The Division 296 Tax Changes
What you need to know, before the changes take place.
Information for high income superannuation and SMSF individuals.
From 1 July 2025, a major shift in Australia’s superannuation landscape will take effect. The proposed Division 296 tax introduces an additional 15% tax on earnings associated with superannuation balances above $3 million, bringing the total tax rate on those earnings to 30%.
The implications for Superannuation, Self Managed Super Funds (SMSFs), retirement planning, and ongoing wealth management strategies are significant. Particularly for high-net-worth individuals and professionals who are using superannuation as a key aspect of their tax planning.
What Is Division 296?
Division 296 is a new federal measure designed to reduce the generous tax concessions for large super balances. From the end of the 24/25 financial year, individuals whose Total Superannuation Balance (TSB) exceeds $3 million at 30 June 2026 will pay an extra 15% tax on the earnings of the portion of their superannuation balance above that threshold.
Crucially, this tax applies whether those earnings are realised or unrealised which has sparked considerable discussion around valuation timing, asset volatility, and liquidity. The rationale behind Division 296 is to enhance the sustainability and fairness of the superannuation system. With some individuals holding over $10 million in concessionally taxed superannuation, the government aims to rebalance tax concessions toward everyday Australians while also boosting long-term revenue. Division 296 is expected to raise approximately $2.3 billion annually and affects approximately 80,000 individuals, which is roughly 0.5% of superannuation account holders.
How Will the Tax Be Calculated?
Under Division 296, the Australian Tax Office will calculate each individual's earnings based on the movement in their TSB across the financial year, adjusted for withdrawals and contributions. Then, they will determine the portion of earnings above the $3 million cap. This portion is taxed at 15%, in addition to the existing 15% concessional rate, making a combined 30% tax.
For example;
If your TSB increases by $200,000 over the year and 50% of your balance is above the $3 million threshold, $100,000 of that increase is considered taxable under Division 296.
Impact on SMSF Strategies and Tax Planning
The changes under Division 296 compel SMSF trustees and high-income individuals to re-evaluate their tax planning frameworks. It may no longer be optimal to keep large asset bases within superannuation.
This shift has broad implications:
Asset reallocation within a SMSF may be required to optimise realised vs unrealised gains, particularly in light of the new tax treatment.
Individuals may find it worthwhile to explore alternative vehicles for wealth accumulation, such as discretionary trusts or investment companies, to manage long-term taxation.
Trustees will need to regularly monitor TSB thresholds to manage exposure to the Division 296 tax and ensure ongoing compliance.
Strategic withdrawals or rebalancing of super holdings might be considered to maintain a TSB under the $3 million cap.
These changes should ideally be made in conjunction with expert SMSF advice, and an experienced wealth management planner, ideally well in advance of the implementation date.
Division 296 and Non-SMSF Superannuation
While much of the Division 296 discussion has focused on SMSF trustees, members of industry, corporate, and retail super funds are not exempt. The tax applies across all superannuation accounts held by an individual, whether managed by you or a fund.
Key Points for Non-SMSF Individuals:
The $3 million threshold is based on your total superannuation balance, not per account. Multiple accounts across different providers will be aggregated by the ATO.
If you are subject to Division 296, then you will receive a tax assessment directly from the ATO.
You can choose to pay the Division 296 tax from your super fund via a release authority, or personally from other assets.
If your super fund does not offer visibility into detailed valuations (as SMSFs do), managing your exposure to unrealised gains can be more difficult. Division 296 takes into account unrealised gains when your tax assessment is being calculated, so it is important for you to know how exposed you are to avoid a surprising tax bill. This makes ongoing reviews crucial and increases the value of seeking professional financial advice in order to maintain your knowledge and mitigate tax losses. Seeking superannuation advice and assessing your long-term contribution strategy could significantly reduce your exposure to the new tax.
