Division 296 Is Now Law — Here's What You Need to Do Before 1 July 2026

Written by Helen McPhee | 17 May 2026

The Division 296 legislation designed to tax large superannuation balances, has passed parliament and will begin on 1 July 2026. While there are some draft regulations still before parliament, the majority of matters that are relevant to plan for the upcoming changes are now known.

We have highlighted below the key points of the legislation. We note, this additional tax, similar to the Div 293 tax already in operation will be assessed to the individual taxpayer, not the superannuation fund itself. An individual can elect to pay the tax personally or via their superannuation fund.

Key points:

The tax will begin from 1 July 2026, with the first assessments based on your Total Superannuation Balance (TSB) at 30 June 2027. The ATO will issue assessments after 30 June 2027.
Transitional rules for the first year apply:
- If your TSB is $3m or less at 30 June 2027, you won’t pay the tax, even if your TSB was higher than $3m on 30 June 2026.
- If your TSB drops from over $10m in 2026FY to between $3m and $10m in 2027FY, only the extra 15% tax applies.
From 1 July 2027, your assessment will be based on the higher of your TSB at the beginning or end of the financial year. For example, in the 2027–28 year, the ATO will use whichever is greater — your balance at 30 June 2027 or 30 June 2028.
Thresholds and Indexation:
- Large Super Balance = $3m–under $10m (indexed by $150k increments)
- Very Large Super Balance = $10m and above (indexed by $500k increments)

Earnings exempt under pension rules will be counted for Div 296 calculations only.
Adjustments to cost bases for assets held at 30/6/2026
- SMSFs can elect to reset the cost base of all the CGT assets to their market value as at 30 June 2026 for Division 296 purposes.
- Any SMSF can take up this opportunity as your TSB may be above $3m in the future.
- This reset does not trigger a CGT event or change the acquisition date, so the 12-month discount remains unaffected for income tax.
- Impact on Tax Calculations
  - Adjustment is only for Division 296 calculations.
  - For the annual SMSF tax return, the original cost base is used.

Capital losses arising from the cost base reset adjustment cannot be carried forward for Division 296 purposes. However, any existing capital losses already carried forward in the annual SMSF tax return can still be applied to reduce your Division 296 earnings.

How will Div 296 be calculated

As an example, an individual who has a TSB of $5,000,000 at 30/06/2027 and had $100,000 of attributable earnings to their account would have Div 296 tax bill of $6,000.

Calculated as follows:

The proportion above $3m = ($5m – $3m) / $5m = 40%.

Taxable earnings = 40% × $100,000 = $40,000.

Tax = 15% × $40,000 = $6,000

How is the Division 296 tax applied

The adjusted superannuation earnings will be taxed at tiered rates depending on your TSB.

TSB Balance at 30 June	Tax rate	How it works
$0 - $3,000,000	15%	Your SMSF annual return
$3,000,000 - $10,000,000	Plus 15% Div 296 = 30% total	Additional tax on earnings attributable to balances above $3m
$10,000,000 +	Plus 10% Div 296 = 40% total	Further additional tax on earnings attributable to balances above $10m

What should you be thinking about

Consider if you want to reduce your total super balance to a particular threshold by 30 June 2027
Do you want to take up the opportunity to use the one-time election to reset the super fund assets to their 30 June 2026 market value? Remember this is for Div 296 purposes and not SMSF income tax purposes.
Obtain 30 June 2026 valuations on unlisted assets in your super fund or for assets held within unit trusts that your super fund owns, ensuring the valuations meet the ATO requirements i.e. inclusion of recent comparable sales, net income yields.
Do you have any illiquid or difficult to value assets in your super fund? Consider how to obtain valuations on these or if another entity in your group should own them. This area will become a focus for auditors and the ATO.
Consider your asset succession strategy and if any restructuring will change these outcomes.
Consider realising any capital losses before 30 June 2026

What should you do next

If your fund may be impacted by these changes, now is the time to review your superannuation structure, asset valuations and long-term strategy ahead of 1 July 2026. The Ascentium Australia team can help you assess your position and identify planning opportunities based on your circumstances.