SUPERANNUATION INFORMATION GUIDE | EPG WEALTH
Division 296: The New $3 Million Super Tax Is Now Law
What the legislation says, how it works, and the questions it raises — for those who want to understand the new rules before speaking with their adviser.
Published March 2026 | epgwealth.com.au | General information only — see important disclaimer below
Important: General Information Only
This article is general information only. It does not take into account your personal financial situation, objectives, or needs, and is not financial advice. The information describes how Division 296 operates under the legislation as passed. How these rules apply to your individual circumstances will depend on your specific situation. Before making any decisions in relation to your superannuation or other financial arrangements, you should seek personal financial advice from a licensed financial adviser. EPG Wealth Pty Ltd holds an Australian Financial Services Licence — details at epgwealth.com.au.
⚠️ Legislative update: Division 296 has passed Parliament
The Treasury Laws Amendment (Building a Stronger and Fairer Super System) Bill 2026 passed the House of Representatives on 5 March 2026 and the Senate on 10 March 2026. It is awaiting Royal Assent and will take effect from 1 July 2026.
This article explains what the legislation contains. It is not personal advice. If your total super balance is above — or approaching — $3 million, we recommend speaking with a licensed financial adviser about your specific situation.
After nearly three years of announcements, consultations, and revisions, the Division 296 super tax is now settled law. The final version differs significantly from what was first proposed in 2023 — it applies to realised earnings only (not unrealised capital gains), the thresholds are indexed to inflation, and a two-tier structure applies different rates for balances above $10 million.
This article explains how the legislation works, who it affects, and the types of questions that those with large super balances are now considering with their advisers. It is not a substitute for personal financial advice.
1. What Division 296 Does
Under existing law, earnings inside a super fund are taxed at 15% in the accumulation phase and 0% in the pension (retirement) phase. Division 296 introduces an additional personal tax on the portion of a member’s super earnings attributable to balances above $3 million.
The tax does not cap the amount you can hold in super. It does not change the rules for balances below $3 million. It reduces the tax concession on earnings attributable to the portion of your balance above the relevant threshold.
| Super Balance | Additional Tax Under Div 296 | Total Effective Earnings Tax (Accumulation) |
| Under $3 million | None | 15% (unchanged) |
| $3 million – $10 million | Additional 15% on earnings from the portion above $3m | Up to 30% on earnings from that portion |
| Above $10 million | Additional 25% on earnings from the portion above $10m | Up to 40% on earnings from that portion |
Both thresholds are indexed to CPI — the $3 million threshold rises in $150,000 increments, the $10 million threshold in $500,000 increments.
The tax is levied at the individual level, not the fund level. The ATO will issue an assessment to the individual, who can then choose to pay it personally or elect to have the amount released from their super fund.
It is important to understand that the tax applies proportionally. Only the share of earnings attributable to the balance above $3 million is subject to the additional tax — not the full year’s earnings.
2. How the Tax Is Calculated: An Illustrative Example
The following example uses hypothetical figures to illustrate how the legislation calculates the tax. It is not representative of any particular individual’s situation.
Illustrative example only — not personal advice
Hypothetical: a member’s total super balance (TSB) grows from $3.6 million to $3.9 million during 2026–27, with no contributions or withdrawals.
Earnings for the year: $3.9m − $3.6m = $300,000
Proportion of balance above $3 million: ($3.9m − $3m) ÷ $3.9m = 23.1%
Earnings subject to Division 296: $300,000 × 23.1% = $69,231
Division 296 tax on those earnings: $69,231 × 15% = $10,385
Under the legislation, this amount can be paid personally or released from the member’s super fund. Actual outcomes will vary depending on individual circumstances, fund type, and the final regulations.
This example is simplified. The actual calculation involves specific legislative adjustments for contributions, withdrawals, and fund type. Figures are for illustration only.
3. The Transitional Rule for the First Year
The legislation includes a specific transitional rule that applies only in the first year Division 296 takes effect (the 2026–27 financial year).
