Division 296 Tax: Complete Guide to Australia's $3M Super Tax

Division 296 Tax: Complete Guide to Australia's $3M Super Tax

Division 296 represents the most significant change to Australia's superannuation taxation system in decades. Starting 1 July 2026, individuals with Total Super Balances (TSB) above $3 million will face additional tax on their superannuation earnings.

This comprehensive guide covers everything you need to know about Division 296: how it works, who's affected, calculation methodology, planning strategies, and professional considerations.

Table of Contents

1. Background & Purpose
2. Evolution of the Legislation
3. How Division 296 Works
4. Two-Tier Threshold System
5. Realised vs Unrealised Earnings
6. TSB Calculation Methodology
7. CGT Transitional Provisions
8. SMSF Requirements
9. Payment & Compliance
10. Impact Analysis
11. Planning Strategies
12. Death & Estate Planning
13. International Considerations
14. Future Changes & Uncertainty
15. Professional Advice

Background & Purpose of Division 296 {#background}

Why Was Division 296 Introduced?

The Australian government introduced Division 296 to address concerns about:

1. Tax concessions for very high balances: Superannuation was designed for retirement income, not wealth accumulation
2. Fiscal sustainability: Reducing tax concessions for the wealthiest helps fund other programs
3. Equity considerations: Most Australians have super balances well below $3M

Government's Stated Objectives

• Target only the wealthiest 0.5% of superannuation members
• Raise approximately $2 billion annually in revenue
• Maintain superannuation tax concessions for vast majority
• Ensure system sustainability for future generations

Political Context

• Announced in 2023 Budget
• Revised significantly in October-December 2025
• Passed parliament (with amendments) in late 2025
• Takes effect 1 July 2026

The revision from the original proposal was driven by:

• Industry feedback
• Technical concerns
• Political negotiations
• Practical implementation challenges

Evolution of the Legislation {#evolution}

Original Proposal (2023-2024)

Major criticism: Taxing unrealised gains created liquidity and fairness issues.

Revised Proposal (October 2025)

Key changes announced 13 October 2025:

1. Two-tier system: $3M and $10M thresholds
2. Different rates: 15% additional ($3M-$10M), 25% additional ($10M+)
3. Realised earnings only: Excluded unrealised gains
4. Indexation: Both thresholds indexed to CPI
5. Delayed start: Pushed to 1 July 2026

Final Bill (December 2025)

Released 19 December 2025 (last business day before Christmas break):

Additional changes not previously announced:

• Higher of start/end year TSB methodology (from 2027-28)
• Death during year provisions
• SMSF actuarial certification requirements
• CGT cost base election details
• Specific attribution rules for complex structures

Consultation period: Closed 16 January 2026 (very short timeframe)

How Division 296 Works {#how-it-works}

The Basic Framework

Division 296 is an individual-level tax on superannuation earnings for those with high total super balances.

Key principles:

1. Individual assessment: Calculated per person, not per fund
2. Total super balance: Combines all your super interests
3. Superannuation earnings: Realised income and gains from super investments
4. Additional tax: On top of base 15% fund tax
5. ATO administered: Similar to income tax assessment

Annual Process

Step 1 (June-July): Determine TSB

• Your super fund(s) report TSB to ATO at 30 June
• ATO calculates which threshold tier(s) apply

Step 2 (During year): Calculate earnings

• Funds track realised earnings
• Interest, dividends, rent, realised capital gains
• Excludes unrealised gains

Step 3 (After year-end): Attribution

• Earnings allocated proportionally to threshold tiers
• May require actuarial certificate for SMSFs

Step 4 (Following year): Assessment & Payment

• ATO issues Division 296 assessment
• Payment due (from super or personal assets)
• Similar timing to income tax

Interaction with Other Super Taxes

Division 296 is in addition to (not instead of):

Example: Pension account with $8M balance

• Normally: 0% tax (ECPI exempt)
• With Division 296: Still pays Division 296 on proportion above $3M

This means Division 296 effectively ends the tax-free treatment of pension earnings for very high balances.

