Division 296 Is Now Law: What You Need to Know

With legislation now passed for the new Division 296 tax, attention has rightly turned to what needs to be done before the new regime starts. 

Division 296 is designed to apply to those with large and very large superannuation balances. 

If your Total Super Balance (TSB) exceeds $3 million, an additional tax of 15% may apply to a portion of your superannuation earnings. For those with a TSB exceeding $10 million, a further 10% tax may apply to earnings attributable to the portion above $10 million. If your TSB is under $3 million, Division 296 will not apply to you. 

The ATO will calculate any Division 296 tax liability based on information reported by your superannuation fund. The tax bill is then issued to you personally. You can pay this from your own resources or elect to have money released from superannuation to pay the bill. 

The new regime starts on 1 July 2026. For the first year, your Total Super Balance as at 30 June 2027 will determine whether you are captured by the new tax. This gives some time to review your position and plan appropriately. In subsequent years, the test will generally look at your TSB over the year (effectively capturing changes from the start to the end of each financial year). 

The “earnings” used to calculate the Division 296 tax is a notional amount based on the movement in your TSB over the year. It broadly reflects: 

• Taxable income of the fund (including realised capital gains), and
• Certain non-taxable earnings (for example, income supporting retirement phase pensions), 

but excludes concessional contributions. The methodology is complex, but the key takeaway is that both accumulation and retirement phase benefits count towards the calculation. 

Given this, there are several actions that members likely to be impacted by Division 296 should consider in the context of their overall financial affairs. 

Action 1 – Should you revalue assets in your SMSF? 

Given that capital gains can influence the Division 296 earnings calculation, self‑managed super funds (SMSFs) have been given a once‑off opportunity to uplift the value of their assets to market value on 30 June 2026 specifically for Division 296 purposes. 

• This does not affect the normal calculation of capital gains for the standard 15% fund tax rate.
• It does impact the notional earnings used to calculate Division 296 tax. 

There is, however, an important catch: if an SMSF elects to uplift asset values on 30 June 2026, it must do so for all eligible assets. You cannot cherry pick only those assets that have risen in price. 

As a result, any decision to revalue assets should be made case by case, taking into account: 

• How much particular assets have increased in value over time
• Your current and projected TSB relative to the $3 million and $10 million thresholds
• Your broader tax position and long‑term investment strategy 

In many cases, an uplift will only make sense where assets have experienced substantial growth and where your TSB is likely to remain above the thresholds. 

Action 2 – Should you withdraw money from super? 

For members who have met a condition of release (for example being over a certain age and retired), it may be tempting to withdraw funds from super before 30 June 2027 to reduce your TSB below the $3 million or $10 million thresholds. 

If you have not met a condition of release, you cannot withdraw money from super, even if it might be more tax‑effective to do so from a Division 296 perspective. 

Even where you can withdraw, the decision is not straightforward. Before acting, you need to consider: 

• Where will the withdrawn funds be invested?
• What tax rate will apply outside super? (for example, personal marginal tax rates, company tax rates, trust distributions)
• Will the overall family‑group tax outcome actually improve over time?
• How does this impact asset protection, estate planning and cash flow? 

In some situations, keeping funds inside a tax‑effective super environment may still be preferable, even if Division 296 applies. Personal advice and scenario modelling are essential here. 

Action 3 – Review your estate planning 

Division 296 can also have implications for your estate planning. 

If a member dies after 30 June 2027, their Division 296 liability will still be calculated for the relevant part of the financial year up until death benefits are paid out. The tax is payable by the deceased’s estate. 

This can create unintended outcomes. For example: 

• Superannuation death benefits are directed to a spouse (via binding death benefit nominations or reversionary pensions), but
• The residual estate is directed to other beneficiaries (such as children from a previous relationship). 

In this scenario, the spouse may receive the superannuation benefits, but the estate may bear the Division 296 tax bill. Depending on the size of the liability and the composition of the estate, this could substantially reduce what non‑super beneficiaries ultimately receive. 

Division 296 is therefore an important prompt to: 

• Review your death benefit nominations
• Revisit your  Will and any  testamentary trust structures
• Consider how any Division 296 liability may affect fairness between beneficiaries 

Working closely with both your financial adviser and estate planning solicitor is recommended. 

Action 4 – Get advice early 

The changes to the taxation of superannuation earnings will affect many people, including those who: 

• Have built substantial superannuation balances over time
• Receive, or may receive, a reversionary pension from a late spouse that lifts their TSB above the $3 million or $10 million thresholds
• Hold significant assets within an SMSF, particularly illiquid or long‑term growth assets 

There is a wide range of potential strategies to manage and mitigate Division 296, including: 

• Contribution and withdrawal strategiest
• Asset location decisions (inside vs outside super)
• Use of different ownership structures (such as companies and trusts)
• Estate planning and reversionary pension arrangements
• SMSF‑specific options, such as the 30 June 2026 asset uplift election 

Because the rules are complex and everyone’s circumstances are different, it is important to obtain advice well before the 1 July 2026 start date. This allows enough time to: 

• Understand your projected TSB
• Model different scenarios
• Implement any structural or estate planning changes thoughtfully, rather than rushing at the deadline 

At Hewison Private Wealth, we are actively reviewing our clients’ SMSFs and superannuation positions to ensure they are appropriately structured in light of Division 296. If you would like to discuss how these changes may affect you and your family, please contact us to arrange a time to speak with one of our advisers.