For Australians with substantial superannuation balances, 1 July 2026 marked an important change.

New rules known as Division 296 now apply to individuals with total superannuation balances above $3 million.

If your super is approaching or above that level, you may already have heard plenty about the changes.

You may also have heard several different versions of how they work.

That’s understandable. The rules went through significant changes before becoming law, which means some of the commentary published while they were being developed no longer reflects the final position.

So what should affected super members be thinking about now?

First, this isn’t simply another 15% tax on everything over $3 million

This is probably the most important misconception to clear up.

Division 296 doesn’t mean that once your super balance passes $3 million, all of your superannuation earnings suddenly become subject to another 15% tax.

The final rules introduce two thresholds.

The large superannuation balance threshold is $3 million, while the very large superannuation balance threshold is $10 million.

Broadly, the new tax applies to a portion of an individual’s superannuation earnings where their total superannuation balance exceeds the relevant threshold.

• For balances between $3 million and $10 million, the Division 296 tax rate is 15%.
• For the portion relating to balances above $10 million, a higher rate applies.

The calculation is therefore more nuanced than simply taking your super balance, subtracting $3 million and applying 15%.

The first year is 2026–27

Division 296 applies from the 2026–27 financial year.

For most affected members, this means the first important measurement point is 30 June 2027.

That makes the current financial year particularly important for people whose total superannuation balance is already above $3 million or may approach that level.

It is also important to remember that we are talking about an individual’s total superannuation balance, not simply the balance of one particular SMSF or super account.

If you have interests across multiple superannuation funds, they may all be relevant when determining your position.

The final rules are different from what you may have heard earlier

One of the most controversial features of the original Division 296 proposal was the prospect of taxing unrealised gains.

That aspect of the proposal attracted considerable attention.

The legislation that ultimately became law was changed.

The final framework is based on realised earnings, with specific rules determining what is included in the Division 296 calculation.

That distinction matters, particularly for SMSFs holding assets such as property or long-term investments that may increase significantly in value without being sold.

If you formed an opinion about Division 296 based on articles or commentary from the earlier stages of the proposal, it is worth revisiting that understanding now that the final rules are in place.

SMSFs may have some additional work to do

For SMSF trustees, Division 296 isn’t simply a matter of checking the fund’s bank balance.

Asset values, cost bases, realised gains and the timing of transactions can all become relevant.

There are also transitional rules affecting certain assets held by small superannuation funds at 30 June 2026.

These provisions are important because they deal with how pre-commencement gains are treated when determining future Division 296 earnings.

The practical implication is straightforward:

Good records and reliable asset information are going to matter.

For SMSFs holding property, unlisted investments or other assets that aren’t bought and sold on a public market every day, appropriate valuations and historical records can become particularly important.

Don’t make decisions based on the $3 million number alone

Whenever a new tax threshold is introduced, there is an understandable temptation to ask:

“Should I just get my super below $3 million?”

Sometimes changes to a person’s superannuation strategy may deserve consideration.

But the existence of Division 296 doesn’t automatically mean withdrawing money from super is the right answer.

Superannuation remains a concessionally taxed environment, and moving money out can have consequences extending well beyond Division 296.

• There may be capital gains tax considerations within a fund when assets are sold.
• There may be investment consequences.
• There may be estate planning considerations.
• There may be differences in asset protection and the taxation of future investment income outside super.
• And once money has been withdrawn, contribution rules may limit your ability to put it back later.

The right question isn’t simply:

“How do I avoid Division 296?”

It is:

“Given the new rules, what is the best overall strategy for my circumstances?”

Those are very different questions.

Liquidity also deserves attention

Another issue for some members will be liquidity.

The Division 296 liability is imposed on the individual rather than simply becoming part of the ordinary tax paid by their superannuation fund.

Affected individuals will generally receive an assessment from the ATO and may have options regarding how that liability is paid, including potentially electing for an amount to be released from superannuation.

For an SMSF holding a high proportion of its wealth in property or other illiquid assets, that makes forward planning important.

A fund can have substantial assets on paper without necessarily holding substantial cash.

This is another reason the conversation should extend beyond the headline value of the member’s super balance.

What about the $10 million threshold?

The introduction of the second threshold means individuals with very large superannuation balances need to consider an additional layer of the rules.

Where the relevant balance exceeds $10 million, the portion of Division 296 earnings attributable to the amount above that threshold is subject to an additional 10% rate, producing a 25% Division 296 rate for that portion.

For most superannuation members, this won’t be relevant.

But for those it does affect, the interaction between investment strategy, realised gains, liquidity and the timing of transactions may become increasingly important.

The thresholds won’t stay at $3 million and $10 million forever

Another change from the original proposal is that the thresholds are indexed.

The $3 million and $10 million thresholds are designed to increase over time in line with the legislated indexation arrangements.

That is an important feature because it means the rules should be considered as part of a longer-term superannuation strategy rather than viewed as permanently fixed dollar limits.

What should you be doing now?

For people potentially affected by Division 296, we think the starting point is understanding your position rather than immediately changing it.

That means knowing:

• your total superannuation balance across all funds
• whether you are likely to be above one of the thresholds at 30 June 2027
• what assets your SMSF holds and whether your records are complete
• whether your fund has sufficient liquidity
• how potential asset sales could affect realised earnings
• how superannuation fits with your investments outside super
• whether your estate planning arrangements should also be reviewed.

Most importantly, don’t make a significant financial decision based solely on something you read about an earlier version of the legislation.

The final rules matter.

This is a strategy conversation, not just a tax calculation

For affected members, Division 296 will undoubtedly introduce another layer of complexity to Australia’s superannuation system.

But focusing only on the additional tax risks missing the bigger picture.

Superannuation is part of a broader financial strategy involving retirement income, investments, tax, family circumstances and estate planning.

A strategy that produces the smallest possible Division 296 liability isn’t necessarily the strategy that produces the best overall outcome.

The aim shouldn’t be to organise your financial life around one tax threshold. It should be to understand the threshold, understand your options and make decisions in the context of your overall position.

At Indigo Financial, we work with SMSF trustees and superannuation clients to understand how tax and superannuation changes apply to their individual circumstances and when specialist financial advice may also be appropriate.

If your total superannuation balance is approaching or above $3 million, now is a good time to understand what Division 296 could mean for you.

Contact Indigo Financial on (08) 8212 8585 if you need help with understanding any of your accounting, taxation and business development needs.

Sources
Australian Government, Treasury Laws Amendment (Better Targeted Superannuation Concessions) Act 2026
Australian Taxation Office, Division 296 tax
Australian Government Treasury, Better targeted superannuation concessions