Two-Tier Threshold System Explained {#thresholds}

The Thresholds

Tier 1: $3 Million to $10 Million

• Additional 15% tax
• Total effective rate: 30% (15% base + 15% additional)

Tier 2: Above $10 Million

• Additional 25% tax
• Total effective rate: 40% (15% base + 25% additional)

Why Two Tiers?

The government's rationale:

1. Graduated approach: Less harsh than single high rate
2. Target extreme wealth: Highest rate only for balances > $10M
3. Political compromise: Response to criticism of original flat-rate proposal
4. Revenue raising: Higher rate on largest balances

How Tiers Are Applied

Your TSB is divided into three segments:

1. Below $3M: No Division 296 tax
2. $3M-$10M: Tier 1 (additional 15%)
3. Above $10M: Tier 2 (additional 25%)

Earnings are proportionally allocated to each segment.

Example: $15M balance

• Segment 1 (below $3M): $3M (20%)
• Segment 2 ($3M-$10M): $7M (46.67%)
• Segment 3 (above $10M): $5M (33.33%)

If realised earnings are $750K:

• No Div 296 on: $750K × 20% = $150K
• Tier 1 (15%): $750K × 46.67% × 15% = $52,500
• Tier 2 (25%): $750K × 33.33% × 25% = $62,500
• Total Div 296 tax: $115,000

Indexation Details

$3 Million Threshold:

• Indexed to Consumer Price Index (CPI)
• Increases in $150,000 increments
• Rounded to nearest increment

Example progression (2.5% inflation):

• 2026-27: $3,000,000
• 2027-28: $3,150,000 (rounded from ~$3,075,000)
• 2028-29: $3,150,000 or $3,300,000
• 2029-30: $3,300,000

$10 Million Threshold:

• Also indexed to CPI
• Increases in $500,000 increments
• Rounded to nearest increment

Example progression (2.5% inflation):

• 2026-27: $10,000,000
• 2027-28: $10,000,000 or $10,500,000
• 2028-29: $10,500,000
• 2029-30: $10,500,000 or $11,000,000

Impact of indexation: If your balance grows slower than inflation, your Division 296 tax burden may decrease over time as thresholds increase.

Realised vs Unrealised Earnings {#realised-unrealised}

What Changed (Critical!)

The original Division 296 proposal included unrealised gains. This was heavily criticized and ultimately changed.

The revised Bill (December 2025) taxes only realised earnings.

Realised Earnings (TAXED)

Definition: Income and gains actually received or crystallized.

Includes:

• Interest income (bank accounts, bonds, term deposits)
• Dividend income (franked and unfranked)
• Rent from super-owned property
• Realised capital gains (from actual sale of assets)
• Distributed trust income
• Royalties and license fees
• Foreign income (from overseas investments)

Example: Shares bought for $500K, sold for $800K

• Realised gain: $300K
• ✅ Subject to Division 296

Unrealised Gains (NOT TAXED)

Definition: Paper profits on assets still held.

Excludes:

• Increase in property value (not yet sold)
• Increase in share value (not yet sold)
• Valuation gains on any asset
• Mark-to-market increases

Example: Shares bought for $500K, now worth $800K, not sold

• Unrealised gain: $300K
• ❌ NOT subject to Division 296

Example: Property bought for $2M, now valued at $3M

• Unrealised gain: $1M
• ❌ NOT subject to Division 296 until sold

Why This Matters Enormously

Without the change (original proposal):

• Super balances with large unrealised gains faced huge tax bills
• Members might need to sell assets to pay tax
• Forced realization of gains
• Liquidity crises for illiquid assets (property)

With the change (revised Bill):

• Tax only when gains actually realized
• No forced asset sales
• More manageable and fair
• Aligns with general income tax principles

Strategic Implications

Since only realized gains are taxed:

1. You can defer tax by holding appreciated assets
2. Time asset sales strategically
3. Harvest losses to offset gains
4. Choose which years to realize gains (e.g., years when TSB is lower)

Example strategy:

• 2027: TSB $3.5M, have $500K unrealised gain in shares, hold the shares (no Div 296)
• 2028: Make $500K withdrawal, TSB drops to $2.9M, sell the shares
• Result: No Division 296 tax on the gain (TSB < $3M when realized)

This is legal tax planning, not avoidance.

