Division 296 tax is an extra 15% on the share of your superannuation earnings that relates to a total super balance above $3,000,000, with a further 10% on the share relating to a balance above $10,000,000, and it applies from 1 July 2026. It does not tax your whole balance and it does not tax your whole earnings. It taxes a proportion, worked out from how far your balance sits above the threshold. The ATO calculates it from figures your super funds report, issues a separate notice of assessment, and gives you 84 days to pay. This guide sets out who it reaches, exactly how the proportion is calculated, how it differs from the Division 293 tax that already exists, and the parts the ATO has not published yet.
Key takeaways
- For 2026-27 the large super balance threshold is $3,000,000 and the very large threshold is $10,000,000 (ATO).
- The extra tax is 15% on taxable super earnings, plus a further 10% on the very large balance component.
- Only a proportion of your earnings is taxed, set by how far your balance exceeds the threshold.
- For 2026-27 only, the test is your balance at 30 June 2027. From 2027-28 it is the higher of the start and end of year figures.
- Assessments for 2026-27 begin issuing in the later half of the 2027-28 income year, and payment is due 84 days from the notice.
- The measure taxes realised earnings. Treasury dropped the unrealised-gains design on 13 October 2025.
What is Division 296 tax?
It is a second layer of tax on superannuation earnings, aimed at large balances, and it is now law. The ATO describes it as reducing the tax concessions available to individuals through their super from 1 July 2026. Where your total super balance exceeds the large super balance threshold, an additional 15% applies to your taxable super earnings, which is the portion of your total super earnings determined by the extent that your balance exceeds that threshold. An additional 10% applies to the very large super balance earnings component, determined the same way against the higher threshold.
For 2026-27 the two thresholds are fixed. Both are indexed in future years in line with the consumer price index, the large threshold in $150,000 increments and the very large threshold in $500,000 increments.
| Threshold (2026-27) | Value | Extra Division 296 rate on the attributable earnings | Indexation step |
|---|---|---|---|
| Large super balance threshold (LSBT) | $3,000,000 | 15% | $150,000 |
| Very large super balance threshold (VLSBT) | $10,000,000 | 10% | $500,000 |
Source: ATO, Division 296 tax on large super balances, last updated 29 June 2026. The 10% is an additional rate on the very large balance component, so the total Division 296 rate on the portion of earnings attributable to a balance above $10,000,000 is 25%, on top of the 15% the fund already pays on its earnings.
The measure has a long history and it changed shape late. Treasury first announced it on 28 February 2023. On 13 October 2025 the government announced practical changes: a second threshold to better target concessions on balances above $10,000,000, indexation of both thresholds, a move to a realised earnings approach that aligns to existing income tax concepts, and a commencement date pushed back to 1 July 2026. That is the version that became law, in the Treasury Laws Amendment (Building a Stronger and Fairer Super System) Act 2026 and the Superannuation (Building a Stronger and Fairer Super System) Imposition Act 2026, which received Royal Assent on 13 March 2026.
Who does Division 296 tax actually hit?
Individuals with a total super balance above $3,000,000 who also had super earnings above nil for the year. Both conditions have to hold. A large balance with no earnings produces no Division 296 tax, and earnings on a balance under the threshold produce none either.
Which balance the ATO looks at depends on the year, and 2026-27 is deliberately different. Transitional provisions mean that for the 2026-27 income year the ATO considers only whether your total super balance at 30 June 2027 is greater than the threshold. From 2027-28 onwards it applies if either your balance just before the start of the income year or your balance at the end of it exceeds the threshold. The practical effect for the first year is that a balance which drops below $3,000,000 by 30 June 2027 escapes the tax for 2026-27, which will not be true in later years.
| Income year | Which balance is tested |
|---|---|
| 2026-27 (first year) | Your total super balance at the end of 30 June 2027 only |
| 2027-28 onwards | The greater of your balance just before the start of the year and your balance at the end of the year |
Source: ATO, How Division 296 tax is calculated, last updated 29 June 2026.
