General Advice Warning: Any advice on this site is general in nature only and has not been tailored to your personal objectives, financial situation and needs. Please seek personal advice prior to acting on this information. Before acting on this advice, consider its appropriateness to your objectives, financial situation and needs.
Legislative status as at March 2026: the Treasury Laws Amendment (Building a Stronger and Fairer Super System) Bill 2026 received Royal Assent on 13 March 2026 (Act No. 8 of 2026). Division 296 applies from 1 July 2026, with the first assessments based on total superannuation balances at 30 June 2027.
Division 296 Tax Strategy: What High-Balance Super Members Need to Know
Is Division 296 relevant to you?
- Your total superannuation balance is approaching or above $3 million
- Your total superannuation balance is above $10 million
- Your SMSF holds property or unlisted assets with limited liquidity
- You are expecting a contribution decision, liquidity event, or business sale in the next 12 to 24 months
- You want to review your position now that the law has been enacted and plan ahead of the first assessment period
If any of the above apply, the strategies on this page are relevant to your current planning position.
For a broader view of fund management and investment governance, see our SMSF strategy.
Key Takeaway
Division 296 is not a panic event. It is a governance and modelling exercise. The clients best positioned when the law is settled are those who have already reviewed their contribution strategy, assessed their SMSF liquidity, and considered outside-super structures as part of a coordinated plan.
If your superannuation balance is approaching or above $3 million, Division 296 will change how your super earnings are taxed from the 2026-27 financial year onwards.
Most of the public commentary on Division 296 falls into two camps: alarmist warnings that superannuation is no longer worth it, or dense technical breakdowns that leave readers no clearer on what it means for their position.
How Division 296 Works: The Two-Tier Structure
The Division 296 tax operates as a two-tier structure applied to superannuation earnings for individuals with a total superannuation balance (TSB) above certain thresholds.
The first tier applies to TSB above $3 million. An additional 15% tax applies to earnings attributable to the balance above this threshold, bringing the combined headline rate to 30% when combined with the existing 15% fund-level tax.
The second tier applies to TSB above $10 million. An additional 10% tax on top of the first tier applies to earnings attributable to the balance above this higher threshold, bringing the combined headline rate to 40%.
Both thresholds are indexed to CPI under the enacted legislation. Exact indexation mechanics are set out in the Act.
Key Design Features
Division 296 applies to the individual, not the fund. The ATO issues the assessment directly to the member. Earnings are calculated using the change in adjusted TSB over the financial year, accounting for contributions made and withdrawals taken.
The revised model no longer taxes unrealised gains. Earnings are calculated under the legislated Division 296 methodology.
For the transitional 2026-27 year, TSB is measured at 30 June 2027 only. From 2027-28 onwards, the higher of start-of-year or end-of-year TSB applies for the threshold test.
Negative Division 296 earnings generally result in a nil assessment and cannot be carried forward.
The Division 296 Cost Base Reset Opt-In
SMSFs can opt in to reset the cost base of all CGT assets to their market value at 30 June 2026 for Division 296 purposes only. This means that pre-commencement capital gains are excluded from Division 296 calculations when assets are eventually sold.
The opt-in operates at the fund level, not asset-by-asset. If the fund opts in, all assets are reset, including those in an unrealised loss position.
The approved opt-in form must be lodged by the due date of the SMSF’s 2026-27 annual income tax return. Missing this deadline permanently forfeits the opportunity.
The cost base reset applies for Division 296 purposes only. It does not affect ordinary tax calculations within the fund.
Any SMSF can opt in, even where no member currently has a TSB above $3 million. This may be a prudent step for funds where member balances are projected to exceed the threshold in future years.
Worked Example: What Division 296 May Cost
This is an illustrative example for educational purposes only. Actual outcomes will vary depending on individual circumstances, investment returns, contribution history, and the final form of the legislation.
Scenario: Senior medical specialist. TSB of $3.7 million at the start of 2027-28. TSB of $4 million at 30 June 2028. $30,000 concessional contributions made during the year. No withdrawals.
Step 1: Adjusted TSB = $4,000,000 − $30,000 = $3,970,000
Step 2: Division 296 earnings = $3,970,000 − $3,700,000 = $270,000
Step 3: Proportion above $3 million = ($3,970,000 − $3,000,000) ÷ $3,970,000 = approximately 24.4%
Step 4: Division 296 tax liability = 15% × $270,000 × 25% = $10,125
In this scenario, the additional tax may be approximately $9,900 for the year. For most members with balances in the $3 million to $5 million range, the additional tax is meaningful but does not, on its own, eliminate the tax advantages of superannuation.
