What you need to know about the new $3m super tax

What is Division 296?

Division 296 is an extra tax on super earnings for those with large super balances. It will be administered similarly to the current Division 293 tax on contributions in that the individual will receive an assessment and can elect for the superfund to make payment if they so choose. However, it is triggered by your total superannuation wealth not your contributions. The calculation covers earnings across all your super interests, including SMSFs, retail and industry funds, and is applied in addition to existing super fund taxes.

When does the new tax start and how does it work?

Division 296 (the $3 million superannuation tax) commences on 1 July 2026. It will apply to investment earnings on superannuation balances exceeding $3 million, with the first calculations and assessments based on balances for the financial year ending 30 June 2027.

Division 296 imposes two additional tax thresholds:

• 15% extra tax on earnings attributable to super balances above $3 million
• A further 10% (25% total) on earnings attributable to balances above $10 million

Division 296 tax are in addition to the normal super fund tax, which is 15% less any tax exempt component due to pensions. Taking both division 296 taxes and normal taxes into account, earnings on balances between $3m and $10m may be taxed at up to 30%, while earnings above $10m can attract up to 40%. We say up to 30% or 40% because the total tax will be less to the extent the member is in pension. Importantly, the extra tax only applies to the proportion of earnings that relate to amounts above each threshold, not the entire balance.

Division 296 earnings ignore pension exemptions and are based on actual super investment income, including:

• Dividends (with franking credits)
• Interest and other investment income
• Capital gains (after CGT discounts)
• Less allowable investment expenses

Contributions are excluded from the earnings calculation.

As a practical example:  If your super balance is $12 million, then:

• 75% of your earnings relate to balances above $3 million
• 16.67% relate to balances above $10 million

These proportions are used to calculate your final Division 296 tax liability.

Resetting asset cost bases 30 June 2026

SMSFs and Small APRA Funds can choose to reset asset cost bases to market value at 30 June 2026. This means unrealised gains to that date are excluded from Division 296. The reset is all-or-nothing and must be elected by the due date of the 2026/27 return. 

WARNING: if a fund has an asset with a market value less than its tax cost base, the asset’s tax cost base will be reduced to its market value. Consider selling this asset prior to 30 June if appropriate. Division 296 and losses is a complex area - get advice.

Key dates for decisions

The period from now until 30 June 2026 provides time for important planning - 30 June 2026 is not a deadline except for the resetting of asset costs for tax. This is because FY2027 is an initial transition year and a member’s super balance will not trigger division 296 until 30 June 2027.

Prior to 30 June 2026:

·         Carefully review asset values

·         Identify all assets in a position of unrealised loss and consider action prior to 30 June 2026 and get advice if the unrealised loss is significant.

·         Consider whether to elect a cost base reset if appropriate

·         Identify exposure across all super interests

·         Review alternative investment ownership structures

·         Align super death benefit planning with broader estate planning

Prior to 30 June 2027:

·         Get a clear understanding of the impact of Div296, taking into account important contextual issues such as estate planning, death benefits tax exposure, inter-generational wealth transfer and philanthropic plans.

·         Give yourself plenty of time to transfer assets out of super if that is appropriate and consider tax and transaction costs.

Division 296 and death

Draft parliamentary Division 296 regulations have raised eyebrows regarding how the new tax will apply when a taxpayer dies.

Under the new law, Division 296 tax will be raised in the year of death but not in subsequent years. Controversially, the draft regulations provide that Div 296 continues to apply to a deceased until all death benefits have been paid out.  An executor of an estate will continue to receive Div 296 assessments beyond the year of death until the death benefits have been paid out.  This is an issue because death benefits might be paid to beneficiaries who are not beneficiaries of the estate, but the death benefit tax liability rests with the estate.  It may also be point of conflict when the trustees of the super fund managing the death benefit payment are different to the executors managing the estate. 

Estate executors will need to defer the final administration of the estate until the deceased’s death benefits have been paid out and the final Div 296 assessment issued.  Div 296 taxpayers may need to reconsider if a pension that automatically reverts to their spouse is still appropriate.

Submissions have been made flagging these difficult operational aspects of the draft regulations and we will wait and see if the government is prepared to make any changes.

Super vs. moving wealth outside

Even with Division 296, super remains competitive for many. The effective tax rate depends on balance size, income vs capital gains, and structure. Decisions should be integrated with estate planning and non-super tax outcomes, there’s no one-size-fits-all answer.

Early preparation, understanding exposure, confirming valuations and aligning super with broader estate and succession planning are key.

For further information or for advice specific to your circumstances, contact your usual Forvis Mazars advisor or a specialist.

Published: 29.04.2026

Please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice.

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