Client Note



Division 296 — What It Means for Large Super Balances

Core change

From 1 July 2026, an additional personal tax applies to superannuation balances exceeding $3 million. The tax is calculated on realised earnings attributable to balances above key thresholds, currently $3m and $10m.

What this does

• Effective tax on super earnings increases to ~30% between $3m–$10m and ~40% above $10m
• Pension-phase assets are no longer fully shielded from additional tax
• The tax is assessed personally (not at the fund level)
• Thresholds are indexed but recalculated annually based on total super balance

What has changed materially

• Unrealised gains are NOT taxed as was originally proposed 
• Early-year withdrawals (before 30 June 2027) can reduce initial exposure
• From 2027/28 onward, calculations use the higher of opening or closing balances — limiting withdrawal strategies

Interaction with wider Budget changes

• Proposed 30% minimum tax on discretionary trusts significantly weakens traditional alternatives
• Post-Budget, super at 30–40% is often competitive relative to trust structures
• Investment companies and lower-income personal ownership become the main alternatives

Key risks

• Exiting super can trigger significant one-off CGT and transaction costs
• Liquidity pressure for SMSFs holding illiquid assets (property, unlisted investments)
• Estate planning complications, particularly for surviving spouses, delays in estate administration due to delayed assessment of personal tax
• Overreacting to the tax without modelling long-term outcomes

Immediate considerations

• Obtain accurate super balance (TSB) position prior to 30 June 2026
• Review asset valuations — particularly for SMSFs
• Consider strategies to equalise balances between spouses
• Model whether fund liquidity is sufficient to meet future tax liabilities
• Avoid major structural changes until broader tax settings are finalised

Our view

Division 296 reduces the attractiveness of very large super balances, but it does not eliminate super as a preferred structure. In many cases — particularly post-Budget — remaining within super will continue to be competitive once all costs, risks and alternatives are considered. Decisions to exit should only be made following detailed modelling across a long-term horizon.

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Financial Product Advice

Nothing in this advice is intended as ‘financial product advice’ as defined by the Corporations Act (as amended by the Financial Services Reform Act 2001). We are not licensed to provide ‘financial product advice’ which includes recommendations regarding contribution to or withdrawal from, or specific investments within a particular superannuation fund (including a Self-Managed Superannuation Fund). You should consider if it is in your interests seeking advice from an Australian Financial Services Licensee before making decisions in relation to a financial product.

Currency of Income Tax Advice

Any taxation advice included in this correspondence is current to the date of writing. Taxation laws in Australia are complex and constantly changing. The government often changes rules effective from the date announced and, in some cases, retrospectively. If there is any delay in the use of this advice you should consider having it refreshed.

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Chancellors Chartered Accountants | Private Wealth Advisory