The Build MyWealth Five-Point Division 296 Exposure Diagnostic
- Balance trajectory modelling: where is your TSB headed over the next five, ten, and fifteen years.
- Unrealised gain exposure: what proportion of your SMSF assets carry significant unrealised capital gains.
- Effective tax rate comparison: is the combined rate under Division 296 still lower than holding assets personally or in a trust.
- Withdrawal and recontribution analysis: can you reduce TSB below threshold before 30 June 2027 without triggering liabilities that outweigh the saving.
- Estate and succession alignment: does reducing super to avoid Division 296 conflict with your estate plan.
To understand how Division 296 interacts with succession and beneficiary planning, see our estate planning overview.
Strategies to Manage Division 296 Exposure
Opt In to the Cost Base Reset
For SMSFs holding assets with large unrealised gains, the cost base reset may materially reduce Division 296 exposure. The trade-off is that assets in a loss position will also be reset. Your adviser should model the net effect across all fund assets before the opt-in deadline.
Withdraw Super to Reduce TSB Below $3 Million
For the transitional 2026-27 year, withdrawing assets before 30 June 2027 may eliminate Division 296 exposure for that year. However, withdrawing super may trigger capital gains tax, remove assets from the concessional super environment, and from 2027-28 the higher-of-start-or-end rule limits the benefit of mid-year withdrawals. This strategy is most relevant for members whose balance is marginally above $3 million who have met a condition of release. It is not a default recommendation.
Adjust Contribution Strategy
Members projecting TSB growth above $3 million may consider redirecting voluntary contributions outside super to slow balance growth. Ongoing contributions continue to receive the concessional 15% entry tax rate but may accelerate Division 296 exposure.
Asset Restructuring Outside Super
For members with very large balances, particularly above $10 million, the 40% headline rate may tip the analysis in favour of holding certain assets outside super in a family trust, company, or personal name. This analysis depends on the member’s marginal personal tax rate, the type of investment income generated, and the intended holding period.
As published in: SmartCompany: The unfunded buyout problem
Outside-Super Options: Trust, Company, Personal Name, and Investment Bonds
For some clients, the most effective response to Division 296 is not to restructure inside super but to redirect future wealth accumulation to structures outside superannuation. The appropriate structure depends on your marginal tax rate, time horizon, liquidity needs, and estate planning objectives. Common outside-super options include family trusts, companies, personal name investing, and investment bonds.
Investment bonds (also called insurance bonds) are not a government or corporate bond. They are a tax-paid investment structure, sometimes called a wrapper, that can hold an underlying portfolio including cash, fixed interest, Australian shares, international shares, and multi-asset options. For some clients impacted by Division 296, an investment bond may be a useful outside-super structure where the goal is to limit further super balance growth, simplify tax administration, and improve estate planning control while maintaining a long-term investment horizon. Like trusts and companies, suitability depends on your marginal tax rate, time frame, liquidity needs, and estate objectives. Any decision should be modelled alongside trust, company, and personal investing alternatives so you can compare after-tax outcomes and governance complexity. For professionals also reviewing contribution timing before 30 June, see EOFY Super Contribution Strategy. For the estate planning implications of outside-super structures, see Estate Planning Strategy.
Structure Comparison: Inside Super vs Outside-Super Options
| Structure | Tax mechanics | Liquidity and access | Estate control | Governance burden | Best-fit use case |
|---|---|---|---|---|---|
| Super (post-296) | 15% on earnings below $3m threshold; additional 15% on earnings above | Restricted to preservation age and conditions of release | Dependent on BDBN, trust deed, and fund rules | Annual audit, trustee obligations, investment strategy | Core retirement accumulation below the $3m threshold |
| Family trust | Taxed at beneficiary marginal rates; 50% CGT discount may apply | Flexible, subject to trustee discretion | High control via trustee and appointor structure | Medium: annual tax return, trust deed, distribution minutes | Income splitting across family members with lower marginal rates |
| Company | 30% corporate rate (or 25% base rate entity); no CGT discount | Access via dividends or loan repayments, more restricted | Controlled via shareholding and constitution | Medium to high: ASIC obligations, annual returns | Long-term retention where marginal rate exceeds 30% |
| Investment bond | Tax-paid structure; tax treatment improves after 10 years (rules apply) | Accessible at any time; 10-year rule for improved tax treatment | Can pay to a nominated beneficiary; estate treatment depends on ownership and nomination | Low: no personal tax return entries, no trust deed required | Long-term outside-super accumulation, estate simplification |
| Personal name | Taxed at full marginal rate; 50% CGT discount after 12 months | Fully accessible at any time | Passes via Will, subject to estate | Low: included in personal tax return | Short to medium term, or where simplicity is the priority |
This table is a general summary only. Tax outcomes depend on individual circumstances. Seek personal advice before making any structural decision.
