It's been talked about, debated, legislated, delayed, redrafted, and legislated again. And now, Division 296 tax is law — having passed both houses of Parliament and heading for Royal Assent.
The headline: from 1 July 2026, if your total superannuation balance (TSB) exceeds $3 million, you'll pay additional tax on the earnings attributable to the portion above that threshold.
What Is Division 296 Tax?
It's a new, personal tax — separate from and on top of your fund's existing 15% tax on super earnings. Think of your existing super tax as the fund's bill, and Division 296 as an extra personal bill that arrives later, addressed to you.
The additional tax rates work like this:
| Balance | Additional Tax Rate | Combined Rate (with existing 15%) |
|---|---|---|
| Up to $3 million | No additional tax | 15% as normal |
| $3m – $10m | +15% on earnings | Up to 30% |
| Over $10m | +15% on $3m–$10m, then +10% above $10m | Up to 40% |
The $3 million threshold is assessed per individual — not per couple, and not per fund.
What Counts as "Earnings"?
Here's some good news compared to earlier versions of this policy: unrealised capital gains are NOT taxed. The final legislation taxes actual, realised earnings — interest, dividends, rent, and capital gains when you actually sell an asset — minus deductible expenses.
So if your SMSF holds a property or shares that have grown in value but you haven't sold them, those paper gains don't trigger Division 296.
When Does It Start, and When Will You Know If You Owe?
The tax applies from 1 July 2026, meaning the first year it's in play is 2026–27.
There's also an important transitional rule for that first year: your super balance is assessed at 30 June 2027 (end of the financial year), not the start. So, if your balance is around the $3 million mark, you technically have until 30 June 2027 to review your position before the first assessment kicks in.
The ATO will issue assessments after 30 June 2027 for the 2026–27 financial year. You'll then have 60 days to pay — either personally or by releasing funds from your super.
SMSFs Get a Special Opportunity: The CGT Cost Base Reset
This is a genuinely useful planning option exclusive to SMSFs (industry and retail funds have a different, less flexible arrangement).
If your SMSF opts in, all assets in the fund will have their cost base "reset" to their market value as at 30 June 2026 — for Division 296 tax purposes only (your normal capital gains tax calculation is unchanged).
What this means in practice: capital gains that your assets built up before the new tax started are effectively quarantined from the Division 296 calculation when you eventually sell.
Example: Your SMSF bought a commercial property for $800,000 years ago. It's worth $1.5 million at 30 June 2026. If you later sell it for $2 million, only the $500,000 gain after the reset date would count for Division 296 purposes — not the full $1.2 million gain from the original purchase price.
Important: This is all-or-nothing. You can't cherry-pick individual assets. If your fund has assets sitting at a loss at 30 June 2026, opting in means those losses are also reset. The math matters here — it's worth getting proper advice before deciding.
Any SMSF can elect this option — even if no members are currently over $3 million — as long as you do it by the due date of the 2026–27 Annual Return. Don't miss the window.
What Should You Do?
If your super balance is approaching, at, or above $3 million, now is the time to:
- Get your total super balance across all funds (not just your SMSF) accurately assessed
- Model the potential Division 296 impact with your accountant or SMSF specialist
- Consider whether the CGT cost base reset election is right for your fund
- Think about your overall super strategy heading into 2027
If you're nowhere near $3 million right now, you may still want to consider the CGT reset option if you expect significant growth in the years ahead.
This post contains general information only and is not financial or tax advice. The Division 296 legislation is finalised but supporting regulations are still being released. Please speak with a qualified accountant or financial advisor about your specific situation.
