Division 296 and the changing superannuation landscape
From 1 July 2026, Division 296 introduces an additional tax measure that changes how higher superannuation balances are treated.
The new rule applies to individuals with total super balances exceeding $3 million. Earnings attributed to the portion above this threshold will be subject to an additional 15 percent tax, effectively increasing the overall tax rate applied to those balances.
While the measure is expected to affect a relatively small proportion of Australians, it represents a broader shift in how the superannuation system is evolving, particularly for those with higher balances.
How the measure works
Division 296 focuses on the concept of earnings within super, rather than contributions or withdrawals.
Under the proposed framework, an individual’s total super balance is assessed at the beginning and end of each financial year. The movement between these values, after adjusting for contributions and withdrawals, is used to determine the earnings figure for that period.
Where an individual’s balance exceeds $3 million, a proportion of those earnings is attributed to the amount above the threshold. It is this portion that becomes subject to the additional 15 percent tax.
This introduces a different method of calculating tax within the super system, one that looks at overall balance growth rather than relying solely on realised income.
The inclusion of unrealised gains
A notable feature of Division 296 is that it includes unrealised gains in the calculation of earnings.
This means that increases in the value of underlying assets, such as property, shares or other investments held within super, may be taken into account even if those assets have not been sold.
This approach differs from traditional tax treatment, where tax is generally applied when a gain is realised. As a result, it introduces an additional layer of complexity in how super outcomes are measured and understood.
It also highlights the evolving nature of how investment growth is assessed within the superannuation environment.
Individual liability and administration
Another key distinction is that the liability for the additional tax sits with the individual, rather than the super fund itself.
This means that, where applicable, the individual will receive an assessment and may have options around how the liability is settled, including paying it personally or arranging for funds to be released from super.
This approach is different from many existing superannuation taxes, which are typically applied at the fund level and reflected in account balances automatically.
A structural shift in the system
Although the immediate impact is limited to those with balances above the threshold, Division 296 represents a structural change in how higher super balances are treated.
It signals a continued shift toward differentiating outcomes within the super system based on balance size. Over time, this may influence how superannuation is viewed as part of a broader wealth strategy, particularly for individuals approaching or exceeding higher balance levels.
It also reflects a wider policy direction where the concessional nature of super is more closely targeted.
Looking ahead
As the start date approaches, the focus for many will be on understanding how the new rules operate and how they interact with existing superannuation arrangements.
This includes gaining clarity on how balances are measured, how earnings are calculated, and how the additional tax is applied over time.
As with many aspects of superannuation, the practical impact will depend on a range of factors, including investment performance, contribution patterns and overall balance levels.
Learn more
If you would like to understand more about Division 296 and how it may relate to your broader financial position, our team is available to help explain the changes and answer general questions. Contact the Carey Group team to arrange a conversation.
Important information
The information on this page is general in nature and has been prepared without taking into account your personal objectives, financial situation or needs. It is not intended to be personal financial advice. Before making any decisions in relation to your superannuation or financial arrangements, you should consider whether this information is appropriate to your circumstances and seek professional advice.
