Division 296 Explained: What the New $3 Million Super Tax Means If You’re Retiring Soon

by Nasser ZreikaSep 14, 2026Retirement Planning Strategies

Division 296 is a new tax that adds an extra 15% on the portion of your realised superannuation earnings attributable to a total super balance between $3 million and $10 million, and an extra 25% on the portion attributable to balances above $10 million.

The legislation — part of the Better Targeted Superannuation Concessions package — passed both Houses of Parliament on 10 March 2026 and takes effect from 1 July 2026, applying from the 2026–27 financial year onward.

The tax applies per individual rather than per couple, so a couple can hold up to $6 million between them without triggering it, and importantly, the final version taxes only realised earnings — dividends, interest, rent and realised capital gains — not unrealised (paper) gains, which was the most contentious feature of the original 2023 proposal.

If your super balance is approaching $3 million and you’re within a few years of retiring, Division 296 is now a real factor in how you time contributions, structure investments and plan withdrawals.

What Exactly Is Division 296?

Division 296 — part of the Treasury Laws Amendment (Better Targeted Superannuation Concessions) Act — is designed to wind back some of the tax concessions available to people with very large superannuation balances.

Superannuation earnings are normally taxed at a concessional 15% inside a fund in accumulation phase (and 0% in retirement phase). Division 296 adds a further personal tax on top of that concessional rate, but only for the slice of your balance that sits above the $3 million threshold.

How Much Extra Tax Are We Actually Talking About?

The rate depends on which band your Total Superannuation Balance (TSB) falls into:

Balances between $3 million and $10 million: an additional 15% tax on the earnings attributable to that portion, on top of the fund’s existing 15% tax — a combined nominal rate of around 30%.
Balances above $10 million: an additional 25% tax on the earnings attributable to that portion (15% + 10%), taking the combined nominal rate to around 40%.
Both the $3 million and $10 million thresholds will be indexed to CPI, in $150,000 and $500,000 increments respectively, so they will gradually rise over time.

Why the 2026 Version Is Different (and Better) Than the Original Proposal

When Division 296 was first announced in 2023, the most controversial feature was that it proposed to tax unrealised capital gains — meaning you could owe tax on a paper gain in an asset you hadn’t actually sold, including illiquid assets like property held in an SMSF.

Following extensive industry consultation, the government revised the design, and the version that passed Parliament in March 2026 taxes only realised earnings: dividends, interest, rental income and capital gains you’ve actually crystallised by selling an asset.

This is a materially better outcome for SMSF trustees holding property or other illiquid assets, though it doesn’t remove the tax altogether — it just changes what triggers it.

How and When Your Balance Is Measured

For the first affected year, 2026–27, your liability is based purely on your Total Superannuation Balance at 30 June 2027 — a one-off transitional measure.

From the 2027–28 financial year onward, the rules tighten: your TSB will be assessed as the higher of your balance at the start or the end of the financial year, which means withdrawing money mid-year to dip below the threshold will no longer necessarily help once that transitional year has passed.

If you’re planning any balance-reduction strategy, the window to act cleanly is really before 30 June 2027.

Who Actually Needs to Pay Attention

Division 296 only affects individuals with a Total Superannuation Balance above $3 million — combining every super interest you hold, including SMSFs, APRA-regulated funds and any defined benefit interests.

For most Australians this simply won’t apply. But if you’re a business owner who has built substantial value inside an SMSF, a couple with one spouse holding the bulk of your combined super, or someone within striking distance of $3 million and still making large contributions, this is genuinely worth modelling now rather than after 30 June 2027.

Practical Steps If You’re Close to the Threshold

Consider whether contribution timing or amount needs adjusting before your balance crosses $3 million.
If you hold assets with unrealised gains inside super, look into the cost-base uplift election available for assets held at 30 June 2026, which can reduce the taxable gain when those assets are eventually sold.
For couples, check whether super balances can be more evenly split between spouses — for example through spouse contributions or contribution splitting — to keep both partners under the threshold.
Model whether future savings might be better directed outside superannuation, once the super threshold is realistically going to be exceeded.
Get advice before withdrawing or restructuring anything — the transitional rules for 2026–27 behave differently to the ongoing rules from 2027–28.

Talk to Lincoln Wealth

Division 296 is exactly the kind of legislative change that rewards early modelling and penalises last-minute reactions — especially given the transitional balance test ends on 30 June 2027.

Lincoln Wealth can run the numbers on your specific super position and help you decide whether any action is worth taking before then.

FAQ’s About Division 296

Does Division 296 apply to unrealised gains?

No. The version of Division 296 that passed Parliament in March 2026 applies only to realised earnings — dividends, interest, rent and capital gains from assets you’ve actually sold. The original 2023 proposal to tax unrealised gains was dropped after industry consultation.

Will my spouse and I be taxed as a couple?

No. Division 296 applies to each individual’s Total Superannuation Balance separately. A couple can hold a combined $6 million in superannuation without either partner being affected, as long as each person’s individual balance stays under $3 million.

When do I actually have to pay this tax?

The tax commences from 1 July 2026 and applies to the 2026–27 financial year onward. For that first year, your liability is based on your balance at 30 June 2027, with the first assessments expected to follow shortly after.