Division 296 – $3 Million Super Tax

The proposed Division 296 tax – often called the $3 million super tax – has been on the table for more than two years, first announced in the 2023–24 Federal Budget. It would apply an extra 15% tax to earnings on super balances above $3 million.

Draft legislation was introduced in September 2023 but lapsed with the March 2025 election. This means Division 296 is still a proposal, not legislated law. The original plan was for it to start on 1 July 2025, with the first calculations made on balances as of 30 June 2026; however, this timing may now be delayed.

Despite still being a proposal, it has fuelled ongoing discussions among self-managed super fund (SMSF) trustees – especially those with higher balances or exposure to property and cryptocurrency. In this article, we’ll unpack what Division 296 is, who it could affect, and the practical steps trustees can take to stay prepared.

What is Division 296 tax?

At its core, the Division 296 tax update proposes a way of applying an additional 15% tax on earnings associated with superannuation balances above $3 million. This would be added to the standard tax already paid within super.

A person’s total super balance (TSB) across all funds would be used for the calculation. If balances were under $3 million, no additional tax would be applied. If balances exceeded $3 million, a formula would be used to work out the proportion of earnings that should attract the extra 15%.

Because the measure is still a proposal, there’s a chance the details may change as it moves through Parliament.

Who does the Division 296 tax update apply to?

If passed, the Division 296 tax would apply to individuals with more than $3 million in superannuation savings, regardless of whether those savings are in an SMSF, retail or industry fund.

Some key points to keep in mind:

• The $3 million threshold is not indexed – meaning it won’t automatically increase with inflation. Over time, more people may be affected.

• It is calculated per individual – not per fund. For example, a couple with $2 million each in separate accounts would not be impacted, but one person with $4 million would be.

• ATO responsibility – the ATO would use data provided by funds to determine whether someone owes the tax, so trustees wouldn’t have to run separate calculations themselves.

For now, only a relatively small group of Australians would be affected, but the lack of indexation means more SMSF trustees could reach this threshold in future.

Potential impacts on SMSFs

For SMSFs, the measure highlights some specific areas of interest:

• Property holdings: Many SMSFs own property, and valuation increases could cause balances to cross the $3 million line. Illiquid assets like property may also create challenges if members need to restructure.

• Crypto investments: Crypto markets can be highly volatile. Large swings in value could push balances above or below the threshold from one year to the next.

• Administration and reporting: Because the tax would be based on the ATO’s view of a member’s total super balance, ensuring valuations are accurate and reported correctly will be essential.

While these are potential impacts only, trustees with higher balances may find it useful to monitor their fund position more closely in the coming years.

Division 296 tax update strategies trustees may consider

If you’re close to the $3 million threshold, it’s worth talking with your adviser or accountant about how best to plan ahead. Some strategies being discussed in the industry include:

• Diversification: Reviewing your investment mix to help balance growth and manage volatility.

• Contribution planning: Rethinking whether further concessional or non-concessional contributions make sense once balances approach $3 million.

• Withdrawals and transfers: Exploring whether drawing benefits or moving assets could help manage balances, while being mindful of tax and transaction costs.

• Future planning: Remembering that the threshold is not indexed, so even if you’re well under now, strong growth or property appreciation could make it relevant later.

Because the measure is still under review, no action is required right now – but planning ahead means you won’t be caught off guard.

Next steps and the importance of good administration

Division 296 is a reminder that good SMSF administration is critical. Accurate record-keeping, timely reporting, and an understanding of fund valuations are all part of staying prepared for changes like this.

Even if your SMSF isn’t currently near the $3 million threshold, market movements, property growth or future contributions could change that picture over time. Staying informed and checking in with a professional SMSF administrator can help ensure you’re ready if and when the measure becomes law.

How Andromedae can help

Managing an SMSF doesn’t need to feel overwhelming. At Andromedae, we specialise in clear, straightforward SMSF administration – from setup and compliance to annual returns and audits, all for a fixed fee.

If you’d like support understanding how Division 296 may affect your fund, or simply want peace of mind that your SMSF is being managed correctly, get in touch with us today.

Disclaimer: Andromedae and its staff do not provide financial advice on whether an SMSF is right for you. We also do not provide advice on what investments your SMSF should undertake. Our role is to manage the administration and compliance of your SMSF. Please seek advice from your own financial professionals to determine what is best for your personal circumstances. All content in this blog is provided as general information only.