From 1 July 2026, Division 296 introduces an additional tax for individuals with total superannuation balances above certain thresholds.
This measure is commonly referred to as the “$3 million super tax”. While it will not affect most Australians, it is important for those with larger superannuation balances to understand their position and consider whether any planning is required.
Who may be affected?
Division 296 applies to individuals, not to couples, SMSFs or individual super funds.
This means all of an individual’s superannuation interests are considered together. SMSFs, retail funds, industry funds and defined benefit interests may all form part of the total superannuation balance.
Two members of the same SMSF may therefore have very different outcomes depending on their respective balances.
Why this matters before 30 June
For those approaching or exceeding the relevant thresholds, it is important to understand the current position before the new rules commence.
This may involve reviewing total superannuation balances across all funds, considering whether future contributions are appropriate, and assessing whether any upcoming events could change the position.
Examples may include:
- planned concessional or non-concessional contributions
- downsiser contributions
- pension commencements
- death benefit pensions
- reversionary pension arrangements
- changes in asset values
No single strategy will be appropriate for every client. The right approach will depend on your balance, age, fund structure, asset mix, liquidity and broader estate planning objectives.
Asset mix and liquidity
Division 296 also makes asset mix and liquidity more important.
Where a fund holds illiquid assets, such as direct property or unlisted investments, tax liabilities may create cash flow pressure if sufficient liquid funds are not available.
This does not mean those assets are inappropriate. However, it does mean trustees and members should understand whether the fund has enough liquidity to meet obligations as they arise.
The timing of asset sales, realisation of gains and income generation may also become more relevant under the new rules.
Super may still remain appropriate
It is important not to view Division 296 as a reason to make rushed decisions.
Even with additional tax applying to some high-balance members, superannuation may still remain an effective long-term environment for retirement savings and investment assets.
The question is not simply whether assets should remain in superannuation. The more useful question is which assets should be held where, and why.
What should you do now?
If your total superannuation balance is approaching or above $3 million, it may be appropriate to review your position before 30 June.
This review should consider your total balance, contributions strategy, investment mix, liquidity, estate planning arrangements and any future events that may affect your position.
Please contact our team if you would like to discuss how Division 296 may apply to your circumstances.