Three groups are excepted outright. You do not pay Division 296 tax if you were a child recipient of a super income stream at any time during the income year, if you received a structured settlement contribution made as a payment for a personal injury in that year or any earlier year, or if you die during the 2026-27 income year. The ATO is explicit on that last one: if you die in 2026-27 you will never be liable to pay Division 296 tax.
Separately, some interests are excluded from the earnings side while still counting towards your balance. Those are constitutionally protected funds held by state higher level office holders, funds established under the Judges Pensions Act 1968 for High Court justices and judges of federal courts, the equivalent ACT and Northern Territory Supreme Court judges funds, pensions payable under section 123 of the Federal Circuit and Family Court of Australia Act 2021, and non-complying Australian funds. The ATO makes the asymmetry clear: earnings from these interests are taken to be nil for Division 296 purposes, but their values still count in your total super balance when testing the thresholds.
How is Division 296 tax calculated?
In three steps, and the second is the one that surprises people. The ATO first identifies your Division 296 total super balance reference amount, then works out what proportion of that amount sits above the threshold, then applies that proportion to your total super earnings to get the slice of earnings that is taxable. Only that slice is taxed.
| Step | What the ATO does |
|---|---|
| 1 | Set your total super balance reference amount. For 2026-27 that is your balance at the end of the year; from 2027-28 it is the greater of the start and end figures. |
| 2 | Proportion above the threshold = (reference amount minus the threshold) divided by the reference amount, times 100, rounded to two decimal places. |
| 3 | Taxable super earnings = total super earnings times that proportion. Division 296 tax = 15% of that, plus 10% of the very large balance component where it applies. |
Source: ATO, How Division 296 tax is calculated, last updated 29 June 2026.
The ATO's own worked example makes the shape obvious. Jordan has one super interest with a balance of $4,000,000 on 30 June 2027 and his fund reports $100,000 of relevant super earnings. The proportion above the threshold is 25.00%, because $4,000,000minus $3,000,000 divided by $4,000,000 is 25.00%. His taxable super earnings are $25,000, and his Division 296 tax is 15% of that, or $3,750. Note what that is not: it is not 15% of $100,000, and it is nothing at all on the $3,000,000 sitting under the threshold.
A quarter of Jordan's balance is above the threshold, so a quarter of his earnings is taxable. The proportion does the work, not the dollar excess.
Applying the same method across a range of balances, at a fixed $100,000 of total super earnings, shows how the bite grows.
| Total super balance | Proportion above $3,000,000 | Proportion above $10,000,000 | Division 296 tax on $100,000 of earnings |
|---|---|---|---|
| $3,000,000 | 0.00% | Nil | $0 |
| $3,500,000 | 14.29% | Nil | $2,144 |
| $4,000,000 | 25.00% | Nil | $3,750 |
| $5,000,000 | 40.00% | Nil | $6,000 |
| $7,500,000 | 60.00% | Nil | $9,000 |
| $10,000,000 | 70.00% | Nil | $10,500 |
| $12,000,000 | 75.00% | 16.67% | $12,917 |
| $20,000,000 | 85.00% | 50.00% | $17,750 |
Illustration only. Computed on this page using the ATO formula from How Division 296 tax is calculated (29 June 2026) and the 2026-27 thresholds, holding total super earnings at $100,000 so the proportions are comparable. Real earnings vary with the fund, and the ATO uses the figures your funds report, not an assumed return.
One quiet detail changes the arithmetic for self-managed funds with borrowings. Limited recourse borrowing arrangement amounts are sometimes included in a total super balance for other purposes, but the ATO states they are never included for Division 296 purposes.
What happens above $10 million?
A second, additional 10% applies to the earnings attributable to the balance above $10,000,000, on top of the 15%. The two components are calculated separately and added, so the higher rate never applies to the earnings attributable to the balance between $3,000,000 and $10,000,000.
