After two years of argument, the tax on large superannuation balances known as Division 296 applies from 1 July 2026, in a design quite different from the one originally proposed. If your total super balance is anywhere near $3 million, or might be one day, here is the shape of it.
What it is
Division 296 adds an extra layer of tax on the earnings attributable to the part of your total super balance above $3 million. For balances between $3 million and $10 million the effective rate on those earnings is 30 per cent. Above $10 million it is 40 per cent.
What changed from the original plan
Two things drew most of the fire in the original design, and both are gone. Earnings are now based on realised taxable income rather than movements in balance, so paper gains on assets you have not sold are no longer taxed. And the $3 million threshold will be indexed to inflation in $150,000 increments, in line with the transfer balance cap, rather than being fixed forever.
When it actually bites
The tax applies to earnings from 2026-27 onward, with the first assessments based on total super balances at 30 June 2027. In later years the higher of your opening and closing balance for the year is used. In other words, nothing is payable tomorrow, but the clock is now running.
Who should be paying attention
Obviously anyone with more than $3 million in super, but also SMSF members holding large illiquid assets like property, where the difference between taxing realised and unrealised gains matters most, and anyone with a balance in the low millions and years of contributions ahead. Whether to hold wealth inside or outside super is now a sharper question, and it deserves modelling rather than guesswork. Keep in mind the final detail depends on the legislation as enacted, so confirm the current state of the rules before acting.