In this guide
Important
Division 296 has not yet been legislated and the details below may change if legislation is amended or not passed.
On 13 October 2025 the government announced changes to the proposed legislation.
The details contained in the following guide (and the calculator) relate to the new proposal.
If the Albanese Government has their way, a new tax will be charged on investment growth that occurs next financial year in super balances above $3 million (Division 296 tax).
If your balance is above $3 million on 30 June 2027, you will be among the first to receive an assessment.
The government recognises that the tax rates on super earnings of 15% in the accumulation phase and 0% in the retirement phase provide a significant concession for most taxpayers. Applying additional tax on the growth of larger balances is intended to better target that concession.
Let our explainer and calculator cut through the jargon.
How has the proposal changed?
In its original form, Division 296 proposed an additional tax on investment earnings for super balances above $3 million. The $3 million threshold was not to be indexed, and the definition of earnings captured unrealised capital gains.
Criticism of the proposed legislation focused on the lack of future indexation of the cap, which would capture the balances of more Australians over time, and on the taxation of unrealised gains, which was unprecedented in tax law.
In October 2025, the Treasurer Jim Chalmers announced changes to the proposal addressing both areas.
Under the new proposal, a second $10 million threshold where a higher tax rate applies is to be introduced. Both the $3 million and $10 million threshold will be indexed.
The original proposed law used the increase in total superannuation balance (TSB) during the financial year to determine estimated earnings, which captures the increase in value of assets that have not been sold (unrealised gains). In the new version, super funds will instead be required to report realised earnings for affected members. Further consultation with the industry will determine approved methods funds can use to estimate the realised earnings that should be attributed to each member.
Implementation is to be delayed by 12 months from the original proposal, with the first application of the tax taking place for earnings accrued during the 2026–27 financial year.
A summary of the old and new proposal is shown in the table below.
| Previously announced measure | New measure |
|---|---|
| Earnings calculated based on changes in TSB, adjusted for withdrawals and contributions. | Earnings calculated based on the superannuation funds’ realised earnings attributed to members with a TSB above the threshold. Fund earnings will be based on its taxable income, aligned with existing tax concepts. |
| $3 million threshold not indexed. | $3 million threshold indexed to CPI. $10 million threshold indexed to CPI. |
| Additional tax of 15% applied to the proportion of earnings corresponding to TSBs above $3 million | Two tiered approach applying: 15% additional tax on the proportion of earnings corresponding to the TSB between $3 million and $10 million 25% additional tax on the proportion of earnings corresponding to TSBs above $10 million |
| Start date 1 July 2025 (focusing on TSB at 30 June 2026) | Start date 1 July 2026 (focusing on TSB at 30 June 2027) |
Total tax on investment earnings
Since the usual tax on earnings is 15% in the accumulation phase, the application of Division 296 brings the total tax rate to 30% for the proportion of earnings corresponding to the TSB between $3 million and $10 million (15% + 15%), and 40% for the proportion of earnings corresponding to the TSB above $10 million (15% + 25%) for assets supporting accumulation phase interests.
However, this is not the end of the story. Some super funds in Australia for government employees are ‘untaxed’, meaning the usual 15% tax on earnings does not apply.
In addition, assets supporting retirement phase interests (pensions) attract tax-free investment earnings.
When Division 296 is applied to the earnings of untaxed funds and retirement phase interests, the total tax is the Division 296 rate alone.
Who does it apply to?
Division 296 tax applies to the taxable super earnings of individuals with total superannuation balances (TSBs) over $3 million at the end of a financial year. If your TSB is below $3 million on 30 June, the tax does not apply, even if you have made withdrawals to bring your balance below the threshold.
The threshold applies to individuals, so couples can still have up to $6 million in super and not be liable for additional tax. Individual application also means the total value of a self-managed super fund (SMSF) may be above $3 million but if no members have an individual TSB above the threshold then no Division 296 applies.
How is it calculated?
Division 296 tax applies at the rate of 15% to the earnings attributed to the portion of your balance that is above $3 million.
A further 10% tax is imposed on earnings attributed to the portion of your balance that is above $10 million, bringing total Division 296 tax on this portion to 25%.
This means if your balance is only a little over the threshold, a correspondingly small proportion of your earnings will attract extra tax.
Division 296 tax formula
15% x taxable earnings x taxable proportion above $3 million (proportion of TSB 1)
+
10% x taxable earnings x taxable proportion above $10 million (proportion of TSB 2)
To calculate the proportions, the below formulae are used:
Taxable proportion above $3 million (proportion of TSB 1)
(your TSB at the end of the year – $3 million)/ your TSB at the end of the year
Taxable proportion above $10 million (proportion of TSB 2)
(your TSB at the end of the year – $10 million)/ your TSB at the end of the year
The result can be expressed as a percentage.
Example: Balance below $10 million
Runi has a total super balance of $4.5 million on 30 June 2027.
Her fund has reported earnings attributed to her of $150,000.
Step 1 – proportion:
($4.5 million – $3 million)/$4.5 million
= $1.5 million/$4.5 million
= 0.3333 or 33.33%
Step 2 – apply Division 296 tax
15% x 33.33% (proportion above $3 million) x $150,000 (earnings)
= $7,500
Example: Balance above $10 million
Jonathan has a total super balance of $11.5 million on 30 June 2027.
His fund has reported earnings of $500,000 attributed to him
Step 1 – proportions
Proportion of TSB 1:
= ($11.5 million – $3 million)/$11.5 million
= $8.5 million/$11.5 million
= 0.7391 or 73.91%
Proportion of TSB 2:
($11.5 million – $10 million)/$11.5 million
= $1.5 million/$11.5 million
= 0.1304 or 13.04%
Step 2 – apply Division 296 tax
= 15% x 73.91% (proportion of TSB 1) x $500,000 (earnings) + 10% x 13.04% (proportion of TSB 2) x $500,000 (earnings)
= $61,952.50
What if my investment return is negative?
A negative return (fall in value) can occur in your super balance for the year if the value of your investments is lower at the end of the year than at the start.
In this scenario, your fund still has taxable income from interest earned on cash, dividends received from shares, rent on property, realised capital gains, etc.
It is the realised income attributed to you that will attract Division 296 tax, so you will still have tax to pay even in years when your balance has decreased.
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