Last reviewed October 2026
Updated October 2026 now that Division 296 is law, with the final rules, the indexed thresholds and projections for people still building their super.
Division 296 is the extra tax on super balances above $3 million, so most people in their thirties and forties assume it’s someone else’s problem. The numbers say otherwise. A 38-year-old on $400,000 with $600,000 in super, contributing to the cap every year, has about $4.25 million by 60 on ordinary growth assumptions.
The threshold does rise with inflation, which buys that 38-year-old some time, and they don’t cross it until about 64. Someone who’s 45 with $1.5 million crosses at 57, before they can touch a dollar. And whether to keep pouring money into super turns out to be a different question to the one most people are asking.
General information only. It isn’t personal advice. Consider speaking with a licensed adviser and registered tax agent about your situation.
Five points decide whether Division 296 should change how you contribute.
- From 2026-27, earnings on the share of a balance above $3 million are taxed at 30%, and above $10 million at 40%
- Only realised earnings count, and both thresholds rise with inflation
- A 38-year-old at the contribution cap typically crosses the indexed threshold in their early sixties, and a 45-year-old with $1.5 million at 57
- Even above $3 million, money salary sacrificed into super usually still beats investing outside it on tax
- The real trade-off is access, flexibility and the risk of more rule changes, which is why couples evening up their balances matters so much
What Division 296 is
Division 296 is an additional tax on super earnings for people whose total super balance is above $3 million. It became law on 13 March 2026 and applies from the 2026-27 year, with the ATO setting out how it’s calculated that the first assessments come after that year ends.
Super funds normally pay 15% tax on earnings in the accumulation phase. Division 296 adds another 15% on the share of your earnings that relates to the part of your balance between $3 million and $10 million, so that slice is effectively taxed at 30%. Above $10 million, a further 10% applies, taking that slice to 40%.
That top rate is worth a pause. It’s higher than the 30% you’d pay in a company, an investment bond, or even a family trust under the proposed 30% minimum tax. Reading between the lines, the government doesn’t want anyone holding more than $10 million in super.
Two changes from the original 2023 design matter a lot. The tax only applies to realised earnings, like interest, dividends, rent and capital gains when assets are actually sold, so it doesn’t tax paper gains. And both thresholds are indexed to inflation, the $3 million one in steps of $150,000 and the $10 million one in steps of $500,000.
How the extra tax is worked out
The tax applies to a proportion of your earnings, not the whole lot. You work out what share of your balance sits above $3 million, then apply that share to the year’s realised earnings.
Take a balance of $4 million with $280,000 of realised earnings in the year. A quarter of the balance sits above $3 million, so a quarter of the earnings, $70,000, is taxed an extra 15%. The Division 296 tax is $10,500, on top of the fund’s normal tax.
Near the line, the tax is smaller than people expect. At $3.5 million with $245,000 of realised earnings, only one-seventh of the earnings relates to the slice above $3 million, so the Division 296 tax is $5,250. It grows quickly from there, because both the share above the line and the earnings keep rising.
Your total super balance counts every super account you hold, in accumulation and pension phase, including an SMSF. For 2026-27, your balance at 30 June 2027 is what counts. From 2027-28, it’s the higher of your balance at the start or the end of the year, so a big withdrawal late in the year won’t get you under the line for that year.
The ATO sends the assessment to you personally, rather than your fund, and you can generally pay it yourself or have it released from your super. If you’re in an industry or retail fund, the fund works out and reports your earnings. If you have an SMSF, that falls to your fund’s accountant, and the extra work will likely show up in the fees. The tax only counts earnings from 1 July 2026, with transitional rules for gains that built up before then, which is why SMSFs were told to get their assets valued at 30 June 2026.
Division 293, the other high-earner super tax
If you’re wondering how many numbered taxes one super fund can attract, you’re not alone. The government has its hand out at the contribution stage, at the earnings stage, and again when super passes to adult children, so it’s no wonder people mix them up.
Division 293 is the one that hits money going in. Once your income plus your concessional contributions passes $250,000, it adds 15% to the tax on those contributions, taking it to 30%. Division 296 is the one that hits earnings once your balance passes $3 million.
