Division 296 – Super balances over $3 million will see tax rate double to 30% by 2026

division 296 rules

Have you heard about the proposed superannuation tax Division 296? Recent government announcements have updated how this tax will apply to high-balance super accounts.  

Here’s what you need to know. 

What is Division 296?

Division 296 is a proposed tax measure that affects individuals with a Total Superannuation Balance (TSB) over $3 million. Under the proposed updated rules: 

  • The tax would only apply to future realised earnings, rather than unrealised gains. 
  • The $3 million threshold will be indexed based on the transfer balance cap. 
  • A second threshold at $10 million (also indexed) would apply a 40% tax rate on earnings attributable to balances $10 million. 

When Will the Tax Start? 

The Division 296 tax is now expected to commence from 1 July 2026. This delay gives individuals and advisers more time to plan appropriately. 

How Will The New Tax Work?

Under the current proposal:  

– Additional 15% tax (30% total tax) on realised earnings attributable to super balances between $3 and $10 million. 

– Additional 25% tax (40% total tax) on realised earnings attributable to super balances above $10 million. 

Only earnings that have been realised (e.g., from income or asset sales) will be subject to the tax. 

What Should You Be Doing Now, To Prepare For Division 296?

At this stage, we recommend a cautious and considered approach. No significant changes should be made to your superannuation strategy until the legislation has been finalised.

Premature action could have negative consequences. Potential examples could be:

  • Withdrawals made before the law passes may not be re-contributed due to caps and eligibility limits

  • The final version of the legislation may still change

Considerations Before Making Any Changes

It’s critical to undertake appropriate modelling and seek professional advice from a licensed Financial Advisor. Several factors that need to be considered include: 

  • Tax implications outside superannuation 
  • Capital Gains Tax (CGT) implications of any realised superannuation assets 
  • Personal circumstances and objectives 

Superannuation is likely to be the most tax-effective structure for retirement savings under $10 million. Without appropriate modelling and planning, you may not have the correct information to make the right decision for your personal circumstances.  

How Can We Help You?

 If you need advice on Division 296 rules and how to best manage your superannuation, please contact us.

Related Posts