On 13 October 2025, the Government announced a revision to the proposed Division 296 changes. Responding to mounting pressure, there have been some significant changes, including:
- The removal of the controversial taxation of unrealised capital gains.
- Adding a second threshold of $10 million to the originally proposed $3 million threshold.
- Applying a higher tax rate for funds exceeding the thresholds.
- Allowing indexation to apply for the application of Division 296 thresholds.
The start date of the rules has been pushed back to 1 July 2026 to allow for consultation on the final legislation.
Summary of the key changes compared to the previously announced measures
Identification of high-balance members and ATO reporting process
| Previous measure |
New measure |
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Superannuation funds submit individuals’ balances to the ATO for all members. The ATO would add all the superannuation interests of an individual to calculate an individual’s Total Super Balance (TSB).
The ATO would then contact a super fund for contribution and withdrawal data for any individual with a TSB above the legislated threshold.
Funds provide this information (based on existing data).
The ATO would calculate the tax liability.
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Superannuation funds submit individuals’ balances to the ATO for all members. The ATO will add all the superannuation interests of an individual to calculate an individual’s Total Super Balance (TSB).
The ATO will then contact a super fund for the proportion of the fund’s applicable realised earnings for any individual with a TSB above the legislated threshold.
Funds undertake calculation of earnings and the share attributable to in-scope individuals, and provide this information back to the ATO.
The ATO will calculate the tax liability.
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Calculating superannuation earnings
| Previous measure |
New measure |
Individuals’ superannuation earnings calculated based on changes in TSB, adjusted for withdrawals and contributions.
Calculation applied equally to all superannuation interests (including accumulation and defined benefit interests) in both APRA-regulated funds and self‑managed superannuation funds (SMSFs).
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Revised methodology will be based on superannuation fund’s realised earnings, attributed to members with a TSB above the large balance threshold.
Fund’s realised earnings will be based on its taxable income, adjusted for elements such as contributions and pension phase income. Calculations closely aligned to existing tax concepts.
In-scope members will then be attributed an appropriate share of the fund’s realised earnings based on existing reporting mechanisms or on a fair and reasonable basis. This would be supported by guidance from the ATO. |
Indexation of large balance thresholds
| Previous measure |
New measure |
| $3 million threshold not indexed. |
$3 million threshold indexed to the Consumer Price Index in $150,000 increments, maintaining alignment with movements in the Transfer Balance Cap (TBC).
Second threshold of $10 million (see below) indexed in $500,000 increments, maintaining alignment with the Transfer Balance Cap. |
Introduction of a tiered approach to the Div 296 tax rate
| Previous measure |
New measure |
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A total concessional tax rate of 30 per cent on the proportion of earnings corresponding to TSBs above $3 million.
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Two-tiered approach with total concessional tax rates for large balance holders:
- 30 per cent on the proportion of earnings corresponding to TSBs between the lower threshold ($3 million) and the higher threshold ($10 million); and
- 40 per cent on the proportion of earnings corresponding to TSBs above the higher threshold ($10 million).
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Start date & timing
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New measure |
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Start date: 1 July 2025 (focusing on TSB at 30 June 2026)
First notices of assessments expected to be issued in the 2026-27 financial year.
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Start date: 1 July 2026 (focusing on TSB at 30 June 2027)
First notices of assessments expected to be issued in the 2027-28 financial year.
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Whilst the method for calculating the tax liability has not been settled and will require consultation, Treasury has provided some broad steps. These steps apply a proportionate basis to taxation aimed at determining how much of a member’s total super balance meets threshold one ($3 million) and threshold two ($10 million).
Examples for calculating tax liability
Megan – both APRA-regulated fund and SMSF interests
- Megan is 58 and she is both a member of an APRA-regulated fund and a member of an SMSF and has a total super balance of $4.5 million, of which $2.3 million is in an APRA fund and the remaining $2.2 million is in an SMSF.
- In the 2026-27 financial year, Megan had $100,000 in realised earnings from her APRA fund and $200,000 in realised earnings from her SMSF (a total of $300,000).
- The proportion of her $4.5 million balance above the $3 million threshold is 33.33 per cent. The proportion above $10 million is nil.
- Megan’s Div 296 tax liability is therefore $15,000 (0.15 x 0.3333 x $300,000).
Emma – SMSF member with over $10 million
- Emma is 55 and a member of an SMSF and has a total super balance of $12.9 million at the end of the 2026-27 income year. That year she was attributed $840,000 of the fund’s realised earnings for the purposes of this tax.
- The proportion of her balance above the $3 million threshold is 76.74 per cent and the proportion of her balance above the $10 million threshold is 22.48 per cent.
- Emma’s Div 296 tax liability is therefore $115,581 (0.15 x 0.7674 x $840,000 + 0.10 x 0.2248 x $840,000). Note the combined Div 296 tax rate on earnings over $10 million is 25 per cent.
Our thoughts
The Labour Government’s softening of proposed Division 296 is a positive, pragmatic response to fairness concerns raised by industry under the previously announced measures. However, complexity and uncertainty will continue until these latest changes become law. Moore Australia will be monitoring any further announcements on Division 296 closely and whilst these are welcomed changes, the devil will, undoubtedly, be in the detail.
Next Steps
The Government has not yet released legislation for these changes, however, has indicated that this will occur in 2026. Given the start date of 1 July 2026, we urge the Government to release this as soon as possible.
In the interim, we recommend you seek advice on the impact of these proposed changes for your superannuation balance. If you would like to consider this further, please reach out to your advisor.