From 1 July 2026, the Australian Government will introduce Division 296 tax, a new measure designed to reduce concessional tax treatment on superannuation earnings for individuals with large super balances.
If your superannuation balance is above $3 million—or could reach that level in the future—it is important to understand how these superannuation tax changes may affect your retirement savings.
What Is Division 296 Tax?
Currently, earnings within superannuation funds are generally taxed at a concessional rate of up to 15%. Under the new rules, higher tax rates will apply to a portion of earnings attributable to larger super balances.
Division 296 Tax Rates
From 1 July 2026:
- Superannuation balances between $3 million and $10 million will be taxed at 30% on the proportion of earnings attributable to balances within this range.
- Superannuation balances above $10 million will be taxed at 40% on the proportion of earnings attributable to balances exceeding $10 million.
The Australian Taxation Office (ATO) will calculate any Division 296 tax liability and issue an assessment notice to affected individuals.
Taxpayers will have the option to:
- Pay the tax personally, or
- Release the required amount from their superannuation fund.
As the measure commences on 1 July 2026, the first assessments are not expected until the 2027–28 financial year.
Quick Answer: Who Will Be Affected by Division 296?
Division 296 tax will only apply to individuals with a total superannuation balance exceeding $3 million.
According to government estimates:
- Less than 0.5% of Australians with superannuation accounts are expected to be affected in 2026–27.
- Less than 0.1% of Australians are expected to be affected by the higher 40% tax rate for balances exceeding $10 million.
For the vast majority of Australians, there will be no change to the current taxation of superannuation earnings.
What Happens if Your Super Balance Grows Above $3 Million?
One of the key features of the legislation is that the $3 million and $10 million thresholds will be indexed annually to the Consumer Price Index (CPI).
This means the thresholds should increase over time in line with inflation, helping ensure that Division 296 remains targeted at individuals with higher superannuation balances.
Even if your super balance grows significantly over the coming years, indexation may reduce the likelihood of being unintentionally captured by the new rules.
What Should You Do if Division 296 May Affect You?
If your current superannuation balance exceeds $3 million—or is expected to approach that level—it may be worth reviewing your long-term retirement strategy.
Some actions to consider include:
Review Your Investment Strategy
A qualified financial adviser can help assess whether your current investment mix remains appropriate under the new tax environment.
Model Future Tax Outcomes
Understanding how Division 296 tax could affect your retirement savings over time may help you make more informed decisions about contributions, withdrawals, and investment structures.
Seek Professional Advice
The impact of Division 296 will vary depending on your circumstances, superannuation structure, and retirement goals. Professional advice can help ensure you are prepared before the new rules take effect.
Need Help Understanding Division 296 Tax?
The upcoming super tax changes from 1 July 2026 may create new planning considerations for individuals with larger superannuation balances.
If you’re concerned about how Division 296 tax could affect your retirement strategy, contact our team today for tailored advice and guidance. We can help you understand your options and plan confidently for the future.
