The Australian Government has announced significant refinements to the proposed Division 296 tax, aimed at improving fairness and reducing complexity in the taxation of high superannuation balances. These changes have been made in response to industry feedback and are set to take effect from 1 July 2026.
What’s Changing?
Here are the most important updates:
No Tax on Unrealised Gains
The tax will now apply only to actual realised earnings, not paper gains. This is a major shift from the original proposal and brings the measure in line with standard tax principles.
Indexed Thresholds for Fairness
- The $3 million threshold will be indexed to CPI in $150,000 increments.
- A new $10 million threshold will be introduced, with earnings above this taxed at 40%, indexed in $500,000 increments.
Tiered Tax Rates Based on Super Balance
| Super Balance Portion | Tax Rate | Explanation |
| $0 – $3 million | 15% | Standard concessional rate |
| $3m – $10 million | 30% | 15% standard + 15% Div 296 |
| $10m+ | 40% | 15% standard + 15% Div 296 + 10% additional |
Delayed Start Date
The tax will commence from 1 July 2026, with assessments based on total super balances as at 30 June 2027. First assessments will be issued in the 2027–28 financial year.
Defined Benefit Pensions Included
These will now be captured under Division 296 to ensure consistent treatment across all superannuation structures.
Who Does What?
- ATO: Will administer and calculate the Division 296 tax liability.
- Super Funds: Will be responsible for calculating and reporting realised earnings for each member using taxable income concepts.
These changes represent a more balanced approach to taxing high super balances, with a focus on actual earnings, indexed thresholds, and tiered rates. The inclusion of defined benefit pensions and the delayed start date provide additional clarity and time for implementation. If you have super balances approaching or exceeding these thresholds, now is a good time to start planning for the new regime.
If you have any questions about changes to the Division 296 tax and how it may impact you, please give us a call on (03) 9851 6500 or email hello@colledges.com.au.
