The $3 Million Superannuation Tax: What Division 296 Could Mean for You

The Federal Government has proposed a new superannuation tax, Division 296, which could see individuals with large super balances paying an additional 15% tax on earnings. While not yet law, the proposed measure has generated significant discussion, particularly among SMSF trustees and high-net-worth individuals.

Here’s what we know so far and what you should be doing to prepare.

What Is Division 296?

Division 296 is a proposed measure that would apply to individuals whose total superannuation balance (TSB) exceeds $3 million as at 30 June in a given income year. If legislated in its current form, it will impose an extra 15% tax on a portion of your earnings above that threshold.

The tax would be:

• Assessed to the individual, not the fund
• Payable from your super or personal funds
• Calculated based on the growth in your net super balance (not just realised income), adjusted for some contributions and withdrawals

How Will It Work?

Let’s look at some simplified examples based on the current proposal:

Sam’s Account

• 30 June super balance: $4 million.
• Annual growth: $120,000.
• Portion above $3m: ($4m–$3m)/$4m = 25%
• Taxable earnings: $120,000 × 25% = $30,000
• Extra tax: $30,000 × 15% = $4,500

Chris’ Withdrawals

• Withdraws $200,000 before 30 June
• Balance now under $3 million at year end
• No Division 296 tax liability

Lisa’s Inheritance

• Receives $2.5 million via death benefit pension (total balance now $4.5 million)
• Only future growth on the inherited portion is taxed, but her balance still exceeds the threshold, so some tax may apply.

What You Should Consider

If your super balance is nearing or above $3 million, now is the time to start preparing. While the rules aren’t final, planning ahead may help reduce your exposure and improve your flexibility when the time comes.

Here are a few practical steps to take:

• Review the liquidity of your super fund – will there be enough cash flow to cover a future tax bill?
• Ensure asset valuations are current – particularly important for SMSF trustees
• Track your total superannuation balance across all funds
• Document all major contributions, rollovers, and withdrawals
• Review any planned transactions ahead of the proposed date of 30 June 2026
• Seek professional advice before making changes to your structure or investment strategy

We’re Here to Help

The Division 296 tax may still be subject to change as it progresses through Parliament but the time to understand its potential impact is now.

Whether you hold an SMSF, have multiple super accounts, or are planning a large contribution or withdrawal, PPT can help you stay informed and prepared.

Get in touch with our team to discuss your super balance and strategy, call (03) 5331 3711.

DISCLAIMER: The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.