Home » community » News » Update – Div 296 Tax Legislation Arrives 1 July 2026

Update – Div 296 Tax Legislation Arrives 1 July 2026

If your superannuation balance is above, or approaching, $3 million, an important new tax measure is about to take effect. From 1 July 2026, Division 296 introduces an additional tax for individuals with higher super balances. While the original proposal created strong debate, the legislation is now moving into effect and high-balance members should review how it may impact their long-term retirement strategy.

For many Australians, superannuation will remain one of the most tax-effective wealth structures available. However, the new rules create added complexity around tax planning, liquidity, asset location, and estate planning.

What Is Division 296?

Division 296 is a personal tax applied to individuals whose Total Super Balance (TSB) exceeds $3 million. It sits alongside the existing tax already paid within super funds. In practical terms, higher-balance members may now face an extra tax layer on certain super earnings once their balance moves above the thresholds.

Importantly:

• The tax is assessed to you personally, not your fund
• It applies across all super accounts combined
• It includes balances in accumulation and pension phase
• Pension phase does not exempt you from Division 296

How Division 296 Works

If your Total Super Balance exceeds $3 million, an additional tax applies to earnings attributable to the portion above that threshold. Thresholds are expected to be indexed over time.

Proposed Effective Rates

Important Division 296 Features to Understand

1. First Year Testing Rule

For the first year (2026–27), testing is based on your Total Super Balance at 30 June 2027. From 2027–28 onwards, testing may apply based on the higher of your balance at the start or end of the year. This means late-year withdrawals may not remove you from scope.

2. Combined Super Balances Count

If you have multiple funds, such as an Australian Taxation Office regulated fund plus an SMSF, balances are aggregated.

3. Payment Is Personal

The Australian Taxation Office will issue an assessment to you individually.

You can generally:

• pay personally from outside super, or
• elect to release funds from superannuation

Payment is generally due within 84 days of assessment.

SMSF Cost Base Reset Opportunity

For members with an SMSF, a significant planning opportunity may exist.

A one-off option may allow assets to be reset to market value as at 30 June 2026 for Division 296 purposes.

Key Considerations

• Election generally due with the 2026–27 fund tax return
• Irrevocable once made
• Must apply across fund assets
• May reduce future gains exposure
• Could disadvantage assets currently sitting at a loss
• Separate records may be required

Even balances currently below $3 million may wish to assess this opportunity now.

Planning Considerations for High Balance Members

Every situation is different, but areas worth reviewing now include:

Understand Your Exposure

• Total balances across all funds
• Future growth likely to push you above thresholds
• Pension phase balances still included

Review Investments

• Are certain assets better held inside or outside super?
• Are valuations current for property or unlisted assets?
• Is sufficient liquidity available to meet future liabilities?

Consider Contributions Carefully

Large contributions today may accelerate movement above thresholds.

Review Estate Planning

Death benefit nominations, pensions, succession planning and family structures may need review.

Don’t Rush to Withdraw

For many people, super may still remain highly attractive despite the new tax. Decisions should be strategic, not reactive.

Key Dates

• 30 June 2026: Valuation date for possible cost base reset
• 1 July 2026: Division 296 commences
• 30 June 2027: First assessment year measured
• FY2027 return due date: Cost base reset election deadline
• 2027–28: First ATO assessments expected

How McKinley Plowman Can Help

Division 296 introduces new strategic questions around tax, superannuation, retirement income, SMSFs and wealth structuring. Our specialist teams can assist with:

• modelling likely Division 296 exposure
• reviewing SMSF asset structures
• liquidity planning
• contribution strategies
• estate planning considerations
• broader retirement strategy advice

If your super balance is near or above $3 million, now is an ideal time to review your position before the rules commence. Contact McKinley Plowman on (08) 9301 2200 or via the website to discuss your options.

written by:

Ben Teti

Ben’s career began in April 2008 specialising in taxation and business advisory by managing a small portfolio at a young age. He joined McKinley Plowman in 2014 as a Senior Accountant and with his passion for business and assisting clients in achieving their objectives he has progressed to a Business Services Manager, and more recently being appointed as an Associate Director.

As a qualified Certified Practising Accountant, his areas of expertise include but are not limited to, assisting clients with new business start-ups, advising on business structures, tax planning, business valuations and management reporting across many industries.

Ben prides himself on being part of his client’s business journey in taking them from where they are now and working towards where they want to be.