Update, October 2026: Division 296 is now law. It received royal assent on 13 March 2026 and applies from 1 July 2026. See what the final legislation means for you.

When the Federal Government confirmed the introduction of Division 296, the policy intent appeared narrow: an additional tax on superannuation earnings for balances above $3 million, designed to raise revenue while affecting only a small proportion of Australians.

What has followed is something broader and more consequential.

For many high-net-worth Australians, and for those likely to cross the threshold in time, Division 296 has triggered a structural reassessment of where wealth is held, how future capital is deployed, and which parts of the tax system can still be relied upon.

The result is not panic. It is capital re-direction.

The emotional catalyst: trust, not tax

In private wealth circles, the reaction has been remarkably consistent.

These are individuals who did exactly what the system encouraged. They saved, invested, sold businesses, paid tax, and channelled surplus capital into superannuation over decades. They accepted contribution caps and preservation rules on the understanding that super was the preferred, and protected, environment for long-term wealth.

Division 296 has unsettled that assumption.

The frustration is not about paying tax. It is about the perception that once wealth reaches a certain scale, the rules change again, and that the superannuation system is no longer a stable container for long-term or intergenerational capital.

That shift in sentiment matters, because behaviour follows confidence.

Where the money is actually going

The clearest trend advisers are seeing is this: new money is no longer defaulting into super once balances approach the $3 million mark. Instead, capital is being redirected into three main channels.

1. Family trusts and private companies

Discretionary trusts are once again becoming a central pillar of wealth structuring. They offer flexibility in distributing income among beneficiaries, the ability to manage marginal tax rates within a family group, and a level of control and asset protection that superannuation increasingly lacks.

Importantly, trusts allow families to separate ownership from enjoyment, which becomes critical as wealth passes between generations. This is not a revival driven by tax minimisation alone, but by control, particularly when further changes to superannuation are widely expected.

2. Investment bonds: now a primary destination, not a footnote

Perhaps the most decisive shift is toward investment bonds, which are seeing renewed inflows as advisers position them as a long-term alternative to super for excess capital. Advisers are using them for surplus cash that would otherwise have gone into super, proceeds withdrawn from SMSFs, and long-term capital earmarked for children or grandchildren.

• They sit outside the superannuation system.
• They are tax-paid internally, removing annual personal tax reporting.
• They are not subject to contribution caps or balance thresholds.
• When held for at least 10 years, withdrawals can be made without personal tax.

The headline 30 per cent tax rate is often not the effective rate. Where portfolios hold fully franked Australian shares, franking credits reduce the internal tax drag, and industry commentary suggests effective long-term rates can fall into the low to mid teens, depending on the asset mix. For families who have lost confidence in super as a permanent solution, investment bonds are becoming the default outside-super growth vehicle.

3. Family loans rather than outright gifts

A quieter but equally important shift is happening in how wealth is passed to the next generation. Rather than gifting capital outright, families are increasingly using documented family loans, particularly where children are buying property or investing alongside partners.

Parents can help their children while keeping control of the balance sheet and protecting family wealth from a future relationship breakdown. Loans can later be forgiven as part of estate planning, but only when the family is comfortable doing so.

Super is still relevant, just no longer dominant

None of this suggests superannuation is being abandoned. For many, it remains an effective vehicle for retirement income up to a point. What has changed is its role. Super is increasingly treated as a retirement funding tool, not a multi-generational wealth store. Capital intended for legacy, flexibility or compounding beyond retirement is going elsewhere.

The estate planning overlay is accelerating the shift

Division 296 has also brought renewed attention to superannuation death benefits tax, particularly where benefits flow to adult, non-dependent children. For families unlikely to spend their super in their lifetime, that’s a structural inefficiency. Assets intended for heirs are increasingly being built outside super, in trusts and investment bonds, where outcomes are more predictable.

A familiar story, now repeating at scale

Consider a Melbourne-based couple with assets of more than $10 million, built largely through long-held residential property. Their original plan was conventional: maximise super, keep the property and let compounding do the work. Division 296 didn’t force them to sell anything. What it forced was re-allocation.

New capital now goes into a combination of family trusts and long-dated investment bonds, with the explicit aim of funding the next generation rather than their own retirement. The decision wasn’t driven by ideology. It was risk management.

The question is no longer how much tax will I pay this year. It is where should future wealth live at all?

Where advice now sits

This is where WE Private increasingly works: helping families build portfolios that are diversified not just across assets, but across legislative frameworks. In an environment of constant reform, certainty is rarely found in policy. But it can still be engineered, deliberately, in structure.

General information only. This article does not take into account your objectives, financial situation or needs and is not tax advice. Seek personal advice before acting.