Understanding Div 296 Superannuation Tax Changes

The Federal Government’s Division 296 tax changes are now law and represent one of the most significant superannuation reforms in recent years. The changes apply from 1 July 2026, with the first assessment based on 30 June 2027 balances.  

The Tax Tiers  

Under the new rules, individuals with total superannuation balances (TSB) above $3 million will pay an additional 15% tax on the proportion of superannuation earnings attributable to the balance above that threshold. For members with balances exceeding $10 million, a further 10% applies to earnings attributable to the balance above that level, resulting in an effective additional tax rate of 40% on those earnings.  

The tax is applied at an individual level, not at the fund level, meaning members across SMSFs will need to monitor their combined super balances carefully.

In summary:  

TSB under $3m: effective tax 15% on income  

TSB $3m–$10m: effective additional tax rate of 15%, 30% on income in this bracket  

TSB above $10m: effective additional tax rate of 10% on that portion, 40% on income in this bracket   

How Earnings Are Calculated  

The revised legislation calculates the tax on realised earnings only — including interest, dividends, rent and realised capital gains — aligned to existing income tax concepts. Unrealised gains are no longer included in the calculation. This is a significant change from earlier proposals and removes a key concern previously raised for SMSFs holding illiquid assets such as commercial property, farms and private investments. 

Indexation of Thresholds  

Both thresholds are indexed to CPI — the $3 million threshold in $150,000 increments and the $10 million threshold in $500,000 increments.

What SMSF Trustees Should Review  

For SMSF trustees, the changes highlight the importance of regularly reviewing:  

• Member balances across all funds  

• Pension strategies  

• Estate planning arrangements  

• Liquidity within the SMSF  

• Long-term contribution strategies  

The reforms result in a higher tax rate on earnings in a superannuation members account but continue to be an effective wealth accumulation and retirement planning vehicle. They do reinforce the need for proactive planning and regular review.  

Next Steps  

If your total superannuation balance is approaching or exceeds the new thresholds, we recommend speaking with your adviser before 30 June 2026 to review your current strategy and ensure your superannuation structure remains aligned with your long-term retirement objectives.