The Better Targeted Superannuation Concessions measure (known as the Division 296 tax) is now law and takes effect from 1 July 2026. For those with large super balances, it's important to understand what the new tax does, why it's been introduced, and the practical steps you and your financial adviser should consider.

The Purpose of the Tax

Division 296 is designed to make superannuation tax concessions fairer and more sustainable. Rather than changing the way super is taxed for everyone, the law targets a small group of people who hold large super balances, ensuring they pay more tax on the portion of investment earnings that relate to those large balances.

Who it Applies to — Thresholds and Rates

This new measure, starting 1 July 2026 (first year is 2026-27), applies to an individual with total superannuation balances (TSBs) in excess of the following thresholds:

Large balance threshold: $3.0 million
Very large threshold: $10.0 million

Both thresholds will be indexed in future years. The overall tax imposed on superannuation fund earnings will be: up to $3m — 15% (standard fund tax); $3m to $10m — 30% (15% + 15%); above $10m — 40% (15% + 25%).

How the Tax Works

From an SMSF perspective, the fund will calculate its Division 296 earnings, which is based on its taxable income with adjustments for assessable contributions, net exempt income attributable to pensions, and any non-arm's length income.

Division 296 tax is levied on the individual, not a superannuation fund. However, the tax can be paid either by the individual or they can elect for the amount to be deducted from their nominated superannuation interest.

Next Steps

If your total super balance is near — or already above — the thresholds, it is important that you contact your financial adviser to arrange tailored modelling and to discuss whether the small-fund CGT election is suitable. Early planning will help you manage cashflow, reporting and any actuarial requirements efficiently.

Download full Client Newsletter April 2026