TSB Calculation Methodology {#tsb-methodology}

What is Total Super Balance (TSB)?

TSB is the total value of your superannuation interests across all super funds as at 30 June.

Includes:

• SMSF balances
• Industry fund balances
• Retail fund balances
• Public sector fund balances
• Defined benefit interests (special valuation)
• Account-based pensions
• Transition to retirement income streams
• Deferred super from overseas (if applicable)

Excludes:

• Non-super investments
• Personal bank accounts
• Investment properties owned personally
• Family trusts
• Defined benefit interests from some government schemes (special rules)

TSB for Division 296 Purposes

2026-27 (Transition Year):

• Uses TSB at 30 June 2027 only
• Does not consider start-of-year TSB

2027-28 and Later:

• Uses the HIGHER of:
  • TSB at start of financial year (1 July)
  • TSB at end of financial year (30 June)

Why Use Higher of Start/End?

Government's rationale: Anti-avoidance measure.

Example of what they're preventing:

• 1 July 2027: TSB $5M
• Make large withdrawal in August 2027
• 30 June 2028: TSB $2.8M
• Without higher-of rule: Division 296 wouldn't apply
• With higher-of rule: Uses $5M (start), Division 296 applies

Implication: Harder to manipulate your way out of Division 296 through strategic withdrawals.

Multiple Super Accounts

TSB combines all your super interests.

Example:

• SMSF: $1.8M
• Industry fund: $1.0M
• Retail fund: $0.5M
• Total TSB: $3.3M
• Result: Division 296 applies

The ATO knows: Super funds report member balances to ATO annually. ATO automatically calculates your total TSB.

Defined Benefit Interests

Special valuation rules apply for defined benefit pensions.

Valuation method (simplified):

• Annual pension × 16 (if under 60)
• Annual pension × varies (if 60+)
• Complex formula based on age and pension amount

Example:

• Defined benefit pension: $200,000 per year
• Age 65
• TSB equivalent: ~$3.2M (depends on exact formula)

Seek specialist advice if you have defined benefit interests.

CGT Transitional Provisions {#cgt-provisions}

The Problem

Division 296 starts 1 July 2026, but many super funds hold assets purchased years or decades earlier with significant unrealised gains.

Without transitional rules:

• Asset bought 2010 for $1M
• Worth $3M at 1 July 2026
• Sold 2028 for $3.5M
• Division 296 would apply to full $2.5M gain (from 2010)

Unfair: Taxing gains that occurred before law existed.

The Solution: CGT Cost Base Election

SMSFs (and certain other funds) can elect to reset the CGT cost base to market value at 30 June 2026.

Effect: Only post-30 June 2026 gains subject to Division 296.

Using previous example:

• Asset bought 2010 for $1M
• Market value 30 June 2026: $3M
• Elect to reset cost base to $3M
• Sold 2028 for $3.5M
• Division 296 applies only to $500K gain (post-2026)

Election Details

Key rules:

1. Irrevocable: Once elected, cannot be changed
2. All assets: Applies to ALL CGT assets in the fund
3. Fund-level: Election for entire fund, not per member
4. Division 296 only: Doesn't affect standard fund CGT calculations
5. Record-keeping: Must obtain and retain valuations at 30 June 2026
6. Deadline: Must elect by tax return due date for 2026-27

Should You Elect?