Our 38-year-old on $400,000 pays both in time. Their $32,500 of concessional contributions, the 2026-27 cap, are taxed at 30% instead of 15% because of Division 293, so $22,750 lands in super each year rather than $27,625. That’s still well ahead of the 47% they’d pay on the same money as salary.
Who crosses the threshold, and when
The table projects five starting points, each contributing at the cap until 60, with $22,750 going in a year after tax. It assumes a 9% gross return, Vanguard’s long-run figure for shares and a little under the 9.8% in our long-term investment returns research, which is 7.65% after the fund’s 15% tax. The threshold rises with 2.5% inflation in $150,000 steps.
| Age now | Super now | Balance at 60 | Threshold at 60 | Crosses the indexed threshold at |
|---|---|---|---|---|
| 38 | $600,000 | $4,245,040 | $5,100,000 | 64 |
| 38 | $800,000 | $5,257,409 | $5,100,000 | 60 |
| 45 | $1,000,000 | $3,622,556 | $4,200,000 | 64 |
| 45 | $1,500,000 | $5,133,264 | $4,200,000 | 57 |
| 50 | $2,000,000 | $4,504,085 | $3,750,000 | 57 |
Most projections you’ll see compare a future balance with today’s $3 million, which makes the first 38-year-old cross at 56. The threshold won’t still be $3 million in 2044, though. In today’s money, their $4.25 million at 60 is worth about $2.5 million.
So for many people under 40, Division 296 is a question for their early sixties. For anyone in their mid-forties with $1.5 million or more, it arrives before they can access the money, and that changes the decision.
Should you stop contributing to super?
It’s worth separating the tax question from the access question, because they give different answers. On tax alone, super usually still wins even above $3 million, because the money goes in before income tax.
The table follows $1,000 of pre-tax salary three ways, invested at 9% a year gross. Into super it’s taxed at 30% going in under Division 293, leaving $700, then 30% on earnings above the threshold. Into an investment bond or company, the $1,000 is taxed at 47% as salary first, leaving $530, then 30% on earnings. In your own name, it’s $530 with earnings taxed at 47%.
| $1,000 of pre-tax salary | Super, above $3 million | Investment bond or company | Your own name |
|---|---|---|---|
| Invested after tax | $700 | $530 | $530 |
| Tax on earnings | 30% | 30% | 47% |
| After 10 years | $1,290 | $976 | $845 |
| After 20 years | $2,376 | $1,799 | $1,346 |
| When you can access it | From 60 | Any time, bond tax-free after 10 years | Any time |
So the case for slowing contributions isn’t really a tax one. Above the threshold, super’s tax on earnings is the same 30% you’d pay in a company or bond, and those are far more flexible. The government also has a nasty habit of mucking around with super. Over the last 20 years they’ve pushed back the age you can access it, and this one measure has been rewritten more than once since 2023. I think it’s more likely the rules change again than stay put.
My view is that ending up around the threshold is a good outcome, and ending up well above it isn’t. So aim to undershoot a little in your thirties and forties, and ramp up as you get closer to 60 and can see both the balance and the rules more clearly, because there are no givebacks once the money’s in.
Where your own line sits depends on your balance, your income, when you want to stop working and what else you’re building outside super. Most people tracking toward the threshold would benefit from modelling it properly before the next 30 June, and our guide to the 2026 super contribution caps covers the limits that apply.
The other reason not to overfill super
Division 296 isn’t the only tax that bites on a big super balance. When super is paid to adult children after you die, the taxable part of it is taxed at up to 17%, including the Medicare levy, because adult children usually don’t count as dependants for tax.
On a $3 million balance that’s all taxable component, that’s up to $510,000 your family doesn’t receive. There are ways to reduce it, like drawing down and recontributing after 60 or holding more wealth outside super, but they take time to put in place, which is another reason to think about the size of your super well before retirement.
Division 296 for couples
Division 296 applies to each person separately. A couple can hold up to $6 million between them, indexed, before either is caught, but only if the balances are roughly even.
