Superannuation tax changes 2026: Prepare for the new rules before July 1

From 1 July 2026, the Australian Government’s superannuation tax changes will reshape how large superannuation balances are treated for tax purposes. These reforms are intended to improve the long-term sustainability of the superannuation system while maintaining its role as a key retirement savings structure for Australians.

The most significant change is the introduction of Division 296 a new tax that applies to individuals whose total superannuation balance exceeds $3 million.

While this measure targets higher-balance members, it introduces broader considerations around how super balances are measured, how earnings are assessed, and how Self-Managed Super Funds are required to track and report investment activity each year.

Alongside Division 296, several other superannuation changes are also being introduced. These include:

• Payday Superannuation, which changes when employers must pay super contributions
• Superannuation on government-funded Parental Leave Pay
• Proposed increases to the Low Income Superannuation Tax Offset (LISTO)

Each reform applies to different groups, but together they represent a broader shift toward tighter superannuation reporting and compliance. This blog post discusses a brief overview of how the new superannuation tax rules work in practice, along with the strategies to prepare for these changes.

What is Division 296 and how does it affect your superannuation?

Division 296 of the Income Tax Assessment Act 1997 introduces an additional layer of tax for individuals whose total superannuation balance exceeds $3 million at the end of a financial year. The tax does not apply to the individual’s entire superannuation balance. Instead, it applies only to the earnings attributable to the portion of the balance above $3 million.

Under this rule, an additional 15% tax is imposed on those earnings at the individual level. This tax sits on top of the existing superannuation tax rules and does not replace them. As a result, the way the tax applies depends on whether the individual is in the accumulation phase or the retirement phase of superannuation.

For members in the accumulation phase, fund earnings are already taxed at 15%. When Division 296 applies, the earnings linked to the balance above $3 million are subject to a further 15% tax, creating a combined effective tax rate of up to 30% on that portion of earnings.

For members in the retirement phase, superannuation fund earnings are generally taxed at 0%. However, Division 296 introduces a separate 15% tax on earnings attributable to the portion of the balance exceeding $3 million.

This means that, even though the fund itself pays no tax on those earnings, the individual may still be liable for Division 296 tax, effectively reintroducing tax on part of their superannuation earnings in retirement.

The purpose of Division 296 is to reduce tax concessions for very large superannuation balances while leaving the existing tax treatment unchanged for the vast majority of Australians.

Overview of Division 296 superannuation tax changes

On 19 December 2025, the Government released the draft Treasury Laws Amendment (Better Targeted Superannuation Concessions) Bill 2025. The draft proposes changes to the Division 296 tax, which will apply to earnings on super balances above $3 million and $10 million.

If passed, the legislation is proposed to commence on 1 July 2026, with the first assessment at 30 June 2027. Here is the brief overview of key changes introduced in the draft regarding Division 296.

Second tax threshold introduced for balances over $10 million

Previously, the Division 296 tax was set to apply at a 15% tax rate for balances exceeding $3 million. With the updated bill, a second tax threshold has been introduced, which targets super balances exceeding $10 million. This 40% headline rate will apply to earnings on the portion of the balance above $10 million.

New method for measuring total superannuation balances

Previously, Division 296 taxable earnings were calculated based solely on the member’s balance at 30 June each year. Under the December 2025 final legislation, this has changed taxable proportion of earnings is now based on the greater of the member’s start-of-year or end-of-year Total Superannuation Balance (TSB).

This means that even if a member’s balance falls below $3 million by 30 June, temporary spikes earlier in the year can still trigger Division 296 tax. For the first year of operation, there is a transitional rule where only the end-of-year balance will be considered.

Indexation rules for Division 296 thresholds

An individual’s total superannuation balance threshold of $3 million will be indexed in line with the Consumer Price Index (CPI) and will increase only in $150,000 increments.

In addition, Division 296 introduces a second threshold of $10 million, which will also be CPI-indexed but will increase only in $500,000 increments. These thresholds determine when additional Division 296 tax applies to superannuation earnings.

Division 296 tax moves to realized earnings

One of the most significant changes in the revised Division 296 tax is the shift towards a realized earnings approach. The earlier version of Division 296 proposed taxing unrealized capital gains, which created complexity and uncertainty for superannuation funds.

However, under the revised bill, the tax will now be based solely on realized earnings—income and capital gains that have been actually realized within the financial year. This move aligns the superannuation tax treatment with existing income tax principles, simplifying the calculation and administration of the tax.

