Division 296 tax: what it means for employers
13 Jul 2026
Important update for employers
Division 296 introduces an additional tax on certain super earnings for individuals with a Total Superannuation Balance (TSB) above the large super balance threshold (LSBT), currently set at $3 million for the 2026–27 financial year.
This is a personal tax and does not change employer super obligations. There are no changes to payroll, reporting requirements or contribution processes.
What this means for your organisation
- No changes to super contribution or compliance obligations
- No changes to reporting or payroll processes
- The tax is assessed directly to individuals by the Australian Taxation Office (ATO)
No action is required from employers at this stage.
How you can support your employees
Some employees may have questions about how Division 296 affects their super, particularly those with higher balances.
You can support them by:
- sharing clear, factual information
- directing them to trusted sources; ATO, CSC website.
- encouraging them to seek financial advice if needed
Where things are up to
Division 296 is now law, with supporting regulations providing greater clarity on how the tax will operate. This includes how different types of super interests are valued and how earnings are calculated.
The new tax applies from 1 July 2026, with first assessments expected in 2027–28.
Key details
Earnings on super are generally taxed at 15%, up to the balance of $3M. Division 296 introduces additional tax on earnings linked to the portion of a member’s total super balance above LSBT.
| Balance range | Additional tax on earnings | Total tax rate on those earnings |
|---|---|---|
| Under $3M | 0% | 15% |
| $3M to $10M | +15% | 30% |
| Above $10M | +15%, plus a further 10% | 40% |
These higher rates apply only to the portion of a member’s balance above each threshold, not their entire super balance.
If a member is affected, the ATO will calculate their Division 296 liability. Members can choose to pay the liability personally or from their super.
Member impact
Employees may be affected if:
- their Total Super Balance exceeds $3 million across all super accounts
- they have earnings captured under the Division 296 framework
All super interests, including those in retirement phase and defined benefit interests, count towards a member’s Total Super Balance.
How this may apply in practice
The impact of Division 296 will vary depending on individual circumstances:
- Members with multiple super interests may have earnings calculated across different account types under a single framework
- Changes in balances over time, including contributions, withdrawals and market movements, will influence outcomes
- Negative earnings outcomes are possible where the value of super interests declines
Defined benefit considerations
Division 296 includes defined benefit interests in both balance and earnings calculations, using prescribed valuation methods.
In practice:
- Defined benefit interests are assigned a value for Total Super Balance purposes
- Earnings are calculated based on changes in the value of the interest over time
- These interests are combined with any other super held by the member when assessing the LSBT threshold
- Specific rules apply to certain pensions, including military invalidity income streams
This approach supports consistent treatment of defined benefit and accumulation interests within the Division 296 framework.
How the tax will be paid
Division 296 is a personal tax liability assessed by the ATO. It is not paid by super funds directly, although members may choose to pay the liability from their super balance.