What is Division 296?
Division 296 imposes an additional 15% tax on earnings linked to the portion of your super balance above $3 million.
This is in addition to existing superannuation taxes. Importantly, the tax is calculated based on the change in your total super balance, which includes unrealised gains—profits on investments that haven’t been sold.
How is the Tax Calculated?
Step 1: Caclculate Earnings
Earnings = (Total Super Balance at end of year + Withdrawals – Net Contributions) – Total Super Balance at start of year.
Step 2: Determine Proportion Over $3 Million
Proportion = (Total Super Balance at end of year – $3 million) ÷ Total Super Balance at end of year.
Step 3: Calculate Division 296 Tax
Tax Payable = 15% × Earnings × Proportion
Example
Sarah’s super balance is $4 million on 30 June 2026. Her earnings for the year, after adjusting for withdrawals and contributions, total $400,000.
- Her balance over $3 million is $1 million, which is 25% of her total balance (being $1 million ÷ $4 million)
- Therefore, 25% of her earnings ($100,000) are subject to the new tax.
- Her Division 296 tax would be: 15% × $100,000 = $15,000
What can SMSF members do?
Here are some early planning strategies to consider:
1. Rebalance between spouses
Keep both members under $3 million if possible.
2.Consider investing outside super
Family trusts or companies may be more tax-effective once your balance grows too large.
3. Plan withdrawals strategy
Use retirement phase or drawdowns to manage balance levels below $3 million.
4. Ensure assets valuations are accurate
Especially for property and unlisted investments.
Final Thoughts
Division 296 is still in draft form, we will continue to monitor the legislation and provide updates. But now it is the time to start reviewing your strategy. If your super balance is close to or over $3 million, feel free to contact us to explore your options.