In that first year, whether a member is subject to Division 296 is determined by their total super balance at 30 June 2027 only — not by their opening balance on 1 July 2026. From the 2027–28 financial year onwards, the standard rule applies, which uses the greater of the balance at the beginning or end of the financial year.
What the transitional rule means in practice
Because the 2026–27 assessment is based solely on the 30 June 2027 balance, members have more time to consider their position than if the assessment had been based on their 1 July 2026 opening balance.
However, some decisions — such as the SMSF CGT cost base reset election described below — relate to the position at 30 June 2026 and are not affected by this transitional rule. Those with SMSF interests should discuss the timing of any decisions with their adviser.
4. The CGT Cost Base Reset for SMSFs
The legislation includes a one-off transitional measure specifically for SMSFs and small APRA-regulated funds. Trustees may make an election to reset the cost base of all directly held CGT assets to their market value as at 30 June 2026, for Division 296 purposes only.
The effect of this election is that capital growth accruing before 1 July 2026 — gains built up before Division 296 existed — would not form part of the Division 296 earnings calculation when those assets are eventually sold.
How the cost base reset works — illustrative example only
Hypothetical: an SMSF purchased a commercial property in 2012 for $900,000. By 30 June 2026, it is independently valued at $2.2 million. The property is later sold for $2.6 million.
Without the reset: the full capital gain above the original $900,000 cost base ($1.7m) would form part of the Division 296 earnings calculation in the year of sale (subject to the proportionality rules).
With the reset: the cost base for Division 296 purposes is stepped up to $2.2 million at 30 June 2026. Only the $400,000 gain above that value (growth after Division 296 commenced) would be included in the Division 296 earnings calculation.
The election applies to all directly held assets in the fund (it cannot be applied selectively to individual assets), is irrevocable, and does not trigger a CGT event or affect the normal fund tax calculation. It applies only to the Division 296 earnings figure.
This example is illustrative only. The actual impact depends on individual fund composition, asset values, member balances, and other factors. SMSF trustees should seek advice specific to their fund before making this election, as it is irrevocable.
The election is available to any SMSF — not only those whose members currently have balances above $3 million — and must be made by the time the SMSF lodges its 2026–27 annual return.
5. Who May Be Affected
The government’s estimate is that approximately 80,000 Australians currently have total super balances above $3 million, representing around 0.5% of all super fund members. Because the thresholds are indexed to CPI (rather than wage growth), this number is expected to grow gradually over time.
Division 296 applies to all super fund types — industry funds, retail funds, SMSFs, and defined benefit schemes. The $3 million and $10 million thresholds apply per individual, not per household or per fund.
The legislation may be relevant to consider for those who:
- Have a total super balance currently above $2.5 million, particularly where it is growing
- Hold an SMSF with property or other assets that have appreciated significantly in value
- Are still in the accumulation phase and making regular contributions with a growing balance trajectory
- Have super balances distributed unevenly across a couple’s respective accounts
Whether and how Division 296 affects any individual depends on their specific circumstances. This list is informational only and does not constitute a recommendation to take any particular action.
6. Areas Commonly Being Considered by Those Affected
The following describes categories of consideration that financial advisers are commonly discussing with clients who have large super balances. This section is educational only — it describes what types of questions exist, not what any individual should do. The appropriateness of any particular approach depends entirely on personal circumstances and should only be assessed with the benefit of personal financial advice.
- Whether to withdraw funds from super: Some members with balances above $3 million may consider whether withdrawing funds from super to bring their balance closer to or below the threshold has merit for their situation. This involves comparing the tax treatment of earnings inside and outside super after Division 296, as well as considering access conditions, estate planning implications, and the structure best suited to holding any withdrawn assets. There are trade-offs in either direction that are specific to the individual.
- How super balances are held between spouses: Because the threshold applies per individual, the way a couple’s combined super is distributed across their respective accounts is a factor that advisers commonly consider. There are various mechanisms that may allow for rebalancing over time. Whether these are appropriate and how they might be implemented is a personal question.
