Why is this tax being introduced?
The government has introduced Division 296 to make the super system a bit fairer.
Super comes with tax benefits, and for most people, those benefits are modest. But for individuals with very large super balances, the tax advantages can become quite significant.
This new measure is designed to limit those extra benefits at the top end, without changing how super works for the majority of Australians.
Who does it apply to?
Division 296 only applies if your total super balance exceeds $3 million.
Here’s how it works:
- Up to $3 million → no change (standard 15% tax on earnings)
- Between $3 million and $10 million → additional 15% tax on earnings linked to that portion
- Above $10 million → additional 25% tax on earnings linked to that portion
In simple terms, the more you have above the threshold, the higher the tax on that portion of your super earnings.
Does this affect most people?
No. This tax is targeted at a relatively small group of Australians with large super balances.
For the majority of people, nothing changes.
But if your super is approaching $3 million, or you expect it to in the future, it’s worth paying attention now rather than later.
How does the tax actually work?
This is where it gets a bit technical, but here’s the simplified version.
Your super fund calculates your earnings, and then the ATO works out how much of those earnings relate to the portion of your balance above $3 million.
The key thing to know is:
👉 The tax is applied to you personally, not the super fund
You then have two options:
- Pay the tax yourself, or
- Have the amount deducted from your super
Are there any exceptions?
Yes, there are a few specific cases where the tax may not apply, even if your balance is above the threshold.
These include:
- Certain death benefit pensions for children
- Structured settlement contributions from personal injury payouts
There are also some important considerations around estate planning, particularly if someone passes away during the financial year.
What should you do next?
If your super balance is:
- Nowhere near $3 million → you likely don’t need to worry
- Getting close → now is the time to start planning
- Already above the threshold → you should be reviewing your strategy
Some things to consider:
- Reviewing how your investments are structured
- Understanding potential tax impacts on future growth
- Looking at whether super is still the best place to hold additional wealth
The bottom line
Division 296 isn’t about changing super for everyone. It’s about tightening the rules at the very top end.
But like most tax changes, the earlier you understand it, the more options you have.
Need help navigating this?
If you’re unsure how this might affect you, or you’d like to review your current super position, our team can help you understand your options and plan ahead with confidence.
👉 Get in touch with Lead Advisory Group to start the conversation
