Update, October 2026: This article reflects the original Division 296 proposal from May 2025. The final law is different in important ways. It applies from 1 July 2026, taxes realised earnings only (not unrealised gains), indexes the thresholds and adds a $10 million tier. Some strategies below, such as revaluing assets before 30 June 2025, no longer apply as described. Read what the final law means.

By Andre Dirckze. Gold Coast, 26 May 2025.

In the quiet corridors of wealth management firms and the boardrooms of self-managed super funds, a new term is causing a stir: Division 296. It isn’t just another line in the tax code. It’s a major shift in how Australia treats retirement savings, and for those with more than $3 million in super, the clock is ticking.

The basics, as proposed

Under the proposal, people with super balances above $3 million would pay an additional 15% tax on the earnings attributed to the part of their balance above that threshold, on top of the existing 15%, effectively doubling the rate to 30% on that slice. The catch: the proposal taxed unrealised gains. If your fund’s assets rose in value, you could owe tax even if nothing was sold.

A tax on wealth that hasn’t been realised

That idea drew sharp criticism across the industry. Taxing valuations introduces volatility and uncertainty. In a rising market investors could face large bills, only to see the gains disappear in a downturn with no refund.

The non-indexed trap

The original $3 million threshold wasn’t indexed to inflation. As asset prices rise, more Australians would be drawn in over time, including professionals who had simply saved well. The final law now indexes both thresholds.

What advisers were urging clients to consider

• Balance super between spouses. Where one partner has a much higher balance, contribution splitting or directing future contributions to the lower-balance spouse can keep both under the threshold.
• Redirect new investment outside super. For people near the threshold, pausing contributions and investing through family trusts, private investment companies or direct ownership instead.
• Plan for liquidity. Holding enough cash or liquid assets to pay any tax without being forced to sell in a downturn.
• Model the future. Scenario modelling over 10 to 20 years, stress-testing portfolios with illiquid assets such as property.

A case study in complexity

Take a 62-year-old retiree with $4.2 million in super, mostly in commercial property and listed shares. If the portfolio rose 8% in a year, that’s a $336,000 gain on paper. The share attributable to the $1.2 million above the threshold, $96,000, would have attracted an extra $14,400 in tax under the original proposal, even though nothing had been sold. Under the final law, only realised earnings are counted.

This isn’t just a tax on the wealthy. It’s a tax on confidence.

General information only, describing a proposal that has since changed. It does not take into account your objectives, financial situation or needs and is not tax advice.