On 19 December 2025, Treasury released the updated exposure draft legislation of the revised Division 296 framework, opening consultation until 16 January 2026.
The revised Division 296 measures remain subject to consultation and passage through Parliament. The final law and any ATO guidance may differ from the current draft.
As a recap, Division 296 introduces a new additional tax imposed on an individual/member level to realised superannuation earnings linked to the portion of an individual’s Total Superannuation Balance (TSB) above $3 million.
The TSB reference amount is the higher of the balance at the start or end of the income year, capturing accumulation and pension-phase interests equally.
Division 296 tax is calculated broadly as follows:
- 15% on the proportion of earnings attributable to the part of an individual’s TSB between $3 million and $10 million (the usual 15% fund tax plus an extra 15% = effective tax of 30%); PLUS
- 10% on earnings attributable to TSB above $10 million (standard 15% fund tax + additional 15% for $3–$10m portion + additional 10% for >$10m portion = effective tax of 40%).
Note: the higher 40% tax rate only applies to the proportion above $10 million, not the entire balance.
Updates to the Exposure Draft
The December 2025 exposure draft introduces significant refinements compared to earlier versions.
1. Unrealised Gains – these will no longer be included in the calculation of “earnings”. However, unrealised growth still influences the values of a TSB.
2. Pre-30 June CGT relief – gains accrued before 30 June 2026 (and realised in a later year) can be excluded from the Division 296 tax calculation if the Super Fund elects the relief.
- This will require dual cost base tracking (see points 1 and 2 below) for the affected assets and only gains exceeding the notional cost base count as Division 296 earnings. There is a critical election requirement where SMSFs must lodge an approved ATO form by the 2026-27 tax return due date. Failure to opt-in eliminates this relief entirely.
- Original cost base (for fund tax) alongside
- Notional cost base (30 June 2026 market value, for Div 296).
3. Total Superannuation Balance (TSB) test – this looks at the higher of year-start or year-end balance (first year 2026-27 uses end balance only).
First-year transitional rule (for 1 July 2026 to 30 June 2027 only) – only the balance at 30 June 2027 (end of the year) will be used to determine whether Division 296 applies. The opening balance at 1 July 2026 will be disregarded for the 2027 FY, regardless of how high it was at the start.
4. Earnings Allocation Among Members– as Division 296 is a tax at the individual level, the fund’s earnings need to be proportionally split amongst its members. The Treasury is yet to release guidance on the exact method of how the earnings will be apportioned among fund members, but it may be similar to a fund applying for an actuarial certificate.
5. Deceased Members – The latest exposure draft narrows transitional relief for deceased members: Division 296 tax won’t apply for 2026-27 if death occurs before 30 June 2027 (tighter than earlier proposals exempting any year-end death). After that, estates could still face liability based on year-start/end TSB tests. Reversionary pension recipients immediately take on the deceased’s full pension value in their own TSB, risking tax exposure right from the death year.
What remained the same?
- Implementation Date – still remains to be 1 July 2026, which means Division 296 assessments will be issued after 30 June 2027.
- Payment Method – Division 296 tax applies to all individuals with TSB over $3 million. As mentioned above, this is a new tax imposed on an individual level. What this means is, the Australian Taxation Office (ATO) will send Notices of Assessment to the affected individuals and payment can be made either personally or from the super fund (once the ATO issues a release authority).
- Two-tiered progressive thresholds & tax rates – $3 million and $10 million
- Thresholds are indexed to CPI
- $3 million threshold will be indexed in increasements of $150,000
- $10 million threshold will be indexed in increasements of $500,000
- If super balance exceeds $3 million, any earnings attributable to the portion above $3 million will be taxed an extra 15% (on top of the usual 15%, giving 30% effective tax)
- If super balance exceeds $10 million, any earnings attributable to the portion above $10 million will be taxed an additional extra 10% (on top of the usual 15% + additional 15% for earnings attributable to the portion above $3 million, giving 40% effective tax)
Next Steps and Considerations
- While Division 296 will operate from 1 July 2026, 2025-26 FY transactions and decisions still directly affect outcomes and member balances.
Accru Felsers is available to assist you with understanding the current proposals and compliance requirements as they evolve. Please feel free to reach out online or call us at 02 8226 1655.
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The information provided in this communication is general in nature and does not take into account your personal objectives, financial situation, or needs. Before acting on any information, you should consider its appropriateness in relation to your own circumstances and seek independent financial advice where necessary. We recommend consulting a licensed financial adviser before making any investment or financial decisions. Past performance is not a reliable indicator of future performance.