That’s often not the case. One partner may have earned more, or taken less time out of work, and ended up with most of the super. Using the table’s assumptions, a 45-year-old couple with $1.5 million in one account and $300,000 in the other would see the bigger account cross the indexed threshold at 57. Even them up to $900,000 each, both contributing, and neither crosses until 65.
Contribution splitting is the main tool for evening up. You can move up to 85% of a year’s concessional contributions to your partner’s account, by applying to your fund in the following financial year. The receiving partner needs to be under their preservation age, or under 65 and not retired. Done every year from your thirties, it can shift a large share of the growth into the account that’s further from the threshold.
If you’re already close to the line
For people already near or over the threshold, a few approaches tend to come up. Each one has trade-offs, and the right mix depends on your age, your partner’s balance and your plans for the money.
Evening up balances with a partner is usually the first. After 60, some people withdraw money and recontribute it to the partner with the smaller balance, within the contribution caps. Because only realised earnings are taxed, the timing of selling assets inside the fund also matters, particularly in an SMSF. And new money that would have gone into super can go to an investment bond or company instead, which caps the tax at 30% while keeping access.
Where the surplus can go instead
If you decide to contribute less, the money still needs somewhere to work. An investment bond or company caps the tax on earnings at 30% while keeping access, a home loan offset saves non-deductible interest, and debt recycling can turn home loan interest you can’t claim into investment interest you can.
Our guides to tax-efficient investing, super contributions to save tax and how to save tax in Australia compare those options in more detail.
Frequently asked questions
Has Division 296 been passed, and when does it start?
Division 296 is an additional tax on the share of super earnings that relates to a balance above $3 million, taking the rate on that slice to 30%, and to 40% above $10 million. It became law in March 2026 and applies from the 2026-27 year, with the first assessments issued after that year ends.
How can I reduce or avoid Division 296 tax?
The tax only applies to the share of earnings above the threshold, so the main levers are keeping each person’s balance under it. That usually means evening up balances between partners through contribution splitting, being deliberate about how much you contribute, and investing new money outside super, through an investment bond, a company or in your own name. Which of these suits you is worth working through with an adviser before you change anything.
Is the $3 million threshold indexed?
Yes. The $3 million threshold rises with inflation in steps of $150,000, and the $10 million threshold in steps of $500,000. At 2.5% inflation, the $3 million threshold would be around $5.1 million in 22 years.
Does Division 296 tax unrealised gains?
No. The final law taxes realised earnings only, such as interest, dividends, rent and capital gains when assets are sold. The original 2023 design would have taxed unrealised gains, and that was dropped in October 2025.
Should I stop salary sacrificing if I’ll go over $3 million?
On tax alone, contributions usually still come out ahead even above the threshold, because they go in before income tax. The stronger reasons to slow down are access, since the money is locked until 60, and the risk of further rule changes. It’s worth modelling your own projection against the indexed threshold before deciding.
How does Division 296 work for couples?
It applies to each person separately, so a couple can hold up to $6 million between them, indexed, before either pays it. Contribution splitting, which moves up to 85% of a year’s concessional contributions to a partner, is the main way to keep balances even.
What is the difference between Division 293 and Division 296?
Division 293 adds 15% tax on contributions going into super once your income plus those contributions passes $250,000. Division 296 adds tax on earnings once your super balance passes $3 million. A high earner can pay both, at different stages of life.
A yearly super check
The useful habit is a short check each year before 30 June, done with your super statement in hand. Project your balance forward to 60 and to your mid-sixties against the indexed threshold, decide how much to contribute for the year, and if you have a partner, lodge the contribution split for the previous year’s contributions through your fund.
A registered tax agent can confirm your Division 293 position each year and handle the SMSF reporting if you have one. And if you want a quick read on where your super stands today, our free Super Gap Finder is a good place to start.
Division 296 and Division 293 both land on high earners, and our page on financial advice for high-income earners sets out how we plan super alongside your tax, investing and property.
If you want some help with your money, we’ve created a free seven-day challenge you can use to get more out of your money you can join here and permanently level up your money in just seven days. And if you want to learn how financial advice can help you, you can schedule a quick call here.
Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstances before acting on it, and where appropriate, seek professional advice from a finance professional.