The ATO's example: Kelly has a total super balance of $12,000,000 on 30 June 2027 and her fund reports $500,000 of relevant super earnings. The proportion above the large threshold is 75.00% and the proportion above the very large threshold is 16.67%.
| Component | Proportion | Earnings in that component | Rate | Tax |
|---|---|---|---|---|
| Above $3,000,000 | 75.00% | $375,000 | 15% | $56,250 |
| Above $10,000,000 | 16.67% | $83,350 | 10% | $8,335 |
| Total Division 296 tax | $64,585 |
Figures computed on this page from the ATO example on How Division 296 tax is calculated (29 June 2026), using a balance of $12,000,000 and $500,000 of total super earnings.
What counts as earnings, and who works them out?
Your super funds do, and then they report the result to the ATO. The ATO says your total super earnings for an income year is made up of your relevant super earnings from each of your super interests, excluding excluded earnings, and that most funds will use a general attribution rule: the fund calculates its Division 296 fund earnings, attributes your share to your interests, and reports that figure. For defined benefit interests not in retirement phase, and certain prescribed interests, the relevant super earnings are instead calculated from the change in the total super balance value of the interest, using a formula set out in the law.
This makes Division 296 an unusual tax for the individual: the number you are assessed on is produced by your fund, not by you. Non-SMSF funds are asked for the information by the ATO. Self-managed funds report it through the SMSF annual return, and the ATO tells SMSF members who think their combined interests will exceed the threshold to let their fund know so the earnings calculation actually gets done.
On the substance of what earnings means, the design is realised earnings. Treasury announced the move to a realised earnings approach that aligns to existing income tax concepts on 13 October 2025, dropping the earlier design that would have captured unrealised movements in value. The detailed fund-level mechanics are the part the ATO has not finished publishing, which is covered further down this page.
When is Division 296 tax assessed and paid?
Later than you might expect. When your fund reports your balance for 2026-27, the ATO calculates your total super balance, and if it exceeds a threshold it uses the reported earnings to calculate your Division 296 tax and issue a notice of assessment. The ATO states that Division 296 assessments for the 2026-27 income year will begin issuing in the later half of the 2027-28 income year. If you lodge your tax return through myTax the notice goes to your myGov Inbox; if you want it to reach your tax agent instead, they have to update your communication preferences.
| Stage | Timing |
|---|---|
| Balance and earnings measured | 30 June 2027, for the 2026-27 income year |
| Notice of assessment issued | From the later half of the 2027-28 income year |
| Election to release money from super | Within 60 days of the date of the notice, and it cannot be withdrawn or reversed |
| Payment due | 84 days from the date of the notice of assessment |
| Amended assessment that increases the tax | A further 84 days from the date of the amended notice, without changing the original due date |
Sources: ATO, Division 296 tax on large super balances and Paying Division 296 tax, both last updated 29 June 2026; ATO, Be ready for new tax on large and very large super balances, published 7 July 2026.
Three things about payment are worth pinning down. First, the 60-day election window is only for deciding whether to release money from super; it does not move the due date, so the liability still has to be paid within 84 days to avoid general interest charge. Second, if you neither pay nor elect, the Commissioner may ask one of your funds to release an amount to pay the debt on your behalf. Third, the payment is not deductible.
Defined benefit interests are handled differently. Where you have a defined benefit interest and have not yet taken an end benefit, the Division 296 tax relating to that interest is deferred to a Division 296 tax deferred account until a later date, with interest applied if it is not paid by the due date. You can pay a deferred liability voluntarily to avoid that interest.
How is Division 296 different from Division 293 tax?
Division 293 taxes contributions going in; Division 296 taxes earnings on money already there. They share a shape, an extra 15% that reduces a concession for people with large super, and they share a payment mechanism, but they are triggered by completely different things and one does not replace the other.
| Division 293 tax | Division 296 tax | |
|---|---|---|
| What it taxes | Concessional contributions going into super | Earnings on super already in the fund |
| What triggers it | Division 293 income plus concessional contributions above $250,000 for the year | A total super balance above $3 million |
| Extra rate | 15% on the taxable contributions amount | 15% on taxable super earnings, plus a further 10% on the component above $10 million |
| How the amount is worked out | The lesser of your Division 293 super contributions and the amount above the $250,000 threshold | Total super earnings multiplied by the proportion of your balance above the threshold |
| First year it applies | Already in force | 2026-27, assessed on your balance at 30 June 2027 |
| Who works it out | The ATO, from your tax return and fund contribution reporting | The ATO, from earnings your super funds report |
| How you pay | Your own money, or elect to release money from super | Your own money, or elect to release money from super |
Sources: ATO, Division 293 tax on concessional contributions by high-income earners, last updated 8 December 2025; ATO, Division 296 tax on large super balances, last updated 29 June 2026.
