WEEKLY E-MAIL

20 January 2026

THE AMENDED DIVISION 296 TAX

By Sam Eley

On the last business day of 2025, Treasury released the Bill for the revised, highly-debated Division 296 – Better Targeted Superannuation Concessions measure. The previous Bill aimed to target all members with balances of more than $3m, while the new Bill adds further tax tiers and largely removes the more controversial tax on unrealised capital gains, while adding additional tax measures.

The new Bill puts in place announced changes made by the Federal Treasurer on the 13th October 2025.

There will be two tax tiers for Division 296:

1. 15% applied to the portion of earnings that corresponds to the share of the individual’s Total Super Balance (TSB) above $3 million; and
2. An additional 10% applied to the portion that corresponds to the share above $10 million

This will mean that the overall tax imposed on superannuation earnings will be as follows:

The new Bill adds an indexation measure, which was missing from the prior version and was one of the key reasons the previous Bill didn’t progress. The $3 million threshold will be indexed in increments of $150,000, and the $10 million threshold will be indexed in increments of $500,000.

Another adjustment that has been made is that the revised Bill uses the higher of the individual’s TSB before the start of the income year, and the TSB at the end of the income year. However, this change will also mean that if a member were to die and their TSB at the start of the income year was over $3 million, they will have a Division 296 liability for their relevant portion of Super earnings for the period from the start of the income year to their date of death. In essence, this would be another form of ‘death tax’ for those with higher superannuation balances.

From a tax standpoint, the Government has moved away from the TSB change methodology that was capturing unrealised capital gains to a specific fund level earnings approach. For SMSF’s, super earnings are calculated as follows:

Division 296 is to commence on 1 July 2026, focusing on the TSB as at 30 June 2027. The first Notice of Assessment is expected to be issued in the 2027-2028 financial year.

The Bill is not yet law, and there may be further amendments before final legislation passes. Once final legislation is approved and the Bill does become law, clients impacted by the proposed changes will need a comprehensive review of their overall wealth position to determine the most appropriate structure to get the best tax outcomes going forward.

Sam Eley
Senior Financial Planner
Authorised Representative No. 1234685

If you have any questions or comments, please email me at sam@gfmwealth.com.au

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