Division 296 Is Now Law. Have You Reviewed Your Position?
When Division 296 was first announced, we advised clients to understand the proposal and model their position, but not make structural changes in response to legislation that hadn't passed.
That legislation has now passed. Division 296 received Royal Assent in March 2026. Division 296 imposes an additional 15% tax on the portion of superannuation earnings attributable to balances above $3 million, plus a further 10% on the portion attributable to balances above $10 million. Together with ordinary accumulation-phase fund tax, these are commonly described as headline rates of 30% and 40%, although actual effective rates vary. Importantly, this is an individual liability, separate from the fund’s own income tax.
If you’ve been patiently waiting to take action, now could be a good time for a proper review.
What's changed since the original announcement?
If you read our earlier piece on Division 296 when it was first proposed, the broad proportional approach remains: Division 296 applies to a calculated portion of earnings, not to the entire superannuation balance. However, the final design differs materially from the original proposal, including its earnings calculation, indexed thresholds, and additional tier above $10 million.
The first financial year affected is 2026–27. The ATO expects to begin issuing assessments in the latter half of 2027–28. Although assessments are not imminent, earnings during the current financial year may contribute to your first liability, making this an appropriate time to review your position.
Questions to ask
How to respond to Division 296 is different for everyone. It depends on your balance, the assets held inside your fund, your age, your income needs, and how superannuation fits into your broader wealth picture.
But here are some questions to work through with your accountant regardless of where you sit:
Is your balance above the threshold, or approaching it?
If you're comfortably below $3 million and not expecting significant growth, this may not require immediate action. If you're above it, or likely to cross it in the next few years, then a review is recommended.
The thresholds apply to your total superannuation balance across your relevant super interests, not separately to each account or fund. For 2026–27, the relevant balance is measured at 30 June 2027. From 2027–28 onwards, the calculation generally uses the greater of your opening and closing balances.
What is the composition of your fund?
The revised design generally uses realised capital gains and other investment income, rather than taxing ordinary unrealised asset appreciation as earnings. However, unrealised growth can still increase your total superannuation balance and affect your exposure. For SMSFs holding property or other illiquid assets, the timing of income and disposals, transitional CGT adjustments, and cash available to meet the tax are important considerations.
Does it still make sense to keep your balance where it is?
Superannuation may remain tax-effective after Division 296, but the answer can’t be reduced to a flat comparison of rates. The appropriate comparison depends on your actual personal tax rate, the type and timing of investment returns, pension-phase treatment, and the alternatives available to you. Modelling should compare the overall after-tax outcomes across structures.
For balances above $10 million, a more careful structural review is warranted. Whether super remains the most effective holding environment for all assets, or whether rebalancing across structures makes sense, depends heavily on individual circumstances.
What not to do
Division 296 becoming law doesn’t mean you should withdraw large sums from super in a hurry. A withdrawal may not be available, necessary, or beneficial. Access rules, benefit taxation, and the consequences of moving assets outside super should be checked before acting. Division 296 can generally be paid personally or by electing to release money from super. That election ordinarily must be made within 60 days of the date of the notice of assessment. Payment is generally due within 84 days after the notice is given; electing to release money does not extend that deadline.
You also don’t want to make wholesale structural changes without modelling the alternatives properly. The tax on super earnings above the threshold is significant, but so are the asset protection, estate planning, and tax advantages of superannuation.
A good accountant will help you look at the full picture, not just the new tax in isolation. They'll consider how it interacts with your income, estate plan, other structures, and goals.
How we help
At Accounting Heart, we work with clients to model their Division 296 exposure and think through what, if anything, should change as a result. This new law means you need to consider tax, structure, and long-term planning. If you haven't reviewed your position since Division 296 passed, we invite you to book a time to talk with us.
Disclaimer: This is general information only and is not advice of any sort. No warranty or representation is provided by Accounting Heart Pty Ltd as to the accuracy, currency or completeness of the information contained in this blog. Readers of this blog should not act or refrain from acting in reliance upon any information contained herein and must always obtain appropriate taxation and/or other advice as may be appropriate having regard to their particular circumstances.