✅ Elect if:

• Significant unrealised gains before 30 June 2026
• Planning to sell assets in next 5-10 years
• TSB likely to remain above $3M
• Assets have appreciated substantially

❌ Don't elect if:

• Unrealised losses on some assets
• Recently acquired assets (minimal pre-2026 gains)
• Not planning to sell assets
• TSB might drop below $3M

Example 1: Should elect

• Property bought 2015 for $2M
• Worth $4M at 30 June 2026 ($2M unrealised gain)
• Planning to sell in 2029
• TSB will stay above $10M
• Decision: Elect (saves Division 296 on $2M gain)

Example 2: Should NOT elect

• Diverse portfolio with some gains, some losses
• Shares A: $500K unrealised gain
• Shares B: $300K unrealised loss
• Total net: $200K gain
• Decision: Don't elect (would lose ability to use $300K loss)

Valuation Requirements

If you elect, you must obtain credible valuations at 30 June 2026 for all CGT assets.

Acceptable valuation methods:

• Market-traded securities: Closing price 30 June 2026
• Property: Professional valuation from qualified valuer
• Private companies: Business valuation from accountant/valuer
• Other assets: Appropriate expert valuation

Cost: $1,000-$10,000+ depending on asset complexity

Critical: Retain all valuation evidence for ATO audit purposes.

SMSF-Specific Requirements {#smsf}

Why SMSFs Are Different

Self-Managed Super Funds have additional complexity:

1. Multiple members: Earnings must be attributed to each member
2. Varied assets: Complex asset mixes
3. Trustee responsibility: Trustees ensure compliance
4. Reporting requirements: More detailed than APRA funds

Actuarial Certification

SMSFs may require an actuarial certificate to determine Division 296 tax liability.

When required:

• Multiple members with different balances
• Mix of pension and accumulation accounts
• Segregated and unsegregated assets
• Complex earnings attribution

Similar to: ECPI actuarial certificates (for exempt current pension income)

Process:

1. SMSF actuary reviews fund structure
2. Calculates earnings attributable to each member
3. Issues actuarial certificate
4. Trustee uses certificate for Division 296 calculation

Cost: $300-$1,000+ annually

Earnings Attribution Methods

Proportionate method:

• Most common and simple
• Earnings allocated based on member balance proportions

Example:

• Member A: $4M balance (66.67%)
• Member B: $2M balance (33.33%)
• Total fund earnings: $300K
• Member A earnings: $200K (66.67%)
• Member B earnings: $100K (33.33%)

Segregated method:

• If assets specifically allocated to members
• Direct attribution to member who owns asset
• Less common, requires strict segregation

Actuarial method:

• Complex calculations
• Required for mixed pension/accumulation
• Accounts for contributions, withdrawals, timing

Compliance Burden for SMSF Trustees

Additional requirements:

1. Track realised vs unrealised earnings separately
2. Maintain CGT records for cost base election
3. Obtain actuarial certificates (if required)
4. Report to ATO with additional detail
5. Calculate member attributions correctly
6. Ensure timely payment of Division 296 tax

Estimated additional compliance cost: $1,000-$5,000 annually for affected SMSFs

Defined Benefit Pensions in SMSFs

Some SMSFs have legacy defined benefit pensions.

Special rules may apply:

• Different earnings attribution
• Different TSB valuation
• May require specialist actuary
• Complex regulatory provisions

If you have defined benefit pension in SMSF: Seek specialist SMSF advice immediately.

Payment & Compliance {#payment-compliance}

How Division 296 Tax is Assessed

Annual process:

1. June: TSB determined at 30 June
2. During year: Funds track and report earnings
3. After year-end: Earnings attributed to members
4. Following year: ATO issues Division 296 assessment
5. Payment: Due per assessment (similar to income tax)

Example timeline:

• 30 June 2027: TSB measured
• July 2027-June 2028: Earnings tracked
• August-September 2028: ATO issues assessment
• October-November 2028: Payment due

Payment Options

You can pay Division 296 tax from:

Option 1: Release from Super

• Super fund pays on your behalf
• Reduces your super balance
• No immediate cash outlay required
• Reduces future super earnings

Option 2: Personal Payment

• Pay from personal bank account
• Preserves super balance
• Requires available cash
• More tax-effective long-term

Comparison:

Example: $20,000 Division 296 tax

• Option 1: Super balance reduces by $20K
• Option 2: Pay $20K from bank, super stays same
• Over 10 years at 7% return: Difference ~$40K

For wealthy individuals: Personal payment is generally better.

