Superannuation Tax March 15: Division 296 Targets $3m+ Balances

Australia’s superannuation tax is set to change under Division 296, with higher effective rates for very large balances. The law has passed Parliament and awaits Royal Assent, making this a live planning issue for SMSFs and advisers. Earnings tied to the $3m–$10m portion will face 30%, and earnings above $10m will face 40%. We explain who is affected, outline examples, and share practical allocation ideas, plus what possible LISTO changes could mean for low‑income workers.

Division 296: What changes and when it applies

Division 296 increases the effective superannuation tax on earnings linked to high balances. Earnings attributable to the $3 million to $10 million portion are taxed at 30%. Earnings attributable to balances above $10 million are taxed at 40%. The standard fund rate on ordinary earnings remains for lower balances. Division 296 targets earnings attributable to the portions above the thresholds, not the first $3 million.

Parliament has passed the bill, and Royal Assent is pending. The measure is scheduled to commence from 1 July 2025, subject to final confirmation, with coverage across APRA funds and SMSFs. Members are tested on total super balance across all funds. Recent guidance and coverage outline the rollout and practical considerations for trustees SuperGuide news for March 2026.

Who is affected and practical examples

Individuals with a total super balance above $3 million are in scope. The test aggregates balances across all funds, including SMSFs and retail or industry funds. Division 296 applies to earnings attributable to the excess portion. It does not draw extra tax on the first $3 million of balance. Non-residents with Australian super are assessed in the same way, using Australian dollar thresholds.

Consider a member with an $8 million total super balance and $400,000 in annual earnings. The portion above $3 million is $5 million, which is 62.5% of the balance. About $250,000 of earnings are attributable to that portion and face a 30% superannuation tax. If a member has $12 million, the share above $10 million attracts 40%, while the $3 million to $10 million share attracts 30%.

Planning moves for SMSFs and advisers

With higher superannuation tax on very large balances, review where the next investment dollar goes. Options include holding growth assets outside super, using family trusts, or considering investment bonds. Some high-balance members are exploring alternative structures and philanthropy strategies, as widely reported Wealthy Australians show how to ‘outsmart’ new $3m super tax. Always weigh franking, CGT, and estate outcomes.

Revisit concessional and non-concessional contributions for each spouse. Consider pension commencement timing, partial commutations, and rebalancing between spouses to manage total super balances. For SMSFs, review asset location, insurance, and reserves policy. Keep enough liquidity for potential Division 296 liabilities. Document advice and trustee decisions, and keep audit evidence for valuations and tax estimates.

Low-income super offset (LISTO) and savings flows

LISTO refunds up to $500 of contributions tax for eligible low-income workers, generally those earning up to $37,000. The refund equals 15% of concessional contributions, capped at $500, and is paid into super. LISTO helps offset contributions tax so take-home pay is not reduced by saving through super. It remains a key support for part-time and casual workers.

Policy discussion suggests potential boosts to LISTO or eligibility changes, which would lift refunds for low-income members. If enacted, we could see greater voluntary contributions from lower-paid workers and more employer salary sacrifice plans. Advisers may tilt contributions toward an eligible spouse to capture LISTO, while high-balance members reassess super versus non-super investing SuperGuide news for March 2026.

Final Thoughts

Division 296 shifts the superannuation tax landscape for very large balances. Earnings tied to the $3 million to $10 million portion face 30%, while earnings above $10 million face 40%. For SMSFs and advisers, the near-term task is to map members’ total balances, estimate attributable earnings, and plan cashflow for possible liabilities. Consider where to place new savings, how to split contributions between spouses, and which assets sit best inside or outside super. At the same time, keep an eye on LISTO settings, since any boost could change contribution patterns for lower-income households. Document your strategy, revisit it at year end, and seek personal tax advice before making structural changes.

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The content shared by Meyka AI PTY LTD is solely for research and informational purposes.  Meyka is not a financial advisory service, and the information provided should not be considered investment or trading advice.