Division 296 Start Date: 1 July 2026 — What Happens Now the Law Has Passed

General information only. This is not tax or financial advice. Consult a registered tax agent for advice specific to your situation.

Division 296, the additional tax on super earnings for high-balance members, passed the Senate on 10 March 2026 and takes effect 1 July 2026. This replaces the earlier timeline uncertainty with a firm implementation date and final design. This article summarises the law as passed, what changed from the drafts, and the planning signals for members at or approaching the thresholds.

What passed

The Treasury Laws Amendment (Building a Stronger and Fairer Super System) Act 2026 implements Division 296 in two tiers, both attached to a member’s Total Super Balance (TSB):

The tax applies only to the realised earnings attributable to the portion of TSB above each threshold. Dividends, interest, rent, and realised capital gains net of realised losses are in scope. Unrealised capital gains are excluded — a material change from the 2023–2025 exposure draft, which taxed notional earnings computed from opening-vs-closing balance differences. The ATO’s published guidance on how Division 296 tax is calculated does not describe any separate treatment for capital gains based on when they accrued — a realised gain is simply part of the fund’s relevant super earnings for the year it is realised, however long the asset was held.

Both thresholds are CPI-indexed: the $3 million threshold rises in $150,000 steps, and the $10 million threshold in $500,000 steps.

First assessment year

• 30 June 2026: first TSB test date (transitional — the 2026-27 first-year rule uses the closing balance only, not an opening-vs-closing comparison).
• Latter half of 2027-28: ATO expects to issue the first Div 296 assessments, based on the 30 June 2027 closing TSB.
• Payment: members can elect to pay from super or personal funds within 84 days of the assessment.

Who is affected

The ATO estimates fewer than 1% of Australians have super balances above $3 million. For the vast majority of workers and retirees, Division 296 is not relevant to their own position. The members most exposed are:

• SMSF members with large property or business real property holdings — liquidity planning matters because Div 296 is payable in cash even if the underlying realised earnings remain inside the fund.
• Account-based pension holders approaching or above the $3M threshold after the transfer balance cap was reached.
• Defined benefit scheme members — a separate commensurate methodology applies; members should seek specific advice on how notional earnings are computed for their interest.
• SMSF members with sizeable unlisted or illiquid assets — the switch to realised-only earnings reduces the worst-case outcomes of the original draft, but realisation decisions still affect timing of the tax liability.

Planning considerations

Liquidity

Confirm the fund can meet an annual Div 296 liability without forcing asset sales. SMSFs holding commercial property or business real property may need to hold cash reserves or plan orderly disposals.

Contribution timing

Non-concessional contributions push a balance closer to or across the $3M threshold. Members within $200k of the threshold should stress-test the incremental Div 296 cost against the benefit of additional contributions.

Withdrawals

Members above the threshold and over 60 may consider withdrawals to bring the balance below $3M — pension-phase withdrawals are generally tax-free at that age. The trade-off is forgoing future concessionally-taxed earnings inside the fund; run the numbers on a 10–20 year horizon before acting.

Realisation timing

With the realised-earnings methodology, the year of disposal determines when Div 296 is triggered on a capital gain — there is no exemption for gains that accrued before a cutoff date. Deferring a sale defers the liability into a later income year; there is no separate “grandfathered base” to use up first. Coordinate disposal timing with the fund’s overall capital-gain position and the member’s broader tax situation.

Record-keeping

Cost-base documentation and asset acquisition dates remain material inputs for calculating the realised gain or loss on each disposal, the same records funds already keep for ordinary CGT purposes — the ATO’s Division 296 guidance does not require funds to separately track a pre-1-July-2025 “grandfathered” pool.

Defined benefit members

The commensurate methodology for defined benefit interests is set out in the Act and supporting regulations. Members should seek specific advice on how their notional earnings are computed and how the tax is debited.

Impact example

A member with a $15M TSB and $900,000 of realised earnings in 2026-27:

• $3M–$10M tranche = 7/15 of TSB → $420,000 assessable × 15% = $63,000
• Above $10M tranche = 5/15 of TSB → $300,000 assessable × 25% = $75,000
• Total Div 296 tax = $138,000

Effective Div 296 rate on the full $900k = 15.3%. Base super contributions tax (15%) remains separate. For a member on the top personal marginal rate of 47%, the same $720,000 of assessable earnings would cost $338,400 if held outside super — so super remains strongly tax-advantaged even at the 40% combined top rate.

Use the Division 296 calculator to model your own position with precise numbers.

What to monitor

• ATO practical compliance guidance — rulings and determinations on the commensurate methodology and interaction with the transfer balance cap and retirement-phase interests.
• CPI movement — first threshold indexation could move the $3M threshold upward from 2027-28 onwards.
• SMSF trustee obligations — reporting and valuation requirements for calculating attributable realised earnings.
• Future policy reviews — Division 296 review mechanisms are included in the Act; monitor Treasury communications for any post-implementation review.

Sources

• ATO — Better Targeted Superannuation Concessions
• Treasury Laws Amendment (Building a Stronger and Fairer Super System) Act 2026
• Treasury media release: new legislation to build a stronger and fairer superannuation system