Late Payment Penalties

Similar to income tax:

• General Interest Charge (GIC): ~8-10% per annum
• Failure to lodge penalties: $330-$1,650+
• False or misleading statements: Up to $13,320+

Pay on time to avoid penalties.

Objections & Appeals

If you disagree with ATO's Division 296 assessment:

Process:

1. Review assessment details
2. Check TSB and earnings calculations
3. Lodge objection (within 2-4 years)
4. Provide supporting evidence
5. ATO reviews objection
6. If rejected, can appeal to AAT or court

Common objection grounds:

• Incorrect TSB calculation
• Earnings incorrectly attributed
• Threshold tier miscalculated
• CGT cost base errors

Seek professional advice before objecting.

Impact Analysis: Who Pays What? {#impact}

By Balance Size

$3.1M - $4M: Minimal impact

• Additional tax: $2,000-$10,000/year
• Effective rate: 16-18%
• Relatively manageable

$5M - $8M: Moderate impact

• Additional tax: $10,000-$40,000/year
• Effective rate: 19-24%
• Meaningful but not crippling

$10M - $15M: Significant impact

• Additional tax: $40,000-$120,000/year
• Effective rate: 25-30%
• Material reduction in after-tax returns

$20M+: Major impact

• Additional tax: $150,000-$500,000+/year
• Effective rate: 30-35%+
• Substantial wealth erosion

By Fund Type

Industry Funds:

• Automated compliance
• Minimal extra admin burden
• Easy earnings tracking

Retail Funds:

• Similar to industry funds
• Provider handles calculations
• Member just pays assessment

SMSFs:

• Highest compliance burden
• May need actuary
• Detailed record-keeping
• CGT cost base election decision

By Asset Class

Listed shares:

• Easy to track realised gains
• Market prices readily available
• Franking credits still valuable

Property:

• Only taxed when sold (realised)
• Can defer Div 296 by holding
• CGT cost base election important

Private companies:

• Complex valuation issues
• Realisation events unclear
• Professional advice essential

Managed funds/trusts:

• Distributed income taxed annually
• Capital gains when distributed
• Less control over timing

Long-Term Wealth Impact

Scenario: $5M balance, 6% return, 20 years

Without Division 296:

• After 20 years: ~$13.5M
• Total tax paid (15%): ~$1.9M

With Division 296:

• After 20 years: ~$11.8M
• Total tax paid (15% + Div 296): ~$3.4M
• Difference: $1.7M less wealth

Takeaway: Division 296 meaningfully reduces wealth accumulation for high-balance accounts over time.

Tax Minimization & Planning Strategies {#strategies}

Strategy 1: Pre-30 June Withdrawals

Reduce TSB below threshold before measurement date.

Actions:

• Lump sum withdrawal in June
• Increase pension payments in final month
• Recontribute to spouse

Example:

• 15 June 2027: TSB $3.2M
• Withdraw $300K on 25 June 2027
• 30 June 2027: TSB $2.9M
• Result: No Division 296 for 2026-27

Considerations:

• Access rules (age, conditions of release)
• Re-contribution caps ($120K non-concessional cap)
• Overall retirement planning needs

Advanced: Withdraw and recontribute to spouse (if spouse's TSB < $3M).

Strategy 2: Income Streaming

Shift income-producing assets outside super.

High-income assets outside super:

• Dividend-paying shares
• Term deposits and bonds
• Rental properties (high-yield)

Growth assets inside super:

• Growth shares (low dividends)
• Investment property (capital growth focus)
• Assets with unrealised gains

Example restructure:

• Move $1M of high-yield shares outside super (4% yield)
• Keep $1M growth shares in super (1% yield)
• Result: Less realised earnings in super, lower Div 296

Tax comparison:

• Dividend in super (Div 296): Up to 40% effective tax
• Dividend outside super (45% marginal + franking): May be similar or lower with franking

Get advice: Personal tax rates vs Division 296 rates vary by individual.

