The $3 Million Super Tax Is Now Live
For years, the idea of a new tax on big super balances has been a headline waiting to happen. It first surfaced back in 2023 as a rough sketch of a policy, then spent the best part of three years being redrafted, delayed, softened and re-announced. Draft after draft. Backflip after backflip. As of 1 July 2026, it’s no longer a draft. Division 296, officially the Better Targeted Superannuation Concessions measure, is now law, having passed both Houses of Parliament in March 2026.
If you’ve been half-following the headlines and switched off every time a new version appeared, that’s understandable. But this one’s staying, so it’s worth fifteen minutes to actually understand it.
What Division 296 does
If your total superannuation balance sits above $3 million, an extra 15 per cent tax now applies to the earnings tied to the portion of your balance between $3 million and $10 million. Above $10 million, that jumps to an extra 25 per cent on the earnings attributable to that top slice. This sits on top of the usual 15 per cent tax paid inside super, it doesn’t replace it.
Here’s a rough example of how it plays out. Say your total super balance is $4 million, and the fund earns $200,000 in taxable income for the year. Roughly a quarter of your balance, the portion between $3 million and $4 million, sits above the threshold. So a proportional slice of that $200,000, in this case around $50,000, is treated as Division 296 earnings and taxed at the extra 15 per cent, adding roughly $7,500 to your tax bill for the year. It’s not a tax on your whole balance. It’s a tax on the earnings tied to the slice above $3 million.
The part that actually matters: realised earnings only
The good news, and it took two years of consultation to land here, is that this tax only applies to realised earnings. That means dividends, interest, rent, and capital gains you’ve actually locked in by selling an asset. The original 2023 proposal wanted to tax unrealised, paper gains on assets you still hold, which would have meant a tax bill on growth you hadn’t actually banked yet, a genuinely unworkable idea for anyone holding property or an illiquid asset inside their fund. That version is dead. If you haven’t sold it, it isn’t taxed under Division 296.
Relief for SMSF trustees
There’s more relief for self-managed super fund trustees specifically. Funds can elect to reset the cost base of their assets to market value as at 30 June 2026. In practice, this means any capital gain that built up before that date, even if you sell the asset years from now, escapes the new tax altogether. Only growth from 1 July 2026 onward counts. It’s an irrevocable, fund-wide election though, so it applies to every asset in the fund, not just the ones you’d like it to apply to, and it’s worth getting advice before you tick that box.
A grace period for the first year
One more wrinkle worth knowing: the first year, 2026-27, comes with a grace period. Rather than comparing your balance at two points in time and working out a change, whether you’re caught at all in that first year depends solely on your balance at 30 June 2027. Both the $3 million and $10 million thresholds are indexed too, rising in $150,000 and $500,000 steps respectively, in line with the Transfer Balance Cap, so the goalposts will shift gradually over time rather than staying fixed.
If you’re not near $3 million yet
If your balance is well under the threshold today, this might feel like someone else’s problem. It’s worth a second look anyway, particularly if you’re still in your accumulation years with decades of compounding ahead, or if you’re planning meaningful additional contributions as part of a broader superannuation strategy (centaurfinancial.com.au/services/superannuation-planning/). Indexation moves the threshold up gradually, but strong fund performance and consistent contributions can move your balance up faster. It’s a conversation worth having once, even if the answer today is “not yet.”
Our view: if your balance is anywhere near $3 million, now is the time for a proper look, not next June. Structuring decisions, contribution strategy, and the SMSF cost-base election all work best with runway, not a last-minute scramble in May. If this sounds like it could touch you, get in touch (centaurfinancial.com.au/contact/) and we’ll run the numbers together.
This isn’t the only change landing on retirees and pre-retirees this September, either. If you or a family member relies on the Age Pension, our piece on the pension changes taking effect on 20 September (centaurfinancial.com.au/retirement/age-pension-changes-september-2026/) is worth a read too.
FAQs
Does Division 296 tax unrealised gains?
No. Only realised earnings, dividends, interest, rent and capital gains actually received, are taxed. Assets you still hold and haven’t sold are not affected.
When does the first Division 296 assessment happen?
The first measurement is at 30 June 2027, based on your total superannuation balance at that date, under the transitional single-point-in-time rule for the 2026-27 year.
Can SMSF trustees protect gains made before the new tax started?
Yes, by electing to reset the cost base of fund assets to market value as at 30 June 2026. This is an irrevocable, fund-wide election, so it’s worth getting advice before making it.
Does Division 296 replace the existing 15 per cent tax on super earnings?
No. It’s an additional tax that sits on top of the standard 15 per cent, applying only to the portion of earnings attributable to balances above $3 million.
Are the $3 million and $10 million thresholds fixed forever?
No. Both are indexed, rising in $150,000 and $500,000 increments respectively, in line with the Transfer Balance Cap indexation method.
Plan well. Live large.
Centaur Financial Services is a Gold Coast financial planning practice helping professionals, retirees, business owners, and investors make confident wealth decisions. Based in Robina and serving clients across Australia, we’re proud to be one of Australia’s most awarded advice firms. We specialise in retirement planning and back it with institutional-grade investment capability.
This article is general information only. It does not take into account your personal objectives, financial situation or needs. Centaur Financial Services Pty Ltd is a Corporate Authorised Representative (CAR No. 342372) of Abundant Wealth Partners Pty Ltd, ABN 35 680 570 487, AFSL 564749. Please obtain personal advice before acting on any of this content.
