Insights

Division 296 Super Tax Update: What It Means for You

The federal government has revised its proposed Division 296 legislation, which introduces an additional tax on superannuation balances above $3 million. These changes aim to make the system fairer and more sustainable, while addressing concerns raised by advisers, industry bodies, and investors.

What Is Division 296?

Division 296 is a new tax measure targeting high super balances. Originally, it proposed a 30% tax on earnings above $3 million including unrealised gains. This meant individuals could be taxed on asset growth even if they hadn’t sold the asset or received income from it.

What’s Changed?

Following industry feedback, the government has made several key adjustments:

• No Tax on Unrealised Gains: Only realised earnings such as dividends, interest, rent, and capital gains from sold assets will be taxed.

• Two-Tier Tax System:

Earnings on balances between $3 million and $10 million will be taxed at 30%.

Earnings on balances above $10 million will be taxed at 40%.

• Indexed Thresholds: The $3 million and $10 million thresholds will now rise with inflation, reducing the risk of bracket creep over time.

• Delayed Start Date: The tax will commence on 1 July 2026, giving clients and advisers more time to prepare.

Who Will Be Affected?

Only a small fraction of Australians (less than 0.5%) currently hold super balances above $3 million. Even fewer exceed $10 million. For most clients, this tax will not apply. However, those approaching the threshold should begin reviewing their strategies.

Planning Implications

• No Need to Exit Super: Super remains a tax-effective environment. The revised rules mean most clients can continue their current strategy without drastic changes.

• Balance Equalisation: Couples can consider strategies to even out super balances, using contribution splitting or re-contribution to minimise exposure to the tax.

• Liquidity Planning: For those affected, ensuring sufficient liquidity to cover any additional tax will be important.

Final Thoughts

The revised Division 296 proposal is more balanced and practical, and they have removed the most contentious elements. For most clients, it’s business as usual. For those affected, we’ll work with you to ensure your strategy remains aligned with your goals and the new rules.

If you have questions or would like to review your position ahead of the 2026 start date, please reach out to your Altitude Adviser.

Altitude Financial Planning is a Corporate Authorised Representative of Altitude Financial Advisers Pty Ltd ABN 95 617 419 959 AFSL 496178

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