Division 296 tax: what it is and what it means for employers

The measure introduces an additional tax on certain superannuation earnings for individuals with a Total Superannuation Balance (TSB) above $3 million. It is designed to apply to very high super balances and is assessed to the individual by the ATO, not the employer.

What's changing

The legislation outlines several key features:

• Two additional thresholds

  $3 million and $10 million, both indexed

• Earnings approach

  Applies to earnings on the portion of a super balance above the thresholds

• Tiered additional tax rates

  • 30% on earnings for balances between $3 million and $10 million (additional 15%)
  • 40% on earnings for balances above $10 million (additional 25%)

  These rates apply only to earnings on the relevant portion of the balance, not the entire account.

Important – detail still to be finalised

While the legislation has passed, key elements are still being developed:

• Supporting regulations, including for defined benefit schemes, are not yet finalised
• Further ATO guidance is expected on calculations, treatment of defined benefit interests, and administrative processes

This means how the measure operates in practice may still evolve.

Does Division 296 change an employer’s super obligations?

In general: no.

• Super Guarantee (SG) obligations, contribution processes and payroll settings remain unchanged
• Division 296 is a personal tax based on an individual’s total super balance across all funds
• For defined benefit schemes (PSS, CSS, MSBS), employer contribution requirements continue under existing scheme rules

Employers may, however, receive questions from senior employees or executives approaching the thresholds.

What should employers do now?

1. Continue the fundamentals

   • Pay SG and scheme contributions correctly and on time
   • Maintain accurate employee records

2. Avoid providing personal tax guidance

   Division 296 is complex, and supporting detail is still being finalised. Employers should not provide advice on personal tax positions or strategies.

3. Be prepared for employee questions

   Suggested response:

   Division 296 introduces an additional tax for individuals with super balances above $3 million. While the law has passed, further detail is still being finalised. If you think you may be affected, consider speaking with a licensed financial adviser or tax professional, and refer to ATO updates.