Strategic Actions to Consider
Now is the time to begin planning. A few proactive steps can help mitigate your exposure to Division 296:
Evaluate Your Super Balance and Contributions - Stay aware of your TSB, particularly if you’re approaching the $3 million threshold. It may make sense to cap future contributions or withdraw funds pre-emptively.
Reconsider your Asset Locations - It may no longer be worthwhile to hold certain investments within your super fund. Speak with a financial planner about tax-effective alternatives you can explore outside of your super.
Integrate Super Changes Into Broader Wealth Management Plans - Division 296 should be a trigger to reassess your overall financial architecture, particularly how your super fits within your financial holdings. Make sure you consider your business, trust, and personal investment structures.
Schedule a Comprehensive SMSF Review - Use this time to stress-test your strategy with professional SMSF advice. Regular portfolio and structural reviews will help preserve flexibility and limit tax leakage.
Retirement and Estate Planning Considerations
Beyond tax efficiency, Division 296 may fundamentally alter how Australians plan for retirement. For many high-net-worth individuals, superannuation has long been the most tax-effective vehicle for intergenerational wealth transfer.
However, with these changes:
Some may reconsider making additional concessional or non-concessional contributions, particularly late in life, when the benefit of deferring tax is diminished.
Others may begin withdrawing surplus funds from super and placing them into family trusts, personal investments, or insurance bonds that offer more favourable estate planning options.
Beneficiaries of large superannuation estates could see reduced inheritances, if super balances are eroded by additional taxation.
This makes intergenerational wealth management and estate tax planning more complex, but also more important. It's essential to review wills, binding death benefit nominations, and potential reversionary pensions to ensure they align with both current and future tax requirements. It is important to understand the effect of Division 296 for your current superannuation balance, but it is also essential that it be taken into consideration when you undertake retirement planning and calculating your required retirement funds. For those already in retirement, consulting with your financial adviser about preserving your funds and revisiting your retirement plant is recommended.
Where to Get Trusted Advice
For anyone currently managing, or considering a self-managed super fund, the ATO recommends seeking expert advice before making changes.
Sources for SMSF information include:
The ATO’s professional SMSF advice page
These are excellent starting points for information, but given the scale of Division 296’s impact, personalised advice is strongly recommended. To find a financial planner who is experienced with SMSF Advice, Superannuation Advice, or Tax Planning we recommend:
Contacting the experienced and professional Tupicoffs’ team
The Financial Advice Association of Australia (FAAA) Find a Planner Tool
ASIC and MoneySmart’s Financial Advisers Register
Secure Your Superannuation with Expert Guidance
Division 296 is more than a new tax. It's a structural change that reshapes how Australians can use superannuation to build and protect wealth. For those with high balances, the right combination of superannuation advice, tax planning, and wealth management is critical to navigate the changes ahead.
Speak with a qualified adviser today to future-proof your strategy, reduce avoidable tax burdens, and ensure your retirement and estate plans remain aligned with your long-term goals.
Tupicoffs Division 296 Readiness Checklist
Super Balance & Structure
- ☐ I know my Total Superannuation Balance (TSB) across all super accounts
- ☐ I understand how the $3 million threshold is applied
- ☐ I’ve reviewed how my super is structured (SMSF vs. industry fund) and whether it’s still optimal
Tax Planning & Earnings Exposure
- ☐ I understand how Division 296 tax is calculated, including on unrealised gains
- ☐ I’ve identified the portion of my balance potentially exposed to the additional 15% tax
- ☐ I’ve explored alternative structures (e.g., trusts, investment bonds) for tax-efficient investing outside super
Strategy & Compliance
- ☐ I’ve reviewed my asset allocation and investment mix within super
- ☐ I’ve considered drawing down or restructuring assets to remain under the threshold
- ☐ I’ve sought expert SMSF or superannuation advice specific to my situation
Retirement & Estate Planning
- ☐ I’ve reviewed how the new tax could impact my retirement income strategy
- ☐ I’ve updated or reviewed my estate plan and death benefit nominations
- ☐ I’ve planned for how beneficiaries will be affected by the tax on remaining super