Why Build MyWealth for Division 296 Strategy
Division 296 sits at the intersection of superannuation strategy, tax planning, and estate planning. It requires modelling, not rules of thumb. Build MyWealth provides the modelling, scenario analysis, and ongoing monitoring required to make informed decisions about Division 296 exposure, including cost base reset opt-in assessment, effective tax rate comparisons across structures, and integration with your broader estate and retirement plan.
Book a 15-Minute Call to Model Your Division 296 Exposure
If your superannuation balance is approaching or above $3 million, now that Division 296 has received Royal Assent, the time to model your exposure and act is now.
Phone: 03 7034 4888
Sangram Rana is an IFA Excellence Awards finalist: Risk Adviser of the Year 2022, 2023, and 2025, SMSF Adviser of the Year 2022 and 2023, and Client Outcome of the Year 2022. Published in the Australian Financial Review, Money and Life, SmartCompany, Inside Small Business, Professional Planner, Life Insurance Guide, CommBank Brighter Magazine, and Benefolk. Corporate Authorised Representative, Lifespan Financial Planning AFSL 229892.
Frequently Asked Questions: Division 296 Tax
Division 296 is an additional tax on superannuation earnings for individuals with a total superannuation balance above $3 million. It applies from 1 July 2026, following Royal Assent on 13 March 2026. A second tier applies to balances above $10 million. The legislation received Royal Assent on 13 March 2026 (Act No. 8 of 2026).
The tax is calculated as 15% (first tier) or 25% (second tier) of the member’s Division 296 earnings, multiplied by the proportion of their total superannuation balance that exceeds the relevant threshold. Earnings are based on the change in adjusted TSB over the financial year, accounting for contributions and withdrawals.
No. The revised February 2026 legislation removed the original provision that included unrealised gains. The revised model no longer taxes unrealised gains. Earnings are calculated under the legislated Division 296 methodology. The one-third CGT discount continues to apply for assets held longer than 12 months.
SMSFs can elect to reset the cost base of all CGT assets to their market value at 30 June 2026 for Division 296 purposes only. This means pre-commencement capital gains are excluded from Division 296 calculations when assets are eventually sold. The opt-in must be lodged by the due date of the SMSF’s 2026-27 annual return.
The first Division 296 assessment is for the 2026-27 financial year. The ATO will issue the assessment after 30 June 2027, with the tax generally due shortly after assessment in accordance with ATO guidance once issued. For the transitional year, only the 30 June 2027 balance is used to determine whether the threshold is breached.
Yes. The legislation allows the Division 296 tax liability to be paid from superannuation, even though the assessment is issued to the individual. This is similar to how Division 293 tax operates.
If your Division 296 earnings are negative, your assessment for that year is nil. Negative earnings cannot be carried forward for Division 296 purposes. However, fund-level tax losses may still be carried forward within the fund’s normal tax calculations.
Yes, but with different calculation rules. Where benefits have not yet become payable, Division 296 tax may be deferred into a Division 296 debt account until the first benefit is paid.
Division 296 is an additional personal tax, separate from the fund’s income tax. The fund continues to pay 15% on earnings. Division 296 adds a further 15% (first tier) or 25% (second tier) on the above-threshold proportion of the member’s earnings. The combined headline rate may reach 30% or 40% depending on the tier.
For many members, yes. Even at a combined 30% rate, superannuation may remain more tax-effective than holding assets personally, where the top income tax rate applies above $190,000 at 45% plus the 2% Medicare levy. The answer depends on the member’s marginal rate, the type of income generated, and the intended holding period.
The approved opt-in form must be lodged by the due date of the SMSF’s 2026-27 annual income tax return. Missing this deadline permanently forfeits the option. Timely lodgement of the 2025-26 return is critical.
Yes. The Treasury Laws Amendment (Building a Stronger and Fairer Super System) Bill 2026 received Royal Assent on 13 March 2026 (Act No. 8 of 2026). Division 296 is now enacted law and applies from 1 July 2026, with the first assessments based on total superannuation balances at 30 June 2027.
It depends on the point at which additional super contributions reduce after-tax efficiency once Division 296 applies, and on your time horizon and estate planning goals. An investment bond is not a bond investment in the traditional sense. It is a tax-paid structure that can hold a diversified portfolio outside super. In some cases it may suit clients who want long-term compounding outside super with simpler tax reporting, but it should be compared against trusts, companies, and personal investing based on your circumstances. We treat this as a modelling decision, not a product decision.