The $3 Million Super Tax Is Now Law. Here's What You Need to Do Before July.
After years of debate, false starts, and revised legislation, it's settled. In early March 2026, the Treasury Laws Amendment (Building a Stronger and Fairer Super System) Act 2026 passed both houses of Parliament. The new tax on large superannuation balances - formally known as Division 296 - takes effect on 1 July 2026. That's less than three months away.
If you or your partner have a total superannuation balance approaching or above $3 million, this article is for you. The changes are significant, the planning window is narrow, and the decisions you make in the next few months will affect your tax position for years to come.
What Is Division 296, and What Does It Actually Mean?
Division 296 introduces an additional 15% tax on superannuation earnings attributable to balances above $3 million. Combined with the existing 15% fund tax, this brings the effective tax rate on those earnings to 30% - double the current concessional rate.
A second tier applies for very large balances: earnings attributed to the portion above $10 million attract a further 10% tax, bringing the total rate on that portion to 40%.
Importantly, the final legislation differs from earlier drafts in a few meaningful ways:
Only realised earnings are taxed. One of the most contentious elements of the original proposal was that it would have taxed unrealised gains - paper increases in the value of assets you hadn't yet sold. That was removed. Division 296 applies only to earnings that have been realised from the sale of assets.
Both thresholds are indexed to CPI. The $3 million threshold will increase in $150,000 increments and the $10 million threshold in $500,000 increments, meaning inflation alone won't gradually drag more people into the tax over time.
It's a personal tax, not a fund tax. The ATO will issue assessments to individuals, not their super funds. You will have the option to pay the liability directly or to release funds from superannuation to cover it - but the bill comes to you personally.
Treasury estimates approximately 90,000 Australians currently hold balances above $3 million, with around 8,000 above the $10 million threshold. While that sounds like a small number, it includes many business owners, farmers, professionals, and self-funded retirees who have built up significant superannuation balances over decades - often through SMSFs holding property or business assets.
How Is the Tax Calculated?
The tax is proportional, which means only the earnings attributable to the excess balance are taxed at the higher rate - not your entire fund's earnings.
Here's a simplified illustration:
Joan is a 50-year-old with a $3.2 million super balance. In 2026-27, her fund reports $250,000 in investment earnings, of which $125,000 is realised from asset sales. The portion of her balance above $3 million is $200,000, which represents 6.25% of her total balance. Division 296 tax applies to 6.25% of her realised earnings - $7,812 - at an additional 15%. Her additional tax bill: approximately $1,172. (Source: ASFA)
In Joan's case, the dollar impact is modest because her balance is only slightly above the threshold. For those further above it, the numbers become more material - particularly for SMSFs holding high-yielding or recently sold assets.
The SMSF Challenge: Illiquid Assets and Cash Flow
The most pressing concern for many of our SMSF clients is liquidity. SMSFs that hold illiquid assets - such as commercial property, farmland, or private business interests - may find it difficult to generate sufficient cash to pay a Division 296 liability without selling assets.
Consider the case of a farming SMSF. The fund may hold land valued at several million dollars, generating modest rental income. If the land is sold and a capital gain is realised, Division 296 tax will apply to the proportion of that gain attributable to the balance above $3 million. For balances significantly above the threshold, this could represent a meaningful additional tax bill - payable personally by the member.
This isn't a reason to panic, but it is a reason to plan carefully. Before 1 July 2026, SMSF trustees should:
Review unrealised capital gains and losses held in the fund. Understanding which assets carry significant embedded gains - and whether any disposals are planned - is the starting point for any planning exercise.
Consider the CGT cost base reset election. Super funds have the ability to make an election to reset the cost base of assets to 30 June 2026 values. This means any future growth from that date will be assessed under the new rules, but prior growth will not be caught. If your fund holds assets with significant embedded gains and you do not make this election, those historical gains could be captured when assets are eventually sold. The deadline for this election is critical and you should not leave it until the last moment.
Model your likely Division 296 liability under different scenarios - holding assets, selling assets, or restructuring holdings. This modelling is exactly the kind of work EGU's advisory and accounting teams do with clients, and it needs to happen before 30 June 2026, not after.
What About Couples?
The threshold applies to individuals, not households. This means a couple can have up to $6 million in combined superannuation balances without either partner triggering Division 296 - provided each individual balance remains below $3 million.
