The Federal Government has released draft legislation that will significantly change the tax treatment of very large superannuation balances. While the measures do not commence until 1 July 2026, they are highly relevant for anyone with a total superannuation balance (TSB) approaching or exceeding $3 million.
From that date, earnings attributable to the portion of an individual’s superannuation balance above $3 million will be subject to an additional 15% tax, taking the effective tax rate on those earnings to up to 30%. For balances above $10 million, the combined effect of existing rules and the new measure can result in earnings being taxed at up to 40%.
This new tax will be imposed under a proposed Division 296 and, importantly, it will be assessed to the individual personally, not the superannuation fund. The ATO will calculate the liability and issue an assessment, similar to how Division 293 tax currently operates. Individuals will have 84 days to pay the tax or elect to release funds from their superannuation account.
How the tax is calculated
Rather than taxing actual income earned inside the fund, the calculation is based on the change in your total superannuation balance over the year, adjusted for withdrawals and contributions. Only the proportion of earnings attributable to balances above $3 million is subject to the additional tax. Losses can be carried forward and offset against future Division 296 liabilities.
Special rules apply in the first year your balance exceeds $3 million, ensuring that only earnings above that threshold are brought into the calculation. Transitional rules will also apply in 2026–27, with the assessment based solely on the year-end balance.
Haven’t large balances already lost concessions?
Yes — progressively. High-income earners have faced additional tax on concessional contributions for years, and transfer balance cap rules already limit how much can sit in tax-free pension phase. This proposal goes further by reducing concessional treatment on earnings for very large balances, regardless of whether they sit in accumulation or pension phase.
What should you be doing now?
There is no one-size-fits-all response. Options may include doing nothing, restructuring investment exposure, or withdrawing amounts from superannuation before the new rules commence. The right approach depends on your age, cash-flow needs, estate planning objectives, and broader investment structure.
Now is the time to model the impact and prepare.
If your superannuation balance is close to — or well above — $3 million, we recommend booking an appointment to discuss how these changes may affect you and what planning steps are available before 1 July 2026.
Make an appointment today to review your position and prepare with confidence.