Division 296: Superannuation Legislation Update
It was hard to escape the media coverage of Labor’s proposed superannuation tax legislation changes earlier this year, impacting those with superannuation balances above $3 million. Since the initial announcement garnered criticisms from many, we’ve received some welcome revisions from the Federal Government. Read on to learn what the tax is, the changes that’ve been made and who it will affect.
What is Div 296?
It’s an additional tax on certain earnings associated with an individual's Total Superannuation Balance (TSB) where that balance exceeds $3 million. For earnings on anything over that $3 million threshold, Australians can expect to be taxed at 30% rather than the standard 15%.
The initial proposal caused some concerns, largely around these two points:
- The TSB was inclusive of unrealised capital gains
- The $3 million threshold was not going to be indexed according to inflation
On October 13 2025, The Treasurer confirmed that a revised Division 296 bill will be introduced in the parliament.
Key changes in the new bill
We’ll continue to follow the passage of this legislation closely as there may be more detail to come, but for now we know that:
- The start date has been amended to 1 July 2026, avoiding the complexities associated with retroactive legislation
- Tax on unrealised gains has been removed with a more common sense income approach
- The thresholds will now be indexed in line with the current pension cap to ensure bracket creep doesn’t result in a much higher number of individuals being impacted
- A second threshold has been introduced to better target super concessions on balances above $10 million. Earnings on balances of $3-$10 million will be taxed at 30% while balances of over $10 million will be taxed at 40%
Our industry bodies have been extensively lobbying the government on this legislation and we are heartened that the government appears to have listened to the concerns of public practitioners.
Who do these changes affect?
In short: the government has suggested a very small portion of the population. The new measure will affect less than 0.5% of Australians with superannuation accounts in 2026-27. The higher tier rate on balances above $10 million will affect less than 0.1 per cent of Australians with superannuation accounts, applying a more progressive treatment to superannuation taxation.
All individuals who will be affected by the new measure in 2026-27 would have been affected by the original policy in the same year.
While the Government is reducing superannuation concessions for Australians with high balances, the tax paid on superannuation earnings, even for those in excess of $10 million, will remain concessional compared to individual tax rates.
Please contact us if you’d like to understand more about Div 296, or discuss how it may affect you.
Photo by Diana Parkhouse on Unsplash.
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