After almost three years of proposals, revisions and arguments, Division 296 is now law. It received royal assent on 13 March 2026 and applies from the 2026–27 financial year, which started on 1 July. If your super is anywhere near $3 million, this is the article to read twice.

The final rules in plain English

• Above $3 million: an extra 15% tax on the share of your fund’s earnings that relates to the part of your balance above $3 million. With the 15% your fund already pays, that slice is taxed at up to 30%.
• Above $10 million: a further 10% on the share relating to the balance above $10 million, taking that slice to up to 40%.
• Realised earnings only. The much-criticised tax on unrealised gains is gone. Interest, dividends, rent and realised capital gains count. Paper gains don’t.
• Thresholds are indexed. Both thresholds will rise over time, unlike the original proposal.
• Losses don’t come back. A bad year doesn’t produce a refund or a carry-forward credit for Division 296 purposes.

The date that matters most: 30 June 2027

For this first year, whether you’re caught depends only on your total super balance at 30 June 2027. From 2027–28 the test uses the higher of your balance at the start and end of the year. The ATO expects to issue the first assessments in 2027–28.

That gives couples, in particular, a window. Where one partner’s balance is well above $3 million and the other’s is well below, the way contributions, pensions and withdrawals are handled between now and June 2027 can make a real difference.

The decision SMSF trustees can’t undo

Small funds, including SMSFs, can elect to reset the cost base of the fund’s assets to their market value at 30 June 2026, for Division 296 purposes only. If your SMSF holds property or shares that have grown a lot over the years, this can stop decades of past growth being counted as Division 296 earnings when those assets are eventually sold.

The catch: the election covers all the fund’s directly held CGT assets, it’s irrevocable, and it must be made by the due date of the fund’s 2026–27 tax return. It’s usually a good idea when assets carry big gains, and sometimes a bad one when they’ve fallen in value. That’s why it needs modelling, not a reflex. Large funds use a different method set out in the legislation.

Division 296 doesn’t make super bad. It makes default decisions expensive.

Five questions worth answering this year

1. Will either of us be above $3 million at 30 June 2027, and by how much?
2. Should our SMSF make the cost base reset election, and has the valuation been done properly?
3. Where should new money go from here: super, a family trust, a company, an investment bond or our own names?
4. Who will inherit our super, and how much tax will they pay on it? Adult children often pay death benefits tax that a spouse wouldn’t.
5. Do we have the cash flow to pay any Division 296 tax without selling something at the wrong time?

My view

Even at 30% on part of your earnings, super is still a good home for a lot of money, particularly once you’re drawing a pension. What has changed is that super is no longer the automatic answer for every surplus dollar. The families who do well from here will be the ones who decide deliberately where each part of their wealth lives, rather than leaving it where it landed.

Andre Dirckze, Head of Private Wealth

Sources: Treasury Laws Amendment (Building a Stronger and Fairer Super System) Act 2026 (No. 8, 2026), royal assent 13 March 2026; ATO, Be ready for new tax on large and very large super balances (July 2026). General information only. It does not take into account your objectives, financial situation or needs and is not tax advice. Seek personal advice before acting.