Division 296 tax on large super balances

Div 296 tax is now in legislation and levied directly on the individual with balances over $3m in super fund. The assessment is issued by the ATO, and payment is generally due within 84 days of the notice. Div 296 tax is in addition to the (up to) 15% tax that super funds pay on fund earnings in the accumulation phase.

From 2026–2027, Div 296 tax applies to you if you have a large total superannuation balances (TSB) as follows:

TSB up to $3 million: no Div 296 tax;

TSB above $3 million: 15% Div 296 tax on earnings attributable to super balances over $3 million; and

TSB above $10 million: a further 10% Div 296 tax on earnings attributable to super balances over $10 million.

Unlike the tax on earnings paid by super funds, Div 296 tax applies to large super balances in the retirement phase as well as the accumulation phase.

You may be liable for Div 296 tax if your total superannuation balance (TSB) just before the start of the year, or at year end, is above $3 million and your total superannuation earnings for the year are greater than nil. Your TSB includes Australian super interests in APRA-regulated funds, SMSFs and relevant public sector schemes, subject to valuation rules and exclusions. Foreign super interests are excluded.

The Div 296 tax calculation includes three broad steps:

your super fund calculates its Div 296 fund earnings for the whole fund for the year;

the fund attributes a share of those earnings to your interest in the fund and reports the amount to the ATO; and

the ATO applies a formula to work out the proportion of your TSB above each threshold and calculates the tax.

Div 296 fund earnings for APRA-regulated superannuation funds are attributed by the fund trustee on a fair and reasonable basis. However, small funds, including SMSFs, must use a specific formula to calculate the member's share of earnings, based on the average value of their interest in the fund over the year.

Trustees of defined benefit and certain other superannuation interests that don't have an account balance attributable to the beneficiary (eg lifetime income streams) use an alternative method to attribute your earnings that’s more appropriate for those particular types of superannuation accounts.

You have the choice of paying Div 296 tax personally or elect to release the amount from your super (or use a combination). If electing a release, your application generally must be lodged within 60 days of the assessment notice. Tax attributable to a defined benefit interest is generally deferred until benefits become payable.