Division 296 Tax Guide: $3M Super Explained

Australia’s superannuation system is undergoing a significant proposed change that could impact individuals with large retirement savings. Known as Division 296 Superannuation Tax, this policy introduces an additional tax on superannuation earnings for people whose balances exceed $3 million.

Often referred to as the $3 million super tax, this proposal would apply an extra 15% tax on super earnings above the threshold. If implemented, it could change how high-net-worth individuals, investors, and self-managed super fund (SMSF) trustees approach their long-term retirement planning.

In this guide, we explain how Division 296 works, who may be affected, how the total superannuation balance (TSB) is calculated, and why accurate SMSF asset valuation before June 2026 will become increasingly important.

What Is Division 296 Tax?

Division 296 Superannuation Tax is a proposed measure introduced by the Australian Government to impose an additional tax on superannuation earnings for individuals with very high balances.

Currently, earnings within the superannuation system are generally taxed at 15% during the accumulation phase. Under the proposed reform, individuals whose total superannuation balance (TSB) exceeds $3 million would pay an additional 15% tax on the proportion of earnings associated with the amount above the threshold.

This means the effective tax rate on those earnings could increase to 30%.

The policy is currently part of the Division 296 draft legislation, and its final structure may change before implementation.

Why the Government Proposed the $3 Million Super Tax

The Australian Government has argued that the superannuation system was originally designed to support retirement income rather than serve as a long-term wealth accumulation vehicle for very large balances.

According to policy statements from the Treasury of Australia, the goal of the reform is to:

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  Improve the long-term sustainability of tax concessions in superannuation
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  Ensure tax benefits are targeted toward retirement income rather than wealth accumulation
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  Increase tax fairness within the system

The government has indicated that only a small percentage of Australians will be affected by the new rules, primarily individuals with very large superannuation balances.

Who Will Be Affected by Division 296?

The proposed tax applies only to individuals whose total superannuation balance exceeds $3 million at the end of a financial year.

This includes individuals with:

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  Large Self-Managed Super Funds (SMSFs)
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  Significant balances in retail or industry super funds
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  Long-term high-value investment portfolios within superannuation

Importantly, the tax is assessed at the individual level, not at the fund level. This means that if a person has multiple super accounts, the balances across all funds will be combined to determine their total superannuation balance (TSB).

How the Extra 15% Tax on Super Earnings Works

The proposed extra 15% tax on super earnings will apply only to the portion of earnings attributable to the balance exceeding $3 million.

Unlike traditional capital gains tax structures, the proposal introduces a controversial feature: unrealised gains may be included in the earnings calculation.

This means the tax may apply to increases in asset value even if the asset has not been sold.

For example, if an SMSF holds:

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  Property
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  Private business assets
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  Unlisted investments

An increase in their value could be included when calculating taxable earnings under Division 296.

Understanding Total Superannuation Balance (TSB) in 2026

Your total superannuation balance (TSB) represents the combined value of all super accounts held in your name.

It includes:

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  Accumulation phase balances
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  Retirement phase pensions
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  SMSF assets
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  Rollovers and multiple fund balances

For Division 296, the TSB will be measured annually, typically at the end of the financial year.

From 2026 onwards, this figure will play a critical role in determining whether the additional tax applies.

Why SMSF Asset Valuation Before June 2026 Matters

One of the biggest practical implications of the proposed tax involves SMSF asset valuation.

Many Self-Managed Super Funds hold complex assets such as:

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  Commercial property
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  Private company shares
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  Unit trusts
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  Development projects

Under the proposed framework, these assets may need accurate and regularly updated valuations to calculate earnings properly.

Strategic Planning for High-Balance Super Members

For individuals approaching the $3 million threshold, the upcoming reforms highlight the importance of proactive financial planning. Reviewing the structure of investments inside and outside super can help investors understand how potential changes may affect their long-term retirement strategies.

This is where working with experienced advisers can be valuable. Firms like Kalculators assist individuals and business owners in navigating complex financial decisions, including retirement planning and superannuation compliance.

Through integrated services such as Financial Planning, SMSF advisory, Mortgage Broker support, and Business Insurance planning, clients can take a more holistic approach to managing wealth and protecting long-term financial goals. For investors with large super balances, this type of coordinated advice can help ensure their strategy remains aligned with evolving tax regulations.

How Division 296 Could Affect SMSF Strategies

For SMSF trustees and high-balance super members, the introduction of Division 296 may influence long-term planning strategies.

Some areas investors may review include:

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  Asset allocation within super
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  Timing of capital gains events
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  Contributions and withdrawals
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  Diversification outside the super environment

The goal of such planning is not necessarily to avoid tax but to ensure the structure of investments aligns with the evolving regulatory environment.

Professional advice will be important because the Division 296 draft legislation is still evolving, and the final rules may change.

Key Timeline for Division 296

Final Thoughts

The proposed Division 296 Superannuation Tax represents one of the most significant potential changes to the taxation of large super balances in recent years.

While it is designed to affect only those with more than $3 million in super, the introduction of additional taxes on earnings and the inclusion of unrealised gains could reshape how high-balance investors approach their retirement strategies.

Because the policy is still progressing through the legislative process, staying informed about updates to the Division 296 draft legislation will be essential. For individuals who may be approaching the threshold, seeking professional financial advice early can help ensure their superannuation strategy remains aligned with future regulatory changes.