Division 293 in one example, from the ATO: Jan has Division 293 income of $240,000 and Division 293 super contributions of $15,000, a total of $255,000. Her taxable contributions are the lesser of her contributions ($15,000) and the amount above the $250,000 threshold ($5,000), so the tax is 15% of $5,000, which is $750. Note the effect of that lesser-of rule: crossing the threshold by a little costs a little, not 15% of everything you contributed.
A high earner near retirement can plausibly meet both tests in the same year, paying Division 293 on the contributions going in and Division 296 on the earnings of the balance those contributions joined. The two are assessed separately, on separate notices.
What does Division 296 tax not do?
A lot of what people fear about the $3 million rule is not in it. Setting out the boundaries is as useful as setting out the rule.
- It does not tax your balance. It taxes a proportion of your earnings, and a balance with no earnings for the year produces no liability.
- It does not tax all your earnings. Only the proportion attributable to the part of your balance above the threshold is taxable, so a balance just over $3,000,000 produces a very small proportion.
- It does not replace the 15% the fund already pays on its earnings. It sits on top.
- It does not tax unrealised gains. Treasury moved the measure to a realised earnings approach on 13 October 2025.
- It does not force money out of super. You can pay it from your own funds; releasing money from super is an election you make, not an obligation.
- It does not apply to anyone who dies during the 2026-27 income year, or to child recipients of a super income stream, or to people who received a structured settlement personal injury contribution.
- It does not change contribution caps, preservation rules, the transfer balance cap, or the tax on withdrawals.
- It does not stay at $3,000,000 forever. Both thresholds are indexed to CPI, in $150,000 and $500,000 steps.
What has the ATO not published yet?
This is new law with guidance still landing, and it is more honest to name the gaps than to fill them. The items below are unresolved as at 4 August 2026 in the ATO material this page relies on.
| Open question | Status |
|---|---|
| Whether negative earnings can be carried forward against future years | Not stated in the ATO web guidance reviewed for this page. The ATO says it is drafting a law companion ruling to support funds with the calculation, so treat the loss treatment as unsettled and check the ruling when it issues. |
| The indexed thresholds for 2027-28 and later years | Not yet published. The ATO confirms the mechanism, that the large threshold indexes in $150,000 steps and the very large threshold in $500,000 steps in line with CPI, but not the future values. |
| The exact date assessments start issuing | The ATO says only that Division 296 assessments for the 2026-27 income year will begin issuing in the later half of the 2027-28 income year. |
| The line-by-line definition of relevant super earnings at fund level | The ATO describes a general attribution rule for most funds and a separate TSB-change formula for defined benefit interests not in retirement phase, but points funds to guidance that is still being drafted. |
pay-calculator.au will update this page as the law companion ruling and the indexed thresholds are published. If a figure you need is not on this page, that is because it was not in the source documents on 4 August 2026.
If your balance is anywhere near $3,000,000, the ATO's own advice is worth repeating: use its Division 296 web guidance to prepare, and discuss the implications and the new way of calculating total super balances with your tax agent. A balance at this level is exactly the situation where general information stops being enough.
For the everyday end of super, the guide to the superannuation guarantee covers the 12% your employer pays, and salary sacrifice explained covers voluntary contributions and the concessional cap. You can also compare a dollar of salary against a dollar of super at your income on the salary versus super marginal dollar page.
