After three years of debate, draft legislation, and industry pushback, the Division 296 tax passed both houses of Parliament on 10 March 2026. It takes effect from 1 July 2026. If your total superannuation balance is above $3 million or approaching it, this is the most significant change to how your super is taxed in a generation.
Here is what it means for your fund, in plain English.
What is Division 296 tax?
Division 296 is an additional tax on superannuation earnings for individuals with a total super balance (TSB) above $3 million. It applies on top of the existing 15% tax your fund already pays on earnings.
The rates work as follows:
Total Super Balance | Additional Division 296 Tax | Effective Tax Rate on Earnings Above the Threshold |
|---|---|---|
$3 million - $10 million | 15% | 30% |
Above $10 million | 25% | 40% |
Example
Take a member with a $4.2 million total super balance at 30 June 2027 and $210,000 in earnings for the year.
The first $3 million remains taxed at the standard 15% fund rate.
The extra $1.2 million (roughly 28.6% of the balance) attracts the additional 15% Division 296 tax. Extra tax for the year is approximately $9,000 (the exact amount depends on how the ATO attributes earnings, but this gives you a realistic sense).
This means the effective tax rate on earnings above $3 million rises from 15% to 30%. Above $10 million, it rises to 40%.
Both thresholds will be indexed to CPI - the $3 million threshold in $150,000 increments and the $10 million threshold in $500,000 increments. This is a meaningful change from the original proposal, which had no indexation at all.
When does it actually kick in?
The tax applies to earnings from 1 July 2026 onward. The first ATO assessments will arrive after 30 June 2027, once the ATO has the data it needs to calculate each individual's liability. Assessments are generally due 84 days after the notice is issued.
One important point on the first year: for 2026-27 only, the ATO will assess your Division 296 liability based on your TSB at 30 June 2027 - not your opening balance on 1 July 2026. From 2027-28 onward, the higher of your opening or closing balance will be used. This matters if you are considering withdrawing funds to reduce your balance.
Does it apply to SMSFs specifically?
Yes - Division 296 applies whether your super is held in an SMSF, an industry fund, or a retail fund. It is a personal tax assessed to the individual, not the fund itself.
However, there is a significant and time-sensitive opportunity available exclusively to SMSF trustees that members of large funds do not have access to.
The CGT cost base election - what it is and why it matters
SMSF trustees can make a once-off, irrevocable election to reset the cost base of all fund assets to their market value as at 30 June 2026. This election is made at the fund level, meaning it applies to all assets - you cannot select individual assets.
What this means in practice: if your SMSF holds a commercial property purchased in 2012 for $800,000 that is now worth $1.5 million, opting in means future capital gains for Division 296 purposes will be calculated from the $1.5 million market value at 30 June 2026 - not the original $800,000 purchase price. The growth already built up before the tax started will not be counted.
This does not affect how your fund's regular CGT is calculated. It is an adjustment for Division 296 purposes only.
Any SMSF can make this election - even funds with no members currently above $3 million. If a member's balance could exceed $3 million in the future, opting in now locks in the relief. The election must be made by the due date for lodging the fund's 2026-27 annual return.
This is not a decision to make without advice. Opting in means opting in for all assets, including any currently in a loss position. For most funds holding property and shares with significant unrealised gains, the election is worth considering. For funds with assets below their purchase price, the calculation is more complex.
What trustees should consider doing before 30 June 2026
If your TSB is above or approaching $3 million, there are three things worth raising with your accountant or adviser before the end of this financial year:
First, obtain current market valuations for all assets in your fund - particularly property and unlisted investments. These valuations establish the cost base for the CGT election, and the ATO expects them to be accurate and supported by objective evidence.
Second, model your Division 296 liability based on realistic earnings projections for 2026-27. Understanding what the tax will actually cost you, rather than fearing the worst, allows for informed decision-making about whether withdrawals, restructuring, or the CGT election actually makes sense for your circumstances.
Third, discuss the CGT cost base election specifically. This is an irrevocable decision with a hard deadline. Missing it means forfeiting relief on decades of capital growth already built up inside your fund.
This article is for educational purposes only and does not constitute financial advice. Always consult a licensed financial adviser or SMSF specialist before making decisions about your fund.