Exclusion of capital gains accrued before the policy’s start

To provide some relief to individuals who already have significant capital gains built up in their superannuation funds before the new tax applies, the revised Division 296 bill excludes capital gains accrued before the start of the policy (i.e., before 30 June 2026).

This means that pre-existing gains that have accumulated on assets already held in super funds before the new rules come into effect will not be taxed under Division 296 when those assets are eventually sold.

This exclusion reduces the impact of the new tax on long-term superannuation holders, particularly those who have substantial capital growth in their existing assets.

Equal tax treatment for defined benefit members

The revised Division 296 bill ensures equitable tax treatment for both defined benefit funds and accumulation funds.

Previously, defined benefit funds, which provide members with a fixed retirement income based on a formula (rather than the balance of accumulated contributions), were taxed differently from accumulation funds, where the retirement benefits are based on the contributions and investment returns.

Under the updated bill, defined benefit funds will now be subject to the same tax rules as accumulation funds when their balances exceed the relevant thresholds (e.g., $3 million and $10 million).

This change aims to ensure fairness, so that individuals in either type of fund will face the same tax treatment on their superannuation balances exceeding these thresholds.

Division 296 start date delayed to July 2026

Finally, one of the notable changes is the delayed start date for the new tax. Instead of being implemented from 1 July 2025, as originally proposed, the tax will now take effect from 1 July 2026.

This gives superannuation funds and individuals more time to plan and adjust to the new tax rules. The 2026/27 financial year will be the first to experience the application of Division 296 tax under the updated rules.

Additional superannuation tax changes to watch for in 2026

In addition to Division 296, the government has announced several other superannuation reforms that affect different groups of Australians.

Payday superannuation changes from 1 July 2026

From 1 July 2026, employers will be required to pay Superannuation Guarantee contributions at the same time as salary and wages, rather than quarterly. This reform aims to improve contribution timing and reduce unpaid super.

Superannuation on parental leave pay explained

From 1 July 2025, eligible parents with children born or adopted on or after this date will receive superannuation on government-funded Parental Leave Pay.

• The contribution will be equal to 12 percent of Parental Leave Pay
• Payments will be made as a lump sum, including interest
• The ATO will begin making payments from July 2026

Low income superannuation tax offset changes (LISTO)

From 1 July 2027, the government has proposed increasing the LISTO income threshold from $37,000 to $45,000, with the maximum payment increasing to $810. This measure is intended to better support low-income earners, although it is not yet law.

How CleanSlate Helps You Prepare for Superannuation Tax Changes?

The new superannuation rules have raised a lot of questions for SMSF members. From how balances are calculated to how earnings are measured and reported each year, there is now more to consider than before. Even small errors in calculations, valuations, or reporting can lead to compliance issues or unexpected tax outcomes.

If you need expert help understanding how these changes apply to your SMSF and managing the details correctly, the SMSF accounting team at CleanSlate can support you in the following ways

• Reviewing superannuation balances and year-end figures: We check how your superannuation balance is calculated at 30 June, ensuring contributions, withdrawals, and member balances are recorded correctly. This is especially important if your balance is approaching the $3 million threshold.
• Managing ongoing SMSF compliance and administration: We support the ongoing administration of your SMSF, including financial statements, annual returns, and compliance obligations, helping keep your fund aligned with current ATO requirements as the rules change.
• Explaining how earnings are calculated under Division 296: We clearly explain how earnings are calculated under the new rules, including how investment income, capital growth, balance movements, and valuation changes are taken into account.
• Assisting with asset valuations and consistent reporting: If your SMSF holds property or long-term investments, we help coordinate valuations and apply consistent reporting methods each year to support accurate and well-documented results.
• Keeping you informed as superannuation rules evolve: We monitor legislative changes affecting superannuation and explain what they mean for your SMSF, so you are prepared for new reporting or tax requirements before they apply.

If you would like to review your superannuation position and make sure your SMSF is prepared for the 2026 changes, book a call with our SMSF experts today.

Final thoughts

With the new superannuation tax changes hitting from 1 July 2026, it's time to take action if your balance is over $3 million. Division 296 will increase tax on large super balances, but there’s still plenty of time to plan. From payday superannuation to contributions on parental leave, these changes could affect you in different ways.

It’s advisable to review your superannuation to ensure you are prepared for these changes. If you have questions about how superannuation tax changes may affect your circumstances or would like tailored advice on your superannuation strategy, our specialists can help you understand what these changes mean. To discuss your options, contact us today!