Division 296 Tax: What the ATO’s 2026 Rules Mean for Large Super Balances

Division 296 tax is a new superannuation tax measure that applies to certain individuals with large super balances. The ATO’s current guidance explains how the tax is calculated, how the 2026–27 transitional rules work and how super funds report relevant earnings.

Who may be affected?

Division 296 tax is not calculated simply by applying a tax rate to your entire super balance. It applies where your total super balance (TSB) is above the relevant large super balance threshold and you have taxable super earnings for the income year.

The ATO currently uses a large super balance threshold (LSBT) of $3 million in its examples. A separate very large super balance threshold (VLSBT) of $10 million can result in an additional tax component. Thresholds and rules should be checked against current ATO guidance.

When does Division 296 tax apply?

Division 296 tax applies from the 2026–27 income year. Transitional rules apply for that first year: the ATO only considers your TSB at the end of the 2026–27 income year, being 30 June 2027, when determining whether you may be subject to the tax.

From the 2027–28 income year onwards, the ATO uses the greater of your TSB just before the start of the income year and your TSB at the end of that income year when determining the relevant reference amount.

How is Division 296 tax calculated?

The calculation has several steps:

1. Your super fund reports relevant super earnings for each of your super interests. The treatment can differ for defined benefit and other prescribed interests.
2. The ATO determines the proportion of your TSB reference amount that is above the LSBT and, where relevant, the VLSBT.
3. Your total super earnings are multiplied by the relevant proportions to determine your taxable super earnings.
4. Division 296 tax is generally calculated at 15% on taxable super earnings relating to the amount above the LSBT, plus an additional 10% component relating to the amount above the VLSBT.

This means the tax is calculated by reference to a proportion of super earnings and is not a 15% or 25% tax on the entire super balance.

Simple calculation example

Assume a person has a TSB reference amount of $4 million and total super earnings of $100,000. The amount above the $3 million LSBT is 25% of the reference amount.

• Taxable super earnings: $100,000 × 25% = $25,000
• Division 296 tax at 15%: $25,000 × 15% = $3,750

This is a simplified illustration only. Actual calculations may involve multiple super interests, fund-reported earnings, defined benefit interests, excluded interests and other specific rules.

Important super balance details

• Your TSB includes the value of your Australian super interests and certain other amounts specified by the rules.
• Limited recourse borrowing arrangement (LRBA) amounts are excluded from your TSB for Division 296 purposes.
• Your super fund plays an important role in calculating and reporting relevant super earnings.
• If you have an SMSF and expect your combined super interests to exceed the relevant threshold, you may need to ensure the necessary calculations and reporting are completed.

What should you do?

• Check your combined TSB across all super funds.
• Ask your super fund or SMSF adviser how relevant earnings will be calculated and reported.
• Review your broader retirement, investment, tax and estate-planning strategy.
• Do not make withdrawals, contributions or structural changes based on a general article alone.

The right approach will depend on your circumstances, the structure of your super interests and the current legislation. Obtain personal advice before making any changes.

Read the latest ATO guidance

For the current rules and calculation examples, see the ATO’s How Division 296 tax is calculated page and its Division 296 tax hub.

Information current as at 29 June 2026. This article provides general information only and does not take into account your objectives, financial situation or needs. Consider obtaining professional advice specific to your circumstances.