Division 296 tax explained: What SMSF members need to know.

You may have heard discussion about the new Division 296 tax, particularly if you have a higher superannuation balance or are a member of a Self Managed Super Fund (SMSF). While it will not affect everyone, it is important to understand what it is, who it applies to and how it may impact your long‑term super strategy.

What is Division 296?
Division 296 is a new personal tax that applies to individuals with more than $3 million in total superannuation. It is designed to reduce some of the tax advantages available to people with larger super balances.

This tax is calculated based on a portion of the investment earnings generated by your super and is paid by you personally, not by your super fund itself. However, there are rules that allow the tax to be paid from your super if you choose.

Importantly, Division 296 is not a cap on how much you can have in super. You can still hold more than $3 million in super. The difference is that some additional tax may apply to part of the earnings on those balances.

Who may be affected?
Division 296 may affect you if your total superannuation balance exceeds $3 million, either at the start or end of a financial year. Your total super includes all super accounts across all funds, including SMSFs, retail and industry funds.

There are two thresholds:

  • Members with more than $3 million may be subject to an additional 15 percent tax on part of their super earnings.
  • Members with more than $10 million may pay an additional 10 percent tax on earnings relating to balances above that level, meaning those earnings are taxed at a higher overall rate.

Some people are fully exempt, such as those who have received structured settlement contributions or children receiving a pension from a parent’s super, although these situations are rare.

When does Division 296 start?
Division 296 will commence from 1 July 2026, with the first year of operation being the 2026–27 financial year.

There is a special rule for the first year. Only your super balance at 30 June 2027 will be used to determine whether the tax applies. This gives affected members some time to review their position and plan ahead.

Why does Division 296 matter for SMSF members?
SMSF members often have larger balances and direct control over investment decisions, which means Division 296 is particularly relevant.

Key points for SMSF members include:

  • The tax is based on investment income, such as rent, interest, dividends and realised capital gains.
  • Unrealised capital gains are not included, meaning asset growth that has not been realised is not taxed under Division 296.
  • SMSFs can choose to opt in to special capital gains relief for assets owned before 30 June 2026. This may reduce the amount of capital gains counted for Division 296 purposes when those assets are sold in the future.

These decisions can have long‑term consequences, which is why tailored advice is important.


Common FAQ’s
Is this a tax on my SMSF?
No. Division 296 is a personal tax, even though it is calculated using your super fund’s earnings.

Can I pay the tax from my super?
Yes. Even if you are not normally able to access your super, you can elect to have your Division 296 tax paid directly from your super fund.

Does this mean super is no longer worthwhile?
Not necessarily. While super may be taxed more than before for higher balances, it can still be a very effective long‑term investment vehicle. In many cases, doing nothing may still be the best option, but this depends on your circumstances.


We are here to help
If you are unsure whether Division 296 may affect you, or if you would like help preparing your SMSF for the changes ahead, our SMSF Specialists are here to support you.

We can help you:

  • Understand whether Division 296 applies to your situation
  • Review your SMSF structure and investment strategy
  • Assess whether any planning opportunities may be appropriate for you

If you would like personalised advice tailored to your super needs, please contact our team on 1300 363 866 or visit www.mcs.au/contact-us to book your appointment.




McConachie Stedman Financial Planning Pty Ltd is a Corporate Authorised Representative of MCS Financial Planning Pty Ltd | ABN 11 677 710 600 | AFSL 560040

General Advice Warning
The information provided in this article is for general information purposes only and is not intended to and does not constitute formal taxation, financial or accounting advice. McConachie Stedman does not give any guarantee, warranty or make any representation that the information is fit for a particular purpose. As such, you should not make any investment or other financial decision in reliance upon the information set out in this correspondence and should seek professional advice on the financial, legal and taxation implications before making any such decisions.