- The SMSF CGT cost base reset election: As described in Section 4, this is a time-sensitive decision for SMSF trustees. Whether to elect the cost base reset depends on the composition and unrealised gains position of the fund’s assets, the members’ balances, and longer-term plans for the fund. Because the election is irrevocable and applies at the fund level rather than the asset level, it warrants careful consideration with an adviser before it is made.
- Future contribution strategies: For those already above $3 million in super, the tax treatment of future contributions — particularly after-tax (non-concessional) contributions — is a factor worth reviewing as part of a broader financial plan. The appropriate contribution strategy depends on an individual’s overall financial position and objectives.
- Overall structure of assets: Some individuals with very large super balances may consider whether holding certain assets inside or outside the super system produces better long-term outcomes in light of Division 296. This involves comparing effective tax rates across different structures, which varies significantly by individual.
7. What Is Still Outstanding
While the legislation has passed Parliament, supporting regulations and ATO guidance have not yet been released as at the date of this article. These are expected to clarify:
- How large APRA-regulated funds will allocate Division 296 earnings to individual members
- Valuation methodologies for defined benefit interests and certain non-account-based income streams
- ATO administrative processes for issuing assessments and handling elections
The absence of regulations means some technical aspects of how Division 296 will operate in practice remain uncertain. Any decisions made prior to the release of regulations carry the risk that final details may differ from current expectations.
8. Summary of Key Legislative Features
| Feature | Detail under the legislation |
| Commencement | 1 July 2026 (first affected year: 2026–27) |
| Tax rate | Additional 15% (on earnings from $3m–10m); additional 25% (on earnings above $10m) |
| What is taxed | Realised earnings only — unrealised capital gains are not included |
| Threshold indexation | $3m threshold indexed in $150,000 CPI increments; $10m in $500,000 increments |
| Who pays | The individual (can elect to have super fund release funds to pay) |
| Transitional rule (first year only) | 2026–27 eligibility determined by TSB at 30 June 2027 only |
| SMSF CGT reset | One-off irrevocable election to reset cost base of assets to 30 June 2026 market value |
| Regulations | Not yet released — operational details subject to further guidance |
Understanding How This Applies to You
Division 296 is now law, and its effect on any individual depends on a range of factors that are personal to their situation — including their total super balance, fund type, age, family circumstances, investment mix, and broader financial position. This article has described how the legislation works in general terms. It is not a substitute for advice that takes your specific circumstances into account.
If you have questions about how Division 296 may be relevant to your situation, or would like to understand the broader picture of your superannuation strategy, speaking with a licensed financial adviser is the appropriate next step.
Want to understand how Division 296 applies to your situation?
The information in this article is general in nature. How Division 296 affects you — and what options may be worth exploring — depends entirely on your personal financial circumstances, including your super balance, fund structure, age, family situation, and broader asset position.
EPG Wealth is a boutique, self-licensed financial planning firm in Sydney. We provide flat-fee, commission-free personal financial advice tailored to your situation.
To discuss your circumstances with one of our advisers, please click here to organise a complimentary 20-minute phone call with an EPG Wealth adviser.
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General Information and Disclaimer
This article has been prepared by EPG Wealth for general information purposes only. It is not financial product advice and has not been prepared taking into account your objectives, financial situation or needs. You should consider whether any information in this article is appropriate for you before acting on it, and we recommend you seek personal financial advice from a licensed financial adviser.
Legislative references are current as at March 2026. The Treasury Laws Amendment (Building a Stronger and Fairer Super System) Bill 2026 has passed both Houses of Parliament and is awaiting Royal Assent. Supporting regulations and ATO guidance notes are yet to be released and may affect how aspects of Division 296 operate in practice.
Worked examples in this article are illustrative only. They use hypothetical figures and simplified assumptions and do not represent the outcome for any particular individual. Tax outcomes will vary depending on individual circumstances.
EPG Wealth Pty Ltd holds an Australian Financial Services Licence. Details available at epgwealth.com.au. Past performance and legislative information are not a reliable indicator of future outcomes.