Division 296 super tax explained (including calculator)

In early March 2026, the ‘Building a Stronger and Fairer Super System’ bills were passed into law. The package of amendments imposes new tax on investment growth that occurs in super balances above $3 million (Division 296 tax).

Division 296 tax comes into effect on 1 July 2026 and will apply to investment earnings earned during 2026–27 and following financial years. Individuals whose total super balance exceeds $3 million on 30 June 2027 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 is the final tax different from the first proposal?

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 and new bills were introduced.

Under the final law, a second $10 million threshold where a higher tax rate is imposed applies. Both the $3 million and $10 million threshold will be indexed.

The original proposal used the increase in total superannuation balance (TSB) during the financial year to determine estimated earnings, which would capture the increase in value of assets that have not been sold (unrealised gains). In the final version, super funds are instead required to report realised earnings for affected members.

The law includes detail of how funds must calculate their total earnings for Division 296 purposes. Further consultation with the industry will contribute to regulations that specify methods or principles that funds can use to attribute a fair share of the fund’s total Division 296 earnings to each member.

Implementation is delayed 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 the fund’s taxable income, with adjustments to remove contributions and include exempt current pension income and capital gains on segregated pension assets.
$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 whose total superannuation balance (TSB) exceeds $3 million.

In 2026–27 (the first year), the tax will be applied based on the TSB at the end of the financial year (30 June 2027). This is a transitional arrangement.

In future financial years, the higher of the TSB on the previous 30 June and year end TSB will be used.

From 1 July 2027 onwards, withdrawing super during the financial year will not necessarily prevent Division 296 tax from applying for that year, as balances both immediately prior to the start of the financial year and the end of the financial year are taken into account.

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.

To calculate the proportions, the below formulae are used:

The result can be expressed as a percentage.

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 may still have tax to pay even in years when your balance has decreased.

Division 296 calculator