Australia’s new super tax on unrealised gains, formally Division 296, adds a 15% tax on the portion of your superannuation earnings tied to any total super balance above $3 million, with a further 10% layered on the portion above $10 million. Because the tax is calculated from the movement in your year-end balance rather than from realised transactions, increases in the value of assets you still hold — property, shares, managed funds — count as taxable earnings even though nothing has been sold.1Australian Taxation Office. Better Targeted Superannuation Concessions
When It Starts and Who Gets Caught
Division 296 applies from income years starting on 1 July 2026, after the Building a Stronger and Fairer Super System legislation received Royal Assent on 13 March 2026.2Parliament of Australia. Treasury Laws Amendment (Building a Stronger and Fairer Super System) Bill 2026 The 2026–27 financial year is the first period captured, so the ATO will not issue Division 296 assessments until after 30 June 2027, once end-of-year balance data has come in from super providers. Earlier drafts pointed to a 1 July 2025 start, and older commentary still reflects that; the enacted law delayed commencement by a year.
The trigger is your total superannuation balance (TSB). The ATO combines every super account you hold — APRA-regulated funds, self-managed super funds, and exempt public sector schemes.3Australian Government Treasury. Treasury Laws Amendment (Better Targeted Superannuation Concessions) Bill 2023 – Exposure Draft Explanatory Materials If the combined TSB at 30 June exceeds $3 million, you fall within scope. Splitting balances across funds does not help.
Two tiers apply for 2026–27:
- Large Superannuation Balance Threshold: $3 million. Earnings on the proportion of your balance above this level attract an additional 15% tax.
- Very Large Superannuation Balance Threshold: $10 million. Earnings on the proportion above this level attract a further 10% on top of the first Division 296 charge.4Australian Taxation Office. Better Targeted Super Concessions Is Law
Both thresholds are indexed to CPI, in $150,000 increments for the $3 million mark and $500,000 increments for the $10 million mark.5Parliament of Australia. Treasury Laws Amendment (Building a Stronger and Fairer Super System) Bill 2026
Why Paper Gains Get Taxed
Division 296 does not track individual investment transactions inside your fund. Instead, the ATO compares your total super balance at the end of the financial year to your balance at the start, then adjusts for money that flowed in or out. Contributions are subtracted, withdrawals are added back, and what remains is treated as your superannuation earnings for the year.3Australian Government Treasury. Treasury Laws Amendment (Better Targeted Superannuation Concessions) Bill 2023 – Exposure Draft Explanatory Materials
Because the method relies on your balance at a point in time, it inherently captures unrealised capital gains. If an SMSF holds a commercial property worth $2 million on 1 July and $2.4 million on 30 June, that $400,000 paper gain shows up in earnings even though you still own the building and received no cash. Shares, managed funds, and any other asset whose market value shifts during the year work the same way. Under normal tax rules a capital gain arises only on sale. Division 296 overrides that principle for high-balance super accounts.
How the Tax Is Calculated
Only the share of earnings attributable to the balance above the threshold is taxed. The ATO calculates that share as your end-of-year TSB minus $3 million, divided by your end-of-year TSB. That percentage is applied to your total earnings for the year, and the result is taxed at 15%.3Australian Government Treasury. Treasury Laws Amendment (Better Targeted Superannuation Concessions) Bill 2023 – Exposure Draft Explanatory Materials For balances above $10 million, a second proportion is calculated on the same basis using $10 million as the threshold, and that slice of earnings is taxed at an additional 10%.1Australian Taxation Office. Better Targeted Superannuation Concessions
A Worked Example
Say your TSB on 1 July 2026 is $3.5 million. During the year you contribute $27,500 and withdraw nothing. By 30 June 2027, your TSB has grown to $4 million. After adjusting for contributions, your superannuation earnings for the year come to roughly $476,000. The proportion above $3 million is $1 million out of $4 million, or 25%. Apply 25% to $476,000 in earnings: about $119,000 is the taxable slice. Multiply by the 15% Division 296 rate and you owe roughly $17,850, on top of whatever tax your fund already paid internally.