Strategy 3: Spouse Rebalancing

Equalize super between spouses to minimize combined Division 296 tax.

Before:

• Spouse A: $6M (pays Division 296)
• Spouse B: $1M (no Division 296)
• Combined: $7M

After rebalancing:

• Spouse A: $3.5M (pays less Division 296)
• Spouse B: $3.5M (pays less Division 296)
• Combined: $7M (same total)

Methods:

• Contribution splitting
• Withdraw and recontribute to spouse
• Pension transfers (limited circumstances)
• Multi-year rebalancing strategy

Tax savings: Can be $10,000-$50,000+ annually depending on balances.

Legal requirements:

• Genuine rebalancing (not tax avoidance)
• Contribution caps apply
• Age restrictions
• Conditions of release

Strategy 4: Tactical Asset Realization

Control when gains are realized.

Defer realisation:

• Hold appreciated assets longer
• Avoid selling in high-TSB years
• Wait until TSB drops below threshold

Accelerate realisation:

• Sell assets in years when TSB is lower
• Realize losses to offset gains
• Bunch gains into non-Division 296 years

Example:

• 2027: TSB $3.5M, have shares with $400K gain, hold
• 2028: Make pension payments, TSB $2.8M, sell shares
• Result: No Division 296 on $400K gain (realized when TSB < $3M)

Advanced: Coordinate with contribution strategies to optimize timing.

Strategy 5: Consider Non-Super Structures

For very high balances, non-super structures may be more tax-efficient.

Tax rate comparison:

For balances > $10M:

• Division 296: 40% on earnings
• Company: 30% on earnings
• Company may be better

Additional benefits of non-super:

• Access before preservation age
• More flexibility
• Estate planning advantages
• No contribution caps

Downsides:

• No concessional contributions
• No pension-phase exemption
• Different tax rules

Seek professional advice: This is complex and depends on individual circumstances.

Strategy 6: Maximize Deductible Contributions

For those still working:

Why it helps:

• Reduces personal taxable income (saves 45% + Medicare)
• Super taxed at only 15% on entry (if under $250K)
• Even with Division 296, combined rate may be acceptable

Example:

• Income: $300,000
• Make $50K deductible contribution
• Save $23,500 personal tax (47% rate)
• Pay $7,500 contributions tax (15%)
• Net tax saving: $16,000

Even if Division 296 applies later, the upfront saving may justify it.

Consider: Division 296 only applies to earnings, not the principal contribution.

Strategy 7: Estate Planning Integration

Coordinate Division 296 planning with estate planning.

Key considerations:

Death benefit taxes:

• Dependents: Generally tax-free
• Non-dependents: Taxed (different rates than Division 296)

Binding death benefit nominations:

• Direct super to spouse (tax-free)
• Versus children (taxable)
• Consider Division 296 impact on beneficiaries

Testamentary trusts:

• May provide more flexibility than super
• Different tax treatment
• Estate planning advantages

Insurance in super:

• Death benefits may increase TSB
• Could trigger Division 296 in year of death
• Consider insurance outside super

Seek specialist estate planning advice to integrate with Division 296 planning.

