What’s changing and why most clients don’t need to rush
You may have seen recent media coverage about a new tax on larger superannuation balances, commonly referred to as Division 296. With the legislation now passed, we wanted to provide a clear and balanced update on what this means — and, just as importantly, what it doesn’t mean for most people.
✅ Only a small number of Australians are affected
✅ There is time to plan thoughtfully
✅ Superannuation remains one of the most effective long‑term wealth structures available
What is Division 296?
From 1 July 2026, an additional tax will apply to a portion of superannuation earnings for individuals whose total super balance exceeds $3 million.
- For balances above $3 million, an extra 15% tax applies to the earnings linked to that portion.
- For balances above $10 million, a higher tier applies.
- These thresholds will be indexed over time, helping keep the measure focused on very large balances rather than gradually capturing more people through inflation alone.
This is not a tax on your entire super balance, and it does not replace the existing 15% tax already applied within super. It simply adjusts the tax outcome on the portion above the thresholds.
Who is affected?
Division 296 is expected to affect around 0.5% of Australians which equates to roughly 80,000 people.
You may be impacted if:
- Your total super balance already exceeds $3 million
- You are likely to exceed $3 million in future years
- You are part of a couple with significant combined super balances, particularly where reversionary pensions apply
For the vast majority of clients, this change will have no direct impact.
Does this change make super less effective?
No. Even where Division 296 applies, superannuation remains a highly tax‑effective environment compared to investing outside super at personal marginal tax rates.
Where balances are large, the conversation shifts away from “rules of thumb” and toward deliberate planning — balancing tax, flexibility, estate outcomes and liquidity — rather than assuming super is always the default answer.
This theme was recently highlighted in the Australian Financial Review, where one of our advisers, Dwayne, was interviewed on the practical implications of Division 296.
In the article, Dwayne explains that changes to the super environment are prompting clients to step back and reassess long‑standing assumptions about where assets should be held, with a greater focus on flexibility and long‑term outcomes rather than automatic decisions.
As Dwayne noted:
“If the tax environment has changed in super, let’s relook at the entire asset structure and work out where the capital should be held, and if it’s tax effective, let’s move money out of the super environment.”
It’s a thoughtful perspective that reflects the increasing complexity of superannuation — and the importance of whole‑of‑wealth advice in a changing policy landscape.
How does the tax work in practice?
- Division 296 is a personal tax, assessed by the ATO.
- It applies only to realised earnings, not paper gains on unsold assets.
- You can pay the tax personally or elect to have it paid from super via an ATO release authority.
- For SMSF clients, there is a one‑off opportunity to reset asset cost bases at 30 June 2026 for Division 296 purposes — a decision that should be made carefully and with advice.
What about estate planning?
Recent guidance has clarified how Division 296 interacts with death benefits and reversionary pensions. While this does not affect most people, it reinforces an important point:
For larger balances, tax, estate planning and liquidity need to work together.
This is less about reacting to a new tax and more about ensuring your arrangements continue to operate as intended for you, and for those you ultimately leave your wealth to.
Do you need to act now?
For most clients, no immediate action is required.
Division 296 does not apply until balances are first tested at 30 June 2027, and key elections can be made later. Between now and 30 June 2026, the focus should be on preparation rather than implementation.
That typically means:
- Understanding whether you may be affected over time
- Confirming asset valuations and documentation
- Reviewing estate planning settings where appropriate
It does not mean rushing to withdraw funds or restructure purely because of this change.
Our approach
Our role is to help clients navigate change calmly and deliberately.
Division 296 is best approached as part of a broader conversation about:
- Long‑term wealth strategy
- Estate and succession planning
- Flexibility and resilience in changing policy environments
We continue to monitor developments closely and model outcomes where relevant. If Division 296 applies to you — now or in the future — we will work with you to ensure your strategy remains aligned with your goals, without unnecessary disruption.
If you have questions, or would like to discuss how these changes may apply to your circumstances, please speak with your adviser.
