Division 296 Superannuation Tax One Step Closer to Becoming Law

Division 296 Superannuation Tax One Step Closer to Becoming Law 

• The Div296 Superannuation Tax has taken the next step to becoming law, having been tabled in Parliament this week.
• Being ‘tabled’ means the proposed law has formally entered the Parliamentary process, but it has not yet become law.
• It would affect individuals with super balances over $3 million. 
• Do not take action yet. The rules, thresholds and timing may change, and there is no ATO guidance currently available.

What needs to happen before Division 296 becomes law?

In Australia, proposed tax changes must pass through several stages before they take effect: 

1. Introduction and tabling – the Bill is introduced into Parliament and made public. 
   This is the stage Division 296 is at now.
2. Parliamentary debate and review – the Bill may be debated, referred to committees, and amended.
3. Passage by both Houses – the Bill must be passed by the House of Representatives and the Senate.
4. Royal Assent – once approved, the Bill becomes law.

Importantly, legislation can change at any stage of this process. Amendments are common, particularly for complex tax measures, and final outcomes may differ from the version currently tabled.

Key elements of the Division 296 proposal

Based on the legislation as currently tabled, the key features include:

Who is affected
Individuals with a total superannuation balance exceeding $3 million, with an additional tier applying to balances above $10 million.

When will it come into play?
The proposed start date is the 2026–27 income year.

How does the tax work?
An additional tax would apply to a portion of an individual’s superannuation earnings, based on how much of their balance sits above the relevant thresholds.

• Balances above $3 million would face an additional 15% tax on attributable earnings.
• Balances above $10 million would face a further 10% on attributable earnings (effective tax rate of 40%).

Who pays the tax? 
The tax would be assessed to the individual, not the super fund. Individuals could choose to pay the tax personally or elect to have funds released from their super to cover the liability.

Indexation
The $3 million and $10 million thresholds are proposed to be indexed over time, although in different increments to other superannuation caps.

What this means for clients right now

Although the legislation has been tabled, it is not yet law.

This means:

• the final design may change,
• thresholds, calculation methods or timing could be amended
• practical guidance from the ATO is not yet available. 

We are closely monitoring the progress of the Division 296 legislation and reviewing how it may affect SMSF clients over time. Once the law is finalised and supporting guidance is released, we will provide clearer, tailored advice based on individual circumstances.  

For now, the key message is to stay informed and avoid making changes based on legislation that is still subject to change. If you have any queries, please do not hesitate to contact us.