What is Division 296?

Division 296 is an extra tax on earnings linked to the part of your super balance above $3 million.

Super is already tax effective. This change is meant to limit those benefits for people with very large balances.

Who does it apply to?

It only applies if your total super balance is more than $3 million.

A few key points to keep in mind:

The $3 million limit is per person, not per super account
Couples can each have up to $3 million
If you’re below the limit, you won’t pay this tax

This means everyday super members won’t be affected.

How the tax works

Division 296 tax does not apply to your entire super balance. Instead, it applies to a proportion of your total earnings based on how much of your super balance is above $3 million. So if only a small part of your super balance is above $3 million, only a corresponding portion of your earnings will be subject to the additional tax.

There are two additional tax rates:

15% extra tax on a portion of your calculated earnings for balances between $3 million and $10 million.
25% extra tax on a portion of your calculated earnings for balances over $10 million.

Over time these balance thresholds may increase in line with inflation (Consumer Price Index).

What if your balance goes down?

Even if your super balance falls in a given year, you might still pay tax.

That’s because you can still earn income (like dividends or interest), even when markets are down.

How you pay the tax

If Division 296 applies to you, the ATO will send you a notice.

You can then choose to pay the tax yourself, or pay it from your super.

What about retirement?

Super earnings are often tax free in retirement. But Division 296 still applies if your total balance is above $3 million.

This means larger balances may still attract extra tax, even after you retire.

What this means for you

For most people, Division 296 won’t change how your super works.

If your balance is growing, it’s a good idea to:

Keep track of your total super balance
Review your strategy over time
Get advice if you’re nearing the threshold of $3 million.

Division 296 tax: What it means for super accounts