The New Division 296 Tax Has Passed the Senate. Here's What It Actually Means for Australians.

Let's cut through the noise.

You've probably seen the headlines — "Division 296 passes the Senate", "super tax shock", "retirees hit hard". And if you're like most people, you read those words and thought: does this affect me?

Here's the honest answer: for most Australians, no. But if you're building serious wealth through superannuation — or you're a business owner, property investor, or high-income earner who's been diligently contributing to super for decades — this is absolutely worth understanding.

Let me break it down in plain English.

What Is Division 296?

Division 296 is a new tax on superannuation earnings for people with very large super balances — specifically, those above $3 million.

It passed Parliament on 10 March 2026 and takes effect from 1 July 2026. The first financial year it will actually impact people is 2026–27, with assessments issued from 2027 onwards.

The idea behind it is straightforward: the government believes that people with super balances above $3 million are receiving a disproportionately generous tax concession compared to everyone else. Division 296 reduces — but does not eliminate — that concession for high-balance holders.

Who Does It Affect?

Division 296 only applies if your total superannuation balance (TSB) exceeds $3 million.

Your TSB is the combined value of all your super accounts across every fund — your industry fund, retail fund, self-managed super fund (SMSF), and any pension accounts you hold.

According to the ATO, fewer than 0.5% of Australians currently have super balances above $3 million. So if you're not in that group right now, this legislation doesn't directly affect you today.

However — and this is important — the $3 million threshold is not indexed to inflation. That means over time, as super balances grow and wages rise, more Australians will eventually cross this threshold. It's worth keeping on your radar.

How Does the Tax Actually Work?

Super funds already pay up to 15% tax on investment earnings. Division 296 adds an additional personal tax on top of that — assessed directly to you, not your fund.

The additional tax rates are:

| Your Total Super Balance | Additional Tax Rate | |---|---| | Under $3 million | No additional tax | | $3 million – $10 million | Additional 15% on earnings above $3m | | Above $10 million | Additional 10% on earnings above $10m |

So if your balance is above $3 million, the combined effective tax rate on earnings attributable to that portion becomes up to 30% for balances between $3m and $10m, and up to 40% for balances above $10m.

Importantly, the tax is calculated on realised earnings — not unrealised gains. This means if your SMSF holds property or shares that have gone up in value but haven't been sold, those paper gains are not included in the calculation. This was a major concern during the debate, and the final legislation addressed it.

What About Negative Earnings Years?

If your super earnings are negative in a given year (i.e. your fund lost money), no Division 296 tax is payable for that year.

The catch? Losses can't be carried forward to offset future years. It's a one-way street — you pay when you earn, but you don't get a credit when you lose.

How Is the Tax Paid?

Once the ATO assesses your Division 296 liability, you have two options: pay it personally out of your own pocket, or elect to have it released from your super fund. This is similar to how Division 293 tax (the extra tax on super contributions for high earners) already works.

What Should You Do If You're Affected?

If your super balance is approaching or above $3 million, here's what I'd suggest:

1. Review your super strategy now — before 1 July 2026. The legislation includes a transitional rule that allows SMSFs to reset the cost base of their assets to market value at 30 June 2026. This is a one-time, irrevocable election that could significantly reduce your Division 296 earnings in future years.

2. Talk to your financial adviser and accountant. Division 296 is complex, and the right strategy depends entirely on your personal circumstances — your balance, your fund structure, your income, and your goals. This is not a DIY situation.

3. Don't panic-withdraw from super. Some people are considering pulling money out of super to get below the $3 million threshold. Before doing anything drastic, get advice. Withdrawing large amounts from super can trigger other tax consequences and may not be the right move for your long-term wealth.

4. Stay informed. The ATO is still releasing regulations around how earnings are calculated and allocated, particularly for SMSFs with multiple members. There will be more guidance to come.

The Bottom Line

Division 296 is a real change, and for those it affects, it's a meaningful one. But it's not the catastrophe some headlines made it out to be.

For the vast majority of Australians — including most women who are still in the wealth-building phase of their financial journey — this legislation doesn't change anything right now. What it does do is serve as a reminder that the rules around superannuation can and do change, and that having a clear, proactive financial strategy matters more than ever.

If you're not sure where you stand, or you want to understand how to build wealth in a way that's resilient to changes like this, that's exactly what Culgan Wealth is here for.

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This article is general information only and does not constitute personal financial advice. For advice specific to your situation, please consult a qualified financial adviser.