Ask your Aspen advisor:
"If my super balance is getting up there, what will the new Division 296 tax actually mean for me from 1 July 2026?”
The new Division 296 tax is now law and will apply from 1 July 2026. It is designed to reduce the tax advantage of holding very large amounts inside super, without changing the rules for everyone else.
In plain English, the Government is saying: super is still a tax-effective structure, but once balances move beyond a certain size, the tax concessions start to taper off.
Who it affects
The new rules apply where an individual’s total super balance is above:
- $3 million
- $10 million for the higher band
Both thresholds are expected to be indexed over time. Under the new setup, earnings linked to balances above those thresholds will be taxed more heavily. For some people, that pushes the effective tax rate on part of their super earnings up to 30%, and for very large balances, up to 40% overall.
That is a major shift for people who have spent years building wealth inside super on the assumption that it would remain one of the lowest-tax environments available.
How it works in practice
For SMSFs especially, this is not just a “new tax” story. It is also an admin and planning story.
The fund will need to calculate its Division 296 earnings using taxable income, adjusted for things like:
- contributions
- exempt pension income
- non-arm’s length income
- certain pooled super interests
- capital gains where relevant elections have been made
That amount is then attributed to members and the ATO issues the tax assessment to the individual, not the fund. The individual can pay it personally or choose to have it paid from a nominated super interest.
Why this matters beyond tax
This is not just about paying a bit more tax. It raises bigger questions around:
- whether excess capital should still sit inside super
- how future investment growth is best managed
- whether estate planning still works the way you thought
- and how cash flow will be handled when the tax starts being assessed
There are also special scenarios that need thought, including death during a financial year and how this interacts with estate planning
What to do now
If your balance is already close to the threshold, or well above it, now is the time to:
- get tailored modelling done
- review whether your current super structure still makes sense
- consider the impact of the small-fund CGT election where relevant
- talk through longer-term strategies with both your accountant and financial adviser
Final thought
Division 296 will not affect everyone, but for those it does affect, it is significant. The earlier you understand the numbers, the more choices you usually have.
If your super balance is near the line, speak with your Aspen advisor now so you can plan ahead, rather than react later.