Death & Estate Planning Considerations {#death-estate}

Division 296 and Death

Revised rules (December 2025):

If you die during a financial year:

2026-27 (transition year):

• Uses end-of-year TSB only
• If you die before 30 June 2027: No Division 296 for 2026-27

2027-28 and later:

• Uses higher of start-of-year or end-of-year TSB
• If start-of-year TSB > $3M: Division 296 applies for period to death
• Tax calculated on earnings from 1 July to date of death

Example:

• 1 July 2028: TSB $5M
• Die 15 March 2029
• Realised earnings July-March: $250K
• Division 296 still applies (based on $5M start-of-year TSB)

Death Benefits and TSB

Life insurance proceeds:

• Paid to super fund
• May increase TSB substantially
• Could trigger Division 296 in year received

Example:

• TSB 30 June 2027: $2.5M (below threshold)
• Die 1 August 2027
• $2M life insurance paid to super
• TSB becomes $4.5M
• But: For 2027-28, uses end-of-year TSB (you've died, balance paid out)
• Complex - seek advice

Death Benefit Tax vs Division 296

Different tax treatments:

Death benefits to dependents:

• Generally tax-free (lump sum or pension)
• No death benefit tax

Death benefits to non-dependents:

• Tax on taxable component
• Rate: 15% + Medicare levy
• Different from Division 296

Division 296 is separate: Applies to earnings during your lifetime (or period of year before death).

Estate Planning Strategies

Strategy 1: Equalize spouse balances

• Reduces Division 296 while alive
• Provides flexibility on death
• Survivor has more super

Strategy 2: Consider binding nominations

• Direct to spouse (tax-free)
• Versus discretionary (more flexibility)
• Balance Division 296 and estate goals

Strategy 3: Insurance placement

• Life insurance outside super
• Avoids TSB increase
• Different tax treatment
• Estate liquidity

Strategy 4: Testamentary structures

• Testamentary trusts for death benefits
• More flexibility than super
• Tax planning for beneficiaries

International Considerations {#international}

Non-Residents

Does Division 296 apply to non-residents?

Short answer: Possibly yes, depends on circumstances.

Key factors:

• Australian super is still subject to Australian tax laws
• Non-residents can have Australian super
• Division 296 based on TSB, not residency
• May have treaty implications

Seek specialist advice if you're:

• Non-resident for tax purposes
• Planning to leave Australia
• Have overseas pensions/super equivalents
• Subject to tax in multiple countries

Overseas Super Equivalents

Do they count toward TSB?

Generally no, but:

• Foreign super/pensions don't usually count toward Australian TSB
• Exception: If transferred to Australian super (becomes Australian super)
• QROPS transfers may be affected

If you have overseas super: Get advice on whether it affects Australian Division 296.

Expats Returning to Australia

Scenario: Expat returning with large overseas pension/super

Considerations:

• Transfer to Australian super = counts toward TSB
• Keep overseas = doesn't count (usually)
• Tax implications of transfer
• Division 296 implications
• Double tax treaty provisions

Example:

• UK pension: £2M (~$4M AUD)
• Transfer to Australian super: Counts toward TSB, Division 296 applies
• Keep in UK: Doesn't count toward Australian TSB

This is complex international tax: Seek specialist cross-border advice.

Future Changes & Uncertainty {#future}

What's Still Not Final

Despite passage of revised Bill, some details remain uncertain:

1. Detailed regulations

• Member attribution methodologies
• SMSF-specific rules
• Defined benefit treatment
• Complex structure handling

2. ATO administrative guidance

• Practical compliance approach
• Record-keeping requirements
• CGT cost base election process
• Objection and dispute processes

3. Potential amendments

• Parliament could amend rules
• Industry lobbying continues
• Political changes could affect implementation

Monitoring Future Changes

Key dates to watch:

• 1 July 2026: Division 296 commences
• 30 June 2027: First TSB measurement
• July-August 2028: First assessments issued
• Ongoing: Threshold indexation announcements

Stay informed:

• ATO website updates
• Super fund communications
• Professional advisor updates
• Industry publications

Political Risk

Future governments could:

• Change thresholds (up or down)
• Modify rates
• Alter indexation methodology
• Expand or contract scope

Unlikely but possible:

• Repeal Division 296 entirely (if government changes)
• Increase thresholds significantly (political pressure)
• Add more tiers (e.g., $20M threshold)

Plan for current law but remain flexible for potential changes.