For couples whose balances are unevenly distributed - where one partner has significantly more than the other - there may be strategies worth exploring to equalise balances and reduce overall Division 296 exposure. These should be considered carefully in the context of broader estate planning and contribution rules, and advice should be sought before acting.
Should You Move Assets Out of Super?
This is the question we're hearing most often. And the honest answer is: it depends, and it requires careful modelling.
Withdrawing funds from super to bring your balance below $3 million can reduce or eliminate your Division 296 liability - but it is not automatically the right strategy. Superannuation still offers significant advantages:
Earnings inside super (even at the new 30% rate above $3 million) are generally taxed at lower effective rates than equivalent earnings held personally or through a trust for high-income individuals.
Assets withdrawn from super and held personally or through other structures will be subject to different tax treatment, including full marginal rates on income and capital gains.
The interaction with aged care assessments, estate planning, and Centrelink (for those nearing pension age) also needs to be considered.
In some cases, restructuring ownership of assets - moving certain holdings outside of super - will make sense. In others, it will not. The key is to model both scenarios with your specific asset base, income profile, and long-term goals in mind. A decision made hastily before 30 June could have consequences that persist for decades.
Key Dates and Actions Before 1 July 2026
With less than three months until the new rules take effect, time is short. Here are the most important near-term actions for affected individuals:
Determine your total superannuation balance across all funds, including defined benefit interests if applicable.
Review your SMSF's unrealised gains and assess the CGT cost base reset election - this election must be made before 30 June 2026.
Model your Division 296 liability under current and alternative holding structures.
Consider spousal balance equalisation if applicable.
Review liquidity to ensure the fund can meet a potential tax liability without forced asset sales.
Don't make major structural changes without advice - withdrawals, rollovers, and restructures all have downstream tax and regulatory consequences.
A Final Thought
Division 296 is a genuine change to the tax treatment of large superannuation balances, and for those affected, the planning required is real and time-sensitive. But it is not a reason to abandon superannuation as a wealth-building structure. For the vast majority of Australians, super remains one of the most tax-effective vehicles available. Even for those above the $3 million threshold, careful structuring can minimise the impact significantly.
At EGU, our wealth management, business advisory, and accounting teams work together to give clients a complete picture - not just the tax, but the investment, the structure, and the long-term strategy. If you think Division 296 may affect you, or you'd simply like to understand where you stand, we'd encourage you to get in touch sooner rather than later. The window between now and 30 June 2026 is the most important one.
Warm regards,
___
Ben Wieland | EGU Wealth Management
Partner and Senior Wealth Manager
1300 102 542 | 0423 710 820
ben@egu.au | www.egu.au
GPO Box 1598 Brisbane QLD 4001
This information is general in nature and does not take into account your personal objectives, financial situation, or needs. Before acting on this advice, you should consider whether it is appropriate for your individual circumstances. If the advice involves acquiring a specific financial product, you should read and consider the relevant Product Disclosure Statement (PDS) before making any decision.
Sources
Australian Taxation Office — Better targeted superannuation concessions: https://www.ato.gov.au/about-ato/new-legislation/in-detail/superannuation/better-targeted-superannuation-concessions
SBS News — How new superannuation changes will impact you (March 2026): https://www.sbs.com.au/news/article/superannuation-changes-2026/f452czcxg
SuperGuide — Division 296 super tax explained (including calculator): https://www.superguide.com.au/super-booster/super-tax-accounts-3-million
Hudson Financial Planning — Division 296 Tax: Complete FAQ for Australians (2026): https://hudsonfinancialplanning.com.au/resources/education-reports/insights-division-296-tax-faq-australia-2026/
ASFA — Explainer: new super tax legislation introduced to Parliament (February 2026): https://www.superannuation.asn.au/media-release/explainer-new-super-tax-legislation-introduced-to-parliament/
HLB Mann Judd — New Superannuation Tax Thresholds: What you need to know by July 2026: https://hlb.com.au/division-296-smsf-changes/
PLH Accountants — Super Tax Changes for Balances Over $3 Million Move to the Senate (March 2026): https://www.plhaccountants.com.au/tax/super-tax-changessenate/
DuoTax — Superannuation Tax Changes 2026: https://duotax.com.au/insights/superannuation-tax-changes-2026/