Understanding the Proposed
Division 296 Tax

In 2023, the Government announced its intention to introduce an additional tax targeting very large superannuation balances, with an initial commencement date flagged for the 2025–26 financial year. The original proposal attracted significant criticism, particularly the plan to tax unrealised capital gains within superannuation funds. In response, the Government reconsidered key design elements of the measure.

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Revised legislation was introduced to Parliament in February 2026 and is expected to be debated during March 2026. Based on the current Bill, the proposed commencement date is 1 July 2026, meaning the first year of application would be the 2026–27 financial year.

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Division 296 introduces an additional layer of tax for individuals with more than $3 million in superannuation, with higher effective tax rates applying to balances exceeding $10 million. As a result, many trustees — particularly SMSF members — are questioning whether the new regime should prompt changes to their existing arrangements, including whether to withdraw funds to reduce balances below key thresholds.

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While these questions are understandable, Division 296 is a technically complex measure, and the implications of any response extend well beyond tax alone. Decisions around withdrawals, restructuring or asset sales can have lasting consequences for retirement outcomes, estate planning, liquidity and asset protection.

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This guide has been developed to help trustees, accountants, and advisers cut through the noise, understand how the proposed rules are intended to operate, and assess potential responses within a broader strategic context — rather than reacting to headlines or incomplete information.