Division 296: What the New $3 Million Super Tax Actually Does
Division 296 tax came into effect on 1 July 2026, adding an extra layer of tax on superannuation earnings for the small number of Australians with a Total Superannuation Balance above $3 million. It was legislated in March 2026 as part of the Building a Stronger and Fairer Super System package, and the first assessments will apply to earnings accrued during the 2026–27 financial year. For most people with a super balance well under that threshold, it will never apply directly. It is still worth understanding, both because balances grow over a working life in ways that are easy to underestimate, and because of what the policy signals about the direction of superannuation tax settings more broadly.
How the tax is actually calculated
The mechanism is a two-tier one. On the portion of a member’s earnings attributable to a Total Superannuation Balance between $3 million and $10 million, an extra 15% tax applies on top of the standard 15% paid inside superannuation, bringing the effective rate to 30% on that band. Above $10 million, a further 10% applies, taking the effective rate to 40% on earnings attributable to the balance above that higher threshold. Both the $3 million and $10 million thresholds are indexed to CPI, rising in $150,000 and $500,000 increments respectively as inflation pushes them up over time, rather than remaining fixed indefinitely.
Why the earnings definition changed
The original 2023 proposal would have taxed unrealised capital gains, meaning a member could face a tax bill on a paper increase in their fund’s value even without selling anything or receiving any income. That feature drew sustained criticism from the superannuation industry and tax profession as a departure from how gains are normally taxed in Australia, and it was ultimately removed. The law that passed instead applies only to realised earnings, based on taxable income for the year, calculated by the fund’s actuary and reported to the Australian Taxation Office. A member whose fund holds assets that have grown in value but not been sold will not be taxed on that growth under Division 296.
Who is actually affected
Division 296 was designed to capture a small minority of superannuation members, mostly those who have built very large balances over a long career, often including business owners with self-managed super funds holding commercial property or concentrated share portfolios. Indexation of the thresholds means that ordinary balance growth from investment returns and Superannuation Guarantee contributions does not, by itself, push a growing number of members over the line each year in the way an unindexed threshold would have. For someone with a balance in the hundreds of thousands or low millions, actually reaching $3 million and staying there in real terms remains a genuinely long way off.
What it signals for everyone else
The more useful takeaway for most readers has little to do with the $3 million figure itself. Superannuation’s concessional tax treatment has always come with limits, and this is the latest example of those limits being adjusted rather than removed. Contribution caps, transfer balance caps and now this earnings-based threshold all represent points where policy has drawn a line between concessional and non-concessional treatment, and those lines shift over time as governments respond to cost and equity concerns. The current concessional and non-concessional contribution caps, along with the existing rules around when and how additional contributions can be made, represent the settings available today. Whether it is worth using more of that capacity while current rules apply is a question specific to each household’s broader financial position, but it is a question raised by watching how this kind of policy evolves, not one that requires a $3 million balance to be relevant.
The table below sets out where this sits alongside the other dollar thresholds that apply across superannuation, from the boosts available at any balance through to this one.
Superannuation thresholds at a glance
| Threshold | Amount | Detail |
|---|---|---|
| Tier 1 – Available at any balance | ||
| Superannuation Guarantee | 12% of wages | The rate employers must contribute on ordinary time earnings. Reached its final legislated step on 1 July 2025 and holds at 12% for 2026–27. |
| Super Co-contribution | Up to $500 | Government matches personal (after-tax) contributions for eligible income earners. Full $500 for income up to $49,293, phasing out to nil at $64,293. |
| Spouse Contribution Tax Offset | Up to $540 | Offset for contributing to a lower-earning spouse’s super (needs a $3,000 contribution for the full offset). Full offset where spouse income is under $37,000, phasing out to nil at $40,000. |
| Low Income Super Tax Offset | Up to $500 | Refunds the 15% contributions tax paid on concessional contributions, for adjusted taxable income at or below $37,000. |
| Tier 2 – Building the balance | ||
| Downsizer Contribution | $300,000 per person | From age 55, from the sale of the family home. Up to $600,000 per couple. No Total Super Balance limit applies, and it doesn’t count toward the caps below. |
| Concessional Contributions Cap | $32,500 a year | Before-tax contributions: employer Superannuation Guarantee, salary sacrifice and personal deductible contributions combined. |
| Carry-Forward Concessional Contributions | 5-year catch-up | Unused concessional cap from the past five years can be added, but only where Total Super Balance was under $500,000 at the prior 30 June. |
| Non-Concessional Contributions Cap | $130,000 a year | After-tax contributions, available where Total Super Balance sits below the general transfer balance cap. |
| Bring-Forward Non-Concessional Contributions | Up to 3 years | Below $1.84m: 3 years, $390,000. $1.84m–$1.97m: 2 years, $260,000. $1.97m–$2.1m: standard cap only, no bring-forward. $2.1m and above: nil. |
| CGT Cap Amount | $1,935,000 lifetime | A separate lifetime cap for contributing small business sale proceeds under the retirement exemption or 15-year exemption, outside the caps above. |
| Tier 3 – Large balances | ||
| General Transfer Balance Cap | $2.1 million | The most that can be moved into a tax-free retirement phase income stream. Rose from $2.0 million on 1 July 2026; existing pensions receive a proportional increase. |
| Division 293 Tax | Extra 15% | Applies to concessional contributions where income plus relevant contributions together exceed $250,000. This combined threshold has not moved since 2017. |
| Division 296 Tax | Extra 15–25% | On realised earnings attributed to a Total Superannuation Balance above $3 million (30% total) and above $10 million (40% total). Both thresholds are indexed to CPI. In effect from 1 July 2026. |
Figures apply for the 2026–27 financial year (from 1 July 2026) and are general in nature, not personal advice. Thresholds are indexed on differing schedules and cycles, so re-check before relying on any figure in a future year.
References
Australian Taxation Office, Contributions caps, ato.gov.au.
Australian Taxation Office, Non-concessional contributions cap, ato.gov.au.
Australian Taxation Office, General transfer balance cap indexation on 1 July 2026, ato.gov.au.
Australian Taxation Office, Government contributions, ato.gov.au.
Australian Taxation Office, Division 293 tax on concessional contributions by high income earners, ato.gov.au.
Australian Taxation Office, Super guarantee, ato.gov.au.
Australian Taxation Office, About Division 296 tax for SMSFs, ato.gov.au.
SuperGuide, Division 296 super tax explained (including calculator), superguide.com.au.
SuperGuide, Small business retirement exemption explained, superguide.com.au.