investment returns could move your balance higher over time. Monitoring your position helps you make informed decisions aligned with your goals.
Does Division 296 affect pension phase or retirement income?
If your balance is under $3 million, there is no direct impact on your pension income. Pension phase earnings generally remain tax-free under current rules. Division 296 does not introduce a new tax simply because you are drawing down your super.
How does First Financial help clients manage Division 296 risk?
First Financial models your projected super balance based on contributions, earnings and long-term growth assumptions. This helps identify whether you may approach the threshold in future years. With this insight, strategies can be adjusted early rather than reactively.
What strategies can First Financial discuss if I want to stay under the threshold?
Our advisers can review contribution timing, concessional and non-concessional caps, investment structures and withdrawal strategies. We also ensure all super accounts are included when calculating your Total Super Balance. This holistic approach helps keep your retirement plan aligned with both legislation and your broader financial objectives.