Division 296: what SMSF trustees with large balances need to know

For three years, “the $3 million super tax” was the most argued-about number in Australian superannuation. That argument is over. The Treasury Laws Amendment (Building a Stronger and Fairer Super System) Act passed Parliament on 10 March 2026 and received Royal Assent on 13 March 2026. Division 296 applies from 1 July 2026, which means the 2026-27 financial year — the one you are in now — is the first year that counts.

Here is what actually landed, and what is worth doing about it.

What Division 296 taxes

Superannuation earnings are normally taxed inside the fund at 15%. Division 296 adds a second layer, assessed to the member personally, on the earnings attributable to the part of their total super balance above a threshold:

Two details matter more than the headline rates.

It is proportional, not a cliff. Crossing $3 million does not tax your whole balance differently. Only the earnings attributable to the portion above the threshold attract the extra tax, so a member just over the line pays a small amount, not a step change.

Total super balance means everything. It is the sum of all your superannuation interests across every fund. Trustees who think of their SMSF in isolation are the ones most likely to be caught by surprise — $2m in the SMSF plus $1.5m elsewhere is a $3.5m total super balance.

The part that changed

The original design taxed unrealised gains — paper increases in the value of assets you had not sold. For SMSFs holding a farm, a commercial property or shares in a private company, that raised a real problem: a tax bill triggered by a valuation, payable in cash, on an asset that had produced none.

That method did not survive. The version that became law taxes realised earnings, based on taxable income. If your fund’s property went up on paper and you did not sell it, that movement is not what is being taxed. Both thresholds are also now indexed — the $3m in $150,000 steps and the $10m in $500,000 steps — so they do not quietly tighten every year the way an unindexed threshold would.

The timeline

• 1 July 2026 — the first year Division 296 measures.
• 30 June 2027 — the balance date that first matters.
• From mid-2027 — the first assessments issue, to members personally.

So nothing arrives in your letterbox this year. What happens this year is the measurement, which is precisely why the useful work is happening now rather than when the assessment turns up.

What is worth doing before 30 June 2027

Establish where you actually stand. Add up every super interest, not just the fund. Plenty of members who assume they are exposed are not, and a few who assume they are safe are not either. This is arithmetic, and it takes us an afternoon.

Get the valuations right, and early. SMSF assets already have to be reported at market value each year, and Division 296 makes that number do more work than it used to. Property, unlisted units and private company shares are where valuations get contested; a defensible file built in advance is worth considerably more than one assembled under assessment pressure. Our SMSF audit checklist covers what that file needs to contain, because the auditor wants the same evidence.

Watch liquidity, not just the tax. The awkward case is a fund whose value sits in one indivisible asset and whose cash is thin. Being assessed personally, with the option to release from the fund, softens this — but a release still has to come from somewhere. If your fund is asset-rich and cash-poor, model the cash flow now.

Keep contribution and pension decisions in the same conversation. Contributions add to the balance the threshold measures. Pension payments reduce it. These interact, and they are decisions with a deadline.

Where our advice stops

BRS Advisory provides accounting, taxation and administration services for self-managed super funds. We do not provide financial product advice — including whether you should contribute, withdraw, start a pension or hold particular assets in response to Division 296. Those are exactly the questions people want answered here, and they belong with a licensed financial adviser, who we are happy to refer you to.

What we do is the part that makes those decisions answerable: a fund whose records are current, whose valuations are defensible, and whose position against the threshold is a number you can see rather than a worry you carry. Our SMSF administration service runs on Class and BGL with data feeds, from $1,650/yr for a standard fund, and we will flag your Division 296 position as part of the annual cycle without being asked.

One caveat worth stating plainly: the detailed regulations underpinning the calculation were still being finalised after the Act passed. The structure above is settled law. The mechanics of particular edge cases — defined benefit interests especially — are worth confirming against current ATO guidance before you act on them, and we will do that with you rather than assume.

Questions we get about this

General information only — it doesn’t consider your circumstances and isn’t financial product advice. Get advice on your own position before acting; that’s literally what we’re for.