Division 296 — How the $3M super tax works
Division 296 is a new tax on superannuation earnings that starts on 1 July 2026. It doesn't touch your whole balance and it doesn't touch your whole earnings — it applies an extra 15% only to the proportion of your realised earnings that corresponds to the part of your balance above $3 million, and an extra 25% to the proportion above $10 million. For a fund already paying the standard 15% earnings tax, that takes the effective rate to 30% on the first tier and 40% on the second.
The proportion method
The mechanism is deliberately simple. Your proportion above the first threshold is (Total Super Balance − $3 million) ÷ Total Super Balance. Apply that percentage to your realised earnings for the year, and the extra 15% is charged on the result. A second calculation, using the $10 million threshold, adds a further 10% (to reach 25%) on the slice above $10 million.
Worked example
Priya finishes the year with a Total Super Balance of $5 million and $400,000 of realised earnings. Her proportion above $3M is ($5M − $3M) ÷ $5M = 40%. So 40% × $400,000 = $160,000 of her earnings fall within Division 296, and the extra tax is 15% × $160,000 = $24,000. Because her balance is under $10 million, the 25% tier doesn't apply.
What changed from the original bill
Two amendments before the law passed matter. First, it now taxes realised earnings only — the widely-criticised plan to tax unrealised (paper) gains on unsold assets was dropped. Second, both thresholds are indexed to inflation ($3M in $150,000 steps, $10M in $500,000 steps), so the $3 million figure rises over time rather than dragging in more people every year through bracket creep.
Timing and negative earnings
The first balance test is 30 June 2027, with assessments issued after that — so nothing is payable in the 2025–26 year. If your fund's earnings are negative in a year, no Division 296 applies and the loss can be carried forward to offset future Division 296 earnings. As with Division 293, you can generally elect to pay the tax personally or release it from super. See the ATO for the final administrative rules.