Four errors in the ATO’s own Division 296 examples
Anyone checking this arithmetic against the source will hit four defects on the ATO page “How Division 296 tax is calculated” (QC107623, last updated 29 June 2026). They are recorded here because a reader who spots one and cannot reconcile it usually concludes the calculation is beyond them, when in fact the published example is simply mistyped. The underlying law and every final figure on that page are correct.
| What the ATO page says | The problem | What it should read |
|---|---|---|
$4,072.65 × 5% = $610.90 | The stated rate is wrong. 5% of $4,072.65 is $203.63. The result shown, $610.90, is 15% of $4,072.65, and 15% is the rate the law applies. | $4,072.65 × 15% = $610.90 |
$227,000 × 23,08% = $52,391.60 | A comma appears where the decimal point belongs. The proportion is stated correctly as 23.08% earlier in the same example. | $227,000 × 23.08% = $52,391.60 |
Jordon’s Division 296 tax liability | The example’s subject is introduced as Jordan and is renamed in the final line. | Jordan’s Division 296 tax liability |
Kellie’s Division 296 tax is calculated as | The example’s subject is introduced as Kelly and is renamed mid-calculation. | Kelly’s Division 296 tax is calculated as |
The first defect is the one that matters. A reader who takes “5%” literally and applies it to their own taxable super earnings will understate their Division 296 tax by two thirds. The worked examples reproduced on this page use 15%, which is the rate in the legislation and the rate that produces the ATO’s own published totals of $3,750 for Jordan and $64,585 for Kelly.
These are typographical faults in guidance material, not errors in the law, and the ATO may correct them at any time. This section states the date it was verified so a reader can tell whether it still applies.
Frequently asked questions
Sources
Every threshold, rate, date and worked figure on this page traces to one of the documents below. Last verified 5 August 2026.
- ATO, Division 296 tax on large super balances, last updated 29 June 2026. Source for the 2026-27 LSBT of $3,000,000 and VLSBT of $10,000,000, the additional 15% and additional 10% rates, the $150,000 and $500,000 CPI indexation increments, the exclusion of limited recourse borrowing arrangement amounts, the three excepted groups, the 84-day payment period, the 60-day election window, and the statement that 2026-27 assessments begin issuing in the later half of 2027-28.
- ATO, How Division 296 tax is calculated, last updated 29 June 2026. Source for the total super balance reference amount, the transitional 2026-27 test at 30 June 2027, the proportion formulas, the taxable super earnings calculation, the general attribution rule used by most funds, the defined benefit formula, the treatment on death, and the Jordan and Kelly worked examples reproduced here.
- ATO, Paying Division 296 tax, last updated 29 June 2026. Source for payment being due 84 days from the notice, general interest charge on late payment, the 60-day irreversible release election, the non-deductibility of the tax, the deferred account for defined benefit interests, and the objection route.
- ATO, Division 296 tax excluded interests, last updated 29 June 2026. Source for the excluded interests list and for the rule that excluded interests still count towards the total super balance when testing the thresholds.
- ATO, Better targeted superannuation concessions (new legislation), last updated 7 July 2026. Source for the statement that the measure is now law, the 2026-27 threshold values, CPI indexation, and the new total super balance value concept.
- ATO, Be ready for new tax on large and very large super balances (Business bulletins newsroom), published 7 July 2026. Source for the 2026-27 start, the threshold values, and the assessment timing.
- Treasury, Reforms to support low-income workers and build a stronger super system, published 13 October 2025. Source for the second $10 million threshold, indexation of both thresholds, the move to a realised earnings approach aligned to existing income tax concepts, and the deferral of commencement to 1 July 2026.
- Treasury Laws Amendment (Building a Stronger and Fairer Super System) Act 2026 (C2026A00008) and Superannuation (Building a Stronger and Fairer Super System) Imposition Act 2026 (C2026A00009), with the supporting regulations (F2026L00726). Royal Assent 13 March 2026, per ATO, Better Targeted Superannuation Concessions Working Group key messages, 19 March 2026.
- ATO, Division 293 tax on concessional contributions by high-income earners, last updated 8 December 2025. Source for the $250,000 Division 293 threshold, the 15% rate, the lesser-of rule for taxable contributions, and the worked example reproduced here.
pay-calculator.au is not a registered tax agent and nothing on this page is personal advice. Division 296 is new law and the supporting ATO rulings are incomplete, so figures here are current as at the verification date above and should be confirmed against the ATO before any decision is made.