What is Division 296?
Division 296 refers to a section of the Australian Income Tax Assessment Act 1997 (ITAA 1997). It primarily deals with superannuation and the taxation of certain superannuation-related amounts.
Who does it affect?
- Individuals with total superannuation balances over $3 million, starting from the 2025–26 financial year.
- The extra tax applies only to the earnings on the portion of the balance above $3 million, not on the entire balance.
An update
Division 296 amends the income tax law to introduce an additional tax of up to 15% on the increase in a person’s Total Superannuation Balance for the year on balances above $3 million. It was intended to take effect from 1 July 2025.
Based on recent media reports, the government has paused the progression of the tax. If the legislation does make it into parliament, it may not be in the same form as the original bill, which lapsed on 21 July 2025. It may be better to wait until we see whether the legislation will go ahead and, if it does, whether any changes are made to the lapsed bills.
It is rumoured that the $3 million threshold may be indexed, which may relieve one of the main issues with the legislation. However, the member’s total superannuation balance, which is used to determine the threshold, may still include unrealised capital gains in the calculation. At the moment, it’s just wait and see what the government proposes to do.
To keep up to date, keep an eye on the Cloudoffis blog and also these sources below:
https://treasury.gov.au/sites/default/files/2023-09/c2023-443986-em.pdf