Division 296 Super Tax Explained: The Super Tax Targeting +$3Mil Balances
- Future Accounting
- Jul 1
- 2 min read
Understanding the Division 296 Superannuation Tax Threshold
So, what does this mean for people impacted by it?
If your total super balance exceeds this threshold at the end of a financial year, an additional 15% tax will apply to part of your super’s earnings.
This tax is separate from your personal income tax and fund tax, making it an entirely new layer of taxation.
Division 296 applies to:
SMSFs and industry/retail funds alike
All super components (accumulation and pension)
Australian super funds only (not foreign pensions)
The Calculation:
The tax rate is 15% on a proportion of your super earnings, calculated using:
15% × (Proportion over $3 million) × (Super Earnings)
This means individuals with large super balances could be taxed up to 30% on some of their super fund growth.
Key Terms and How the Tax Works:
1. Super Balance: This includes all your super accounts, across all funds, combined.
2. Proportion Over $3m: (30 June Super balance – $3m) ÷ 30 June Super balance
3. Super Earnings: The growth in your super across the year, calculated as:
Closing balance + Withdrawals – Contributions – Opening balance
NOTE: Withdrawals are added back, so they don’t reduce taxable earnings. Contributions are deducted.
Importantly, unrealised capital gains (i.e. asset value increases) are included in earnings, making this tax broader than standard super tax rules.
Frequently Asked Questions
Q: Will my pension account be taxed under Division 296?
Yes. Pension and accumulation accounts are both included in the calculation.
Q: Is there any indexation of the $3m threshold?
No. The $3 million cap is fixed unless legislation changes.
Q: Can I avoid the tax by withdrawing funds?
Only if your total balance is reduced below $3 million by 30 June. Withdrawals reduce your balance (and therefore your proportion), but they are still added back when calculating earnings.
Q: Will losses be refunded?
No. You can carry Division 296 losses forward to offset future earnings, but you won’t receive a refund.
Q: How do I pay the tax?
The ATO will issue a personal Division 296 assessment. You can choose to pay it from your super (via a release authority) or personally.
What Should You Do Now?
Although the Div 296 tax is still yet to be legislated, it's looking likely the extra tax will be introduced, and there is still time to assess any plans and implement strategies:
Review your super balances and consider whether you are likely to exceed $3 million.
Strategically plan —this new tax will definitely mean super is less favourably taxed (compared to the alternatives) than it used to be. However, it doesn't necessarily mean super is worse than the alternatives.
We still have time to review things using the "don't panic" lens. Our Superannuation Strategy Team can help you understand the Division 296 implications for your fund and structure a plan to minimise its impact.
