Division 296 explained: the extra tax on super balances over $3 million
The tax on large super balances is now law and started on 1 July 2026. It affects fewer people than the headlines suggested — but SMSFs holding business premises should look closely.
Published
The original proposal to tax unrealised gains on large super balances caused alarm, particularly among farmers and business owners holding property in SMSFs. The version that became law is narrower — but for those above the threshold, it changes the maths of keeping assets in super.
How it works
| Portion of total super balance | Additional tax on attributable earnings |
|---|---|
| Up to $3 million | Nil |
| $3 million to $10 million | 15% |
| Above $10 million | 15% plus 10% (25% in total) |
The additional tax applies to earnings attributed to the proportion of your balance above each threshold, on top of the fund’s normal tax. The $3 million threshold is indexed in $150,000 increments and the $10 million threshold in $500,000 increments.
What changed from the original proposal
- Unrealised gains are not taxed. Tax applies to realised earnings.
- Gains accrued before 1 July 2026 are excluded. SMSFs can elect to reset asset cost bases for Division 296 purposes.
- The thresholds are indexed, so fewer people will be drawn in over time.
Who should review their position
- Members with balances approaching or above $3 million, including couples where one member holds most of the balance
- SMSFs holding business premises or property that may be sold in the coming years
- Members planning large contributions from a business sale
For business owners
Many of our clients hold their business premises in an SMSF. The question is no longer just whether the premises should be in super, but which member’s balance it supports, when it might be sold, and whether the cost base election was made. Those are decisions to make with your adviser and accountant together.
Options to consider
Equalising balances between spouses, timing withdrawals in retirement, holding some investments outside super, and reviewing the fund’s cost base election are all possible responses. None suits everyone, and the tax still applies only to earnings on the excess.
Common questions
From 1 July 2026. For 2026-27, the tax is determined by your total super balance at 30 June 2027.
No. The law as passed applies to realised earnings, and gains accrued before 1 July 2026 are excluded.
No additional tax applies to balances at or below the threshold, which is indexed over time.
Sources
- MLC TechConnect — Division 296 passed (March 2026)
- Australian Taxation Office — better targeted superannuation concessions
General information
This article is general advice only and does not take into account your objectives, financial situation or needs. Consider its appropriateness, read the relevant PDS and TMD, and obtain personal advice before acting. Tax commentary is general and not personal taxation advice.
Full licensing, remuneration and complaints information is set out under Licensing & disclosures.
Want this applied to your actual numbers?
Twenty minutes, no charge, no documents required. We will tell you honestly whether we can improve on what you already have.
Keep reading
Super contribution caps for 2026–27: a guide for business owners
The 2026-27 super contribution caps: $32,500 concessional, $130,000 non-concessional, carry-forward contributions and how business owners can use them for tax and retirement.
Read the article →Capital gains tax changes from 1 July 2027: indexation and the 30% minimum tax
From 1 July 2027 the 50% CGT discount is replaced by indexation with a 30% minimum tax on capital gains. What changes, what is grandfathered and what investors and business owners should do.
Read the article →Income protection for business owners and the self-employed
How income protection works for business owners: insured income for the self-employed, waiting and benefit periods, business expenses cover, tax deductibility and holding cover inside super.
Read the article →