Division 296 Superannuation Tax
The final shape of Division 296 superannuation tax and what it means
The Federal Government’s long anticipated Division 296 superannuation tax has now passed Parliament, one of the most significant structural changes to Australia’s retirement system in over a decade. With Royal Assent received on 13 March 2026, the reform is now law.
This change signals a new era in the way high balance funds are taxed, with important implications for fund trustees, advisers, and individuals seeking to optimise long term wealth strategies.
A new framework for high balance superannuation
Division 296 introduces a two-tiered tax system, applying to earnings on superannuation balances above key thresholds:
15% additional tax on earnings attributable to balances above $3 million
An additional 10% (total 25%) on earnings attributable to balances above $10 million.
These rates apply to earnings only, not the entire balance.
Crucially, the final legislation removes the controversial taxation of unrealised gains, confirming that Division 296 will apply only to realised earnings.
When will Division 296 apply?
The new system begins on 1 July 2026, with the first assessments issued for the 2026–27 financial year. This gives individuals and professional advisers a limited but meaningful window to understand the mechanics of the law and anticipate how it may interact with long term strategies, particularly for those with complex fund structures.
Who will be affected?
Division 296 is targeted squarely at individuals with a Total Superannuation Balance (TSB) exceeding $3 million, aggregated across all super funds.
While this represents a relatively small cohort of Australians, the ripple effect across estate planning, SMSF investment strategies, and intergenerational wealth management will be felt much more broadly. Thresholds will also be indexed, ensuring the system evolves with shifts in national wealth and economic growth.
What happens next?
With legislation now settled, the next phase involves the release of detailed regulations and ATO guidance to clarify:
the precise calculation methodology
reporting and disclosure obligations
administrative processes, including ATO release authorities
transitional arrangements for complex structures
These details will be essential for modelling future scenarios and advising on long term implications.
Our expert view: A turning point for high balance super strategies
Although no immediate action is required before the 2026–27 year, the passage of Division 296 changes the strategic landscape.
From our perspective:
Long term superannuation accumulation strategies may need recalibration for individuals approaching or exceeding the thresholds.
SMSFs with illiquid or lumpy assets, such as property, will need to consider how realised gains may interact with the new tax regime.
Intergenerational wealth strategies may require review to ensure they remain fit for purpose.
This is the time for informed, forward-looking analysis not reactive restructuring.
What should Australians do now?
The priority is to understand exposure and avoid making premature structural changes until the ATO’s methodology, reporting requirements and processes are fully understood.
Consider engaging with professional advisers who can:
Maintain visibility over aggregated super balances
Model scenarios and tax implications under the new system
Provide advice on new planning opportunities that may be relevant based on the law and interpreting ATO guidance.
Have questions in the meantime? Please don't hesitate to get in touch with your Hood Sweeney adviser on 1300 764 200.
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