Division 296 tax Bill: what it is and what it could mean for you

If passed, the Federal Government will introduce a new tax, known as Division 296 tax, which would impose an additional tax to certain super-related earnings for individuals with a Total Superannuation Balance (TSB) above $3 million. This tax is aimed at very high super balances and would be assessed to the individual, not the employer.

What's changing

The Bill outlines several key features:

• Two thresholds

  $3 million and $10 million, both indexed

• A focus on realised earnings

  Consistent with existing income tax concepts.

• Tiered additional tax rates

  The earnings on the portion of a super balance that is above $3 million and up to $10 million will be taxed at 30% (additional 15%). The earnings on the portion that exceeds $10 million will be taxed at 40% (additional 25%). These higher rates apply only to the earnings on each relevant portion of the balance, not the entire account.

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 proposed as a personal tax, assessed to the individual based on their total super balance across all funds
• For Defined Benefit schemes (PSS, CSS, MSBS), employer contribution requirements continue under their existing scheme rules — Division 296 does not change these obligations

However, employers may receive questions from senior staff or executives who are approaching the thresholds.

What should employers do now?

1. Continue the fundamentals

   • Pay Super Guarantee and contributions required by specific schemes correctly and on time
   • Keep employee details accurate to avoid administrative issues

2. Avoid providing personal tax guidance

   Division 296 is complex and the Bill has not yet been passed into law. Employers should avoid advising employees on withdrawal strategies, structuring, or personal tax decisions.

3. Have a simple internal response ready

   Suggested wording:

   The Division 296 tax is not yet law. If legislated, it will apply to individuals with superannuation balances exceeding $3 million. If you think you may be impacted, consider speaking with a licensed adviser or tax agent, and refer to Government or ATO updates.