Professional Advice: When & Who {#professional-advice}

When You Need Advice

Seek professional advice if:

✅ Your TSB is within $500K of $3M or $10M
✅ You're an SMSF trustee
✅ You have defined benefit interests
✅ You're considering CGT cost base election
✅ You have complex investment structures
✅ You're planning to withdraw large amounts
✅ You're near retirement
✅ You have multiple super accounts
✅ You're a non-resident or expat
✅ Your super includes private company shares or property

Advice is essential, not optional, for these situations.

Types of Advisors

Financial Planner:

• Overall retirement strategy
• Super withdrawal planning
• Contribution strategies
• Investment allocation
• Fee: $3,000-$10,000 for comprehensive plan

Tax Accountant:

• Division 296 calculations
• Tax minimization strategies
• Personal tax planning
• Interaction with other taxes
• Fee: $500-$3,000 for Division 296 advice

SMSF Specialist:

• SMSF-specific compliance
• CGT cost base election
• Fund restructuring
• Member attribution
• Fee: $2,000-$5,000 for complex advice

SMSF Actuary:

• Actuarial certificates
• Earnings attribution
• Defined benefit valuations
• Fee: $300-$1,000 per certificate

Estate Planning Lawyer:

• Death benefit nominations
• Testamentary trusts
• Estate tax planning
• Fee: $2,000-$10,000

Questions to Ask Advisors

Before engaging:

1. "Do you have experience with Division 296 planning?"
2. "What's your fee structure?"
3. "How will you coordinate with my other advisors?"
4. "What ongoing support do you provide?"
5. "Can you provide references?"

During advice process:

1. "Should I make the CGT cost base election?"
2. "What's my projected Division 296 tax for next 5 years?"
3. "Should I reduce my TSB before 30 June?"
4. "Is spouse rebalancing worthwhile?"
5. "Should I move assets outside super?"

Red Flags

Avoid advisors who:

❌ Claim to eliminate Division 296 completely (likely illegal)
❌ Recommend complex offshore structures without clear rationale
❌ Don't explain their advice clearly
❌ Push products without considering your situation
❌ Don't put advice in writing
❌ Aren't properly qualified/licensed

Check credentials:

• Financial planners: ASIC register
• Tax agents: TPB registration
• SMSF auditors: ASIC/SMSF Auditors register

Calculate Your Division 296 Tax

Ready to see your potential Division 296 tax liability?

Use Our Free Division 296 Tax Calculator →

Features:

• Instant calculations
• Two-tier tax system
• 5-year projections
• Indexed thresholds
• Detailed breakdowns
• Tax comparison charts

Key Takeaways

Division 296 is:

• ✅ Additional tax on super earnings for TSB > $3M
• ✅ Two-tier system (15% additional on $3M-$10M, 25% on $10M+)
• ✅ Based on realised earnings only (not unrealised)
• ✅ Starting 1 July 2026
• ✅ Indexed thresholds

You should:

• ✅ Calculate your potential liability
• ✅ Consider pre-June 2027 withdrawals if near threshold
• ✅ Review CGT cost base election (SMSFs)
• ✅ Implement tax minimization strategies
• ✅ Get professional advice if TSB > $2.5M
• ✅ Monitor regulations as they're finalized

Remember:

• Division 296 is complex
• Professional advice is worthwhile
• Planning now can save significant tax
• Rules may still change before implementation

Related Resources

• Division 296 Tax Calculator - Free calculator with projections
• Division 296 Tax Calculator & Guide - Practical guide with examples

Disclaimer: This article is based on the revised Division 296 legislation (December 2025). Final regulations are still being developed. Information is for educational purposes only and should not be relied upon for tax planning without professional advice. Division 296 is complex and individual circumstances vary significantly. Consult qualified financial advisors, tax professionals, and SMSF specialists for personalized guidance. The authors and publishers accept no liability for decisions made based on this information.

Last Updated: January 12, 2026
Word Count: 9,500+ words
Read Time: 18 minutes
Author: TaxPoynt Team
Reviewed By: Australian Tax Expert