What Is Division 296 Tax? Australia's New $3 Million Super Balance Tax Explained (FY2026–27)
Division 296 tax is a new tax that now applies in Australia from the 2026–27 financial year. It adds an extra 15% tax on the portion of your superannuation earnings linked to a total super balance above $3 million, with a further 10% on top of that for the portion above $10 million. The measure — officially called the Better Targeted Superannuation Concessions — is now law, and the Australian Taxation Office (ATO) will issue the first bills later in the 2027–28 financial year, covering earnings from 2026–27.
If your super balance — combined across every fund you hold, SMSF or otherwise — is anywhere near $3 million, this isn't something you want to find out about from a bill in the mail. Below is what Division 296 tax actually covers, how the ATO calculates it, when you'll really have to pay, and what's worth reviewing now rather than later.
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What Is Division 296 Tax?
Division 296 tax is an additional tax on part of your superannuation earnings — it isn't a tax on your super balance itself, and it isn't a new contributions cap. It targets the earnings that relate to the slice of your total super balance (TSB) sitting above $3 million. The policy commenced on 1 July 2026, which makes 2026–27 the first income year it applies to.
Baron Tax & Accounting is a registered tax agent based in Rochedale South, Brisbane, helping individuals, sole traders and rideshare drivers across Australia, and changes like this are exactly the kind of year-on-year update we build into every client's annual tax planning.
Who Does Division 296 Tax Apply To?
Division 296 tax applies to any individual whose total super balance sits above the $3 million threshold at the relevant test date — regardless of whether your super is in a self-managed super fund (SMSF), an industry fund, or a retail APRA-regulated fund. Your total super balance is the sum of your interests across every fund you hold (amounts tied up in a limited recourse borrowing arrangement are excluded from this particular calculation).
For the first year the measure applies, 2026–27, the ATO looks at your total super balance at 30 June 2027. From 2027–28 onward, it uses whichever figure is higher: your balance just before the income year starts, or your balance at the end of it.
The 2026–27 Thresholds: $3 Million and $10 Million
Two thresholds matter for 2026–27, and both move over time with inflation:
• Large super balance threshold (LSBT) — $3,000,000 for 2026–27. Earnings linked to your balance above this amount attract an extra 15% tax. This threshold is indexed to CPI in $150,000 steps.
• Very large super balance threshold (VLSBT) — $10,000,000 for 2026–27. Earnings linked to your balance above this amount attract a further 10% on top of the 15% — 25% in total on that top slice. This threshold is indexed to CPI in $500,000 steps.
In practice, most people affected by Division 296 tax in its first year will sit in the $3 million–$10 million band, where only the 15% rate applies. You can see the current thresholds and exemptions set out directly on the ATO's Division 296 tax on large super balances page.
How Is Division 296 Tax Actually Calculated?
The calculation isn't a flat percentage of your whole balance — it's worked out in three steps, based on the proportion of your balance sitting above $3 million:
• Step 1: Work out your total super balance (TSB) at the relevant test date.
• Step 2: Work out what proportion of that balance sits above $3 million — (TSB − $3,000,000) ÷ TSB.
• Step 3: Apply that proportion to your total super earnings for the year (the earnings your fund reports to the ATO) to get your taxable super earnings, then apply the 15% rate — plus the extra 10% on any portion above $10 million.
Example: Say your total super balance at 30 June 2027 is $4,000,000, and your fund reports $100,000 in super earnings for the year. The proportion of your balance above $3 million is ($4,000,000 − $3,000,000) ÷ $4,000,000 = 25%. Your taxable super earnings are 25% of $100,000, which is $25,000. Division 296 tax on that is 15% of $25,000 — $3,750.
Most super funds use a standard attribution method to report your relevant super earnings to the ATO, so this isn't a calculation you need to run from scratch yourself — but it's worth understanding the mechanics before a bill arrives. The ATO sets out the full method, including how it applies to defined benefit interests, on its how Division 296 tax is calculated page.
When Do You Actually Pay It?
You won't get a Division 296 tax bill in the same year the earnings are taxed. For the 2026–27 income year, the ATO expects to start issuing assessments in the second half of the 2027–28 income year — well over a year after the relevant earnings were counted.
Once a notice of assessment arrives, payment is generally due 84 days after the notice issue date. If you'd rather not fund it from outside super, you can elect — within 60 days of the notice — to have the amount released from one of your super funds to pay it.
If you're ever unsure what a notice means for your specific numbers, that's exactly the kind of letter worth bringing to a registered tax agent before you act on it.
Division 296 Tax vs Division 293 Tax: What's the Difference?
