Superannuation & Division 296 Tax Changes
Starting 1 July 2026, a new tax will apply to the earnings of individuals with a Total Superannuation Balance exceeding $3 million.
The Treasury Laws Amendment (Building a Stronger and Fairer Super System) Act 2026 received Royal Assent on 13 March 2026, introducing a new tax under Division 296 of the Income Tax Assessment Act 1997.
This measure is designed to reduce the tax concessions available to individuals with superannuation balances exceeding $3 million. It applies from the 2026–27financial year onwards.
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Total Superannuation Balance
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Additional Tax Rate
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Effective Tax Rate on Earnings
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$3 million to $10 million
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15% on earnings attributable to the portion of the TSB above $3 million
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30%
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Above $10 million
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A further 10% on earnings attributable to the portion of the TSB above $10 million
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40%
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These thresholds are known as the Large Super Balance Threshold (LSBT) of $3 million and the Very Large Super Balance Threshold (VLSBT) of $10 million. Both thresholds will be indexed incrementally to the consumer price index.
Transitional Capital Gains Tax (CGT) Relief
The new Division 296 legislation includes transitional CGT relief for SMSFs and small APRA funds to ensure capital gains accrued before 1 July 2026 are not subject to the additional tax.
Eligible funds may make an irrevocable election to reset the cost base of all fund assets to their market value as of 30 June 2026. The election applies to all assets held by the fund, including those with unrealised losses, and cannot be made selectively.
The reset applies only for Division 296 calculations. The original cost base for ordinary CGT purposes remains unchanged, meaning only growth occurring after 30 June 2026 will be included in future Division 296 earnings calculations.
Trustees have until the due date for lodging the fund’s 2026–27 income tax return to make the election, allowing time for valuations and strategic review.