Division 296 — the additional tax on large superannuation balances — takes effect from 1 July 2026.
That makes 2026-27 its first year of operation, and it means the balance that determines your first assessment is the one you will hold on 30 June 2027.
If your total superannuation balance is anywhere near three million dollars, this is the year the decisions start to matter.
How it works
An additional fifteen percent applies to earnings attributable to the portion of your total superannuation balance above $3 million.
Above $10 million, a further ten percent applies — twenty-five percent in total on earnings attributable to that portion.
Both thresholds are indexed.
The tax is assessed to you personally, not to the fund, although you can direct the fund to pay it. It is calculated on the proportion of your balance above the threshold, not on the whole balance:
> (total super balance − $3,000,000) ÷ total super balance × earnings
So a member with $4 million is taxed on the earnings attributable to a quarter of their balance, not on all of it.
The change most people have not caught up with
The version of this tax that generated two years of argument is not the version that passed.
The original proposal measured earnings as the movement in your total super balance, which meant unrealised gains were captured. A fund holding a property that rose in value on paper would have owed tax on a gain it had not received, and might have had to sell something to pay it.
That is not the law.
The final legislation taxes realised earnings only, on ordinary tax principles — dividends, interest, rent, and realised capital gains, with the usual discounting. To prevent gains that accrued before commencement being caught, a separate notional cost base is tracked, set at market value on 30 June 2026.
This changes the planning question fundamentally. It is no longer how do I fund a tax on paper gains. It is the ordinary question of when to realise — which is a question SMSF trustees already know how to think about.
What SMSF trustees specifically need to do
Get your 30 June 2026 valuations right. That date now sets the notional cost base for Division 296 purposes. A casually estimated property valuation at that date has become a number with a long tail of consequences. If your fund holds unlisted or hard-to-value assets, this is worth doing properly rather than adequately.
Understand the one-off cost base reset. SMSFs have a one-off option to reset the cost base of certain assets to market value as at 30 June 2026 for these purposes. Whether it helps depends on your fund's holdings and unrealised position — it is a decision to make deliberately with your accountant, not one to discover later.
Watch the timing of realisations. Because the tax now follows realised earnings, the year in which you sell an asset determines the year in which the additional tax bites. For a fund holding a large single asset, the difference between realising in one financial year and the next can be material.
Note the first-year measurement quirk. For 2026-27 only, the balance is measured at 30 June 2027. In later years it is tested at either end of the year, whichever is higher — which is a meaningfully harsher test, and worth planning around from year two.
Where the strategies have limits
The obvious reaction is to move money out of super. Sometimes that is right; frequently it is not, and the arithmetic is less favourable than it first appears.
Superannuation in retirement phase still pays no tax on earnings within the transfer balance cap — which rose to $2.1 million on 1 July 2026. Money withdrawn and invested personally is taxed at your marginal rate, which for most people in this position is considerably more than fifteen percent, let alone thirty.
The comparison is not super with Division 296 against no tax. It is against your marginal rate outside super, and on that comparison super frequently still wins even with the additional tax applied.
Withdrawing also has consequences beyond the annual tax rate. Money outside super is exposed to your estate rather than passing under the fund's rules, and the death benefit position changes with it.
There is also a simple structural point that is often missed in couples: the thresholds are per person. A couple with an uneven split between them may be able to even it out over time through contribution splitting or a recontribution strategy, and reduce the amount above the threshold without removing anything from super at all.
What actually to do this year
Find out your current total superannuation balance and project it forward to 30 June 2027. If it is comfortably under three million and unlikely to cross the threshold, this article does not apply to you and no action is required.
If it is near or above, three things are worth doing before June: get the valuations right, take advice on the cost base reset, and — if you have a spouse — look at whether the balances between you can be evened up over the coming years.
None of this is urgent in the way a deadline is urgent. It is urgent in the way that decisions with a measurement date are urgent, which is to say the work has to happen before the date, and the date is 30 June.
Rates, thresholds and rules stated here are current as at August 2026 and are indexed or amended from time to time. Confirm against ATO guidance before acting.
Adapted from The Self-Managed Super Fund Handbook by Paul Yang. See the books.