Division 296 tax is brand new for 2026–27. It's easy to confuse with Division 293 tax, which has existed for years and works in a completely different way:
• Division 293 tax — an extra 15% tax on some or all of your concessional (before-tax) super contributions for a year, if your income plus those contributions exceeds $250,000. It's about contributions going in.
• Division 296 tax — an extra 15% (or 25%) tax on a portion of your super earnings for a year, if your total super balance exceeds $3 million. It's about the balance already sitting in super.
It's entirely possible for the same person to be affected by both in the same year — they're assessed separately and don't offset each other.
Who Is Exempt From Division 296 Tax?
A small number of situations are carved out:
• Children receiving a super income stream following the death of a parent.
• People who received a structured settlement contribution for a personal injury.
• People who die during the income year the tax would otherwise apply to.
• Certain judges and holders of specific government or judicial office, under separate arrangements.
• Interests in foreign superannuation funds or non-complying super plans, which are treated differently.
These exemptions are narrow and fact-specific — if you think one might apply to you, it's worth confirming with a registered tax agent rather than assuming.
What Should You Do If You're Close to $3 Million?
If your combined super balance is sitting anywhere near $3 million — or you expect it to get there in the next few years through investment growth or contributions — a few things are worth reviewing well before any assessment arrives:
• How your balance is split between spouses, where that's relevant, since Division 296 tax is assessed on your individual total super balance, not a household figure.
• The timing of large contributions or asset sales inside super, given the balance is tested at a point in time each year.
• Whether your fund's reporting and your own records of your total super balance across all funds are lining up, so there are no surprises when the ATO's figures land.
• How this interacts with your broader retirement and estate planning, not just this year's tax bill.
This is a genuinely new area even for experienced self-managed super fund trustees, and the mechanics above are easy to get wrong without a proper review of your actual numbers. Baron Tax & Accounting is a registered tax agent based in Rochedale South, Brisbane, helping individuals, sole traders and rideshare drivers across Australia — and for clients with substantial super balances, we can run through exactly what Division 296 tax means for your own position, rather than a generic example.
Frequently Asked Questions
Does Division 296 tax apply only to self-managed super funds?
No. Division 296 tax applies to your total super balance across every fund you hold, including SMSFs, industry funds and retail APRA-regulated funds. There's no exemption simply because your super sits in a large, professionally managed fund rather than an SMSF.
Is Division 296 tax based on unrealised capital gains?
Division 296 tax is calculated on the “super earnings” your fund reports to the ATO for the year, using a set formula based on the change in your total super balance, rather than you working out unrealised gains yourself asset by asset. The exact rules for how funds calculate and report this are still being finalised by the ATO, so it's worth getting a current, personalised explanation rather than relying on general commentary from before the law passed.
When will I get my first Division 296 tax bill?
For the 2026–27 income year, the ATO expects to start issuing the first Division 296 tax assessments in the second half of the 2027–28 income year — so there's a lag of well over a year between the earnings being taxed and the bill arriving.
Can I pay Division 296 tax from my super account?
Yes. Within 60 days of receiving a notice of assessment, you can elect to have the amount released from one of your super funds to cover it, instead of paying it from money outside super.
Will Division 296 tax reduce my super balance directly?
No — it's a tax liability you pay personally, or elect to have released from super. It isn't an automatic deduction the ATO takes from your account. How you choose to fund it, and whether paying from inside or outside super makes more sense for your situation, is worth working through with a registered tax agent before your first assessment arrives.
If you want to go deeper on related areas, these guides might help: Superannuation Contribution Tax Deduction Guide 2026, How Capital Gains Tax Works on Shares and ETFs in Australia, and ATO Payment Plan: Your Guide to Managing Tax Debt.
Get a Personal Review of Your Super Balance
General examples are useful for understanding the mechanics, but Division 296 tax depends entirely on your own total super balance, your fund's reporting, and how your assets are structured. Baron Tax & Accounting can review your position ahead of the first assessments and help you plan around it, rather than finding out the numbers after the fact. You can see our current fees at baronaccounting.com/fees or learn more about our registered tax agents on our About Us page.
Contact Baron Tax & Accounting
If you have questions about how Division 296 tax or any other 2026–27 change affects your situation, reach out — we're happy to help.
• Address: 758 Underwood Road, Rochedale South QLD 4123
• Phone: +61 7 3706 3147 or 1300 087 213
• Email: info@baronaccounting.com
• Hours: Monday–Friday 09:30–17:00
This article provides general information only and does not constitute personal tax or financial advice. It does not take into account your objectives, financial situation or needs. Tax rules change and apply differently to each person's circumstances. Before acting, please seek advice from a registered tax agent. Baron Tax & Accounting accepts no liability for any loss arising from reliance on this article. Source references: ATO (ato.gov.au) and other Australian government agencies, current as at the date of publication.
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