The result shifts significantly with how far above the threshold you sit. Someone at $3.1 million with modest growth might face a few hundred dollars. Someone at $8 million with strong returns could owe tens of thousands.
Total Tax by Balance Tier
Super funds already pay 15% tax on investment earnings at the fund level.6Parliamentary Budget Office. PBO Budget Explainer – How Is Super Taxed Division 296 sits on top of that:
- Below $3 million: 15% (fund-level tax only, unchanged).
- $3 million to $10 million: 30% on the proportional slice above the threshold — the existing 15% fund tax plus the 15% Division 296 charge.3Australian Government Treasury. Treasury Laws Amendment (Better Targeted Superannuation Concessions) Bill 2023 – Exposure Draft Explanatory Materials
- Above $10 million: 40% on the proportional slice above that mark — 15% fund tax, 15% Division 296, and a further 10%.7Commonwealth Superannuation Corporation. Better Targeted Super Concessions (Division 296 Tax)
Division 296 is assessed against you personally, not against the fund. Your super fund continues to pay its own 15% internally as before, and the Division 296 bill comes to you as an individual.
What Happens in a Loss Year
If your investments lose value, your superannuation earnings for the year are negative and no Division 296 tax is owed. Those negative earnings are not wasted. They carry forward and reduce your taxable earnings in future years.3Australian Government Treasury. Treasury Laws Amendment (Better Targeted Superannuation Concessions) Bill 2023 – Exposure Draft Explanatory Materials
The carry-forward applies even if your balance temporarily drops below $3 million, provided your TSB was above the threshold at the start of the loss year. If the balance later recovers above $3 million, accumulated negative earnings offset the positive earnings before any tax is calculated. Losses in consecutive years stack.
This mechanism matters because of the unrealised gains issue. A property or share portfolio might spike in value one year (creating a tax bill) and fall the next (generating a carry-forward credit). Over time the system roughly tracks your real long-term returns rather than short-term volatility. Note the limit though: if you paid a tax bill in year one from personal cash and your fund value falls in year two, you do not get a refund. You get a credit against future Division 296 liabilities.
How You Pay
After the financial year ends, the ATO calculates your Division 296 liability and issues a notice of assessment. You have 84 days from the date of that notice to pay before interest applies.3Australian Government Treasury. Treasury Laws Amendment (Better Targeted Superannuation Concessions) Bill 2023 – Exposure Draft Explanatory Materials
Three options are available:
- Pay from personal funds outside the super system, keeping your super balance intact.
- Elect to release money from one or more of your super accounts to cover the debt. You can choose which fund to draw from, and this option is available whether or not you have met a condition of release.
- Pay part personally and release the rest from super.
To release funds, the election must be made within 60 days of the notice of assessment, with full payment due by the 84-day mark. Miss that deadline and the ATO can issue a release authority directly to your super provider and compel payment, plus interest.
Liquidity is the real problem for people whose super is heavily concentrated in a single asset. A commercial property held in an SMSF cannot be part-sold to meet a tax bill. Paying from personal funds or restructuring the fund’s asset mix well before 30 June are the practical options.
Defined Benefit and SMSF Property
Defined benefit members do not have an individual account balance in the ordinary sense. The ATO applies actuarial valuation factors to determine whether the $3 million threshold is exceeded, and defined benefit funds are required to report the relevant components.8Australian Taxation Office. Better Targeted Super Concessions Is Now Law The liability is calculated each year, but payment is generally deferred until the member retires and actually receives benefits, which avoids taxing an entitlement that cannot be accessed.
For SMSFs holding property, the 30 June valuation drives the entire calculation. Trustees are already required to obtain annual market valuations, but Division 296 raises the stakes. Valuations should be independent, based on comparable sales evidence rather than automated online estimates, and supported by a clear methodology. A prior-year valuation will not satisfy the requirements: a fresh valuation with an effective date of 30 June is needed. Keep the report, the comparable sales data, and related correspondence for at least five years in case of an ATO audit. A weak valuation is one of the easier ways to end up with an inflated bill or a defensibility problem if the numbers are challenged.