What is Division 296 tax?

Division 296 is a new 15% tax on superannuation earnings for individuals whose total super balance exceeds $3 million at the end of the financial year. It applies from 1 July 2026 and is in addition to the existing 15% tax on concessional super contributions. The tax is calculated on a proportional basis — only the share of earnings attributable to the amount above $3 million is taxed.

How is Division 296 tax calculated?

Division 296 tax is calculated in three steps: (1) Calculate total earnings as the change in your super balance plus withdrawals minus contributions. (2) Calculate the proportion above $3M as (closing balance minus $3,000,000) divided by closing balance. (3) Multiply earnings by the proportion, then apply the 15% tax rate. For example, if your balance grew from $3.2M to $3.5M with $30K in contributions and no withdrawals, earnings are $270K, the proportion above $3M is 14.29%, taxable earnings are $38,571, and Division 296 tax is $5,786.

Does Division 296 tax unrealised capital gains?

Yes. Division 296 taxes unrealised gains because it uses the change in your total super balance to calculate earnings. If your super investments increase in value (even if you have not sold them), those paper gains are included in the earnings calculation. This is a significant departure from existing Australian tax principles where capital gains are typically only taxed on disposal.

Who is affected by Division 296?

Division 296 affects individuals with total superannuation balances exceeding $3 million. The ATO estimates around 80,000 Australians will be affected initially. However, because the $3 million threshold is not indexed to inflation, more people will be caught over time as super balances grow through contributions and investment returns.

When does Division 296 start?

Division 296 takes effect from 1 July 2026. The first assessments will be for the 2026-27 financial year. The ATO will issue Division 296 assessments after you lodge your tax return, similar to how Division 293 currently works.

Can I pay Division 296 tax from my super fund?

Yes. You can choose to pay Division 296 tax from your super fund or from personal funds. If you elect to pay from super, you can nominate which fund(s) the ATO should release the money from. This is similar to the existing process for Division 293 tax.

What happens if my super earnings are negative?

If your super earnings are negative in a financial year (your balance decreased after adjusting for contributions and withdrawals), no Division 296 tax applies for that year. Negative earnings can be carried forward to offset positive earnings in future years, reducing your Division 296 liability in those later years.

Division 296 Calculator Australia 2026 — Super Tax Above $3 Million

What is Division 296?

Division 296 is a new tax measure that imposes an additional 15% tax on superannuation earnings for individuals whose total super balance exceeds $3 million. The legislation passed the Australian Senate and takes effect from 1 July 2026, with the first assessments applying to the 2026-27 financial year.

The tax is designed to reduce the tax concessions available to individuals with very large super balances. Currently, all super earnings in the accumulation phase are taxed at a flat 15%, regardless of balance size. Division 296 effectively increases the tax rate to 30% on the portion of earnings attributable to balances above $3 million.

How Division 296 is calculated

The ATO will calculate Division 296 tax using a proportional method:

Calculate total earnings: Earnings = (closing balance - opening balance) + withdrawals - contributions. This captures investment returns, including unrealised capital gains.
Calculate the proportion above $3M: Proportion = (closing balance - $3,000,000) / closing balance. This determines what share of earnings relates to the amount above the threshold.
Calculate taxable earnings: Taxable earnings = total earnings x proportion above $3M.
Apply the 15% tax rate: Division 296 tax = taxable earnings x 15%.

Unrealised gains — the key controversy

Unlike most Australian taxes, Division 296 taxes unrealised capital gains. Your super balance can increase because the value of your investments has risen on paper — even if you have not sold any assets. Under Division 296, these paper gains are included in the earnings calculation and may be taxed.

This has significant implications for SMSF members holding illiquid assets such as property or unlisted shares, as they may face a tax liability without the cash flow to pay it. While the option to pay from super provides some relief, it still reduces the member's retirement savings.

The $3 million threshold is not indexed

The $3 million threshold is fixed and will not be adjusted for inflation or wage growth. This means that over time, more Australians will be caught by Division 296 as their super balances grow through normal contributions and investment returns. The government estimates around 80,000 people are initially affected, but this number will increase significantly in coming decades.

Strategies to manage Division 296

Withdraw excess above $3M: If you are in retirement phase, consider drawing down your balance to stay below the threshold where practical.
Diversify outside super: For future savings, consider investing outside super in structures such as family trusts, investment bonds, or personal investments.
Manage asset allocation: More volatile investments create larger swings in unrealised gains. Consider the tax implications of asset allocation within super.
Carry-forward negative earnings: If your super balance drops in a year, the negative earnings can be carried forward to offset Division 296 tax in future years.

Division 296 vs Division 293

These are separate taxes that can apply simultaneously. Division 293 is an extra 15% tax on concessional contributions for people earning above $250,000. Division 296 is a 15% tax on super earnings for people with balances above $3 million. A high-income earner with a large super balance could be liable for both.

Division 296 Calculator

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