The legislation passed on 10 March 2026. The effective date is 1 July 2026. If your superannuation balance is above $3 million, the clock is running and the first decisions are more time-sensitive than most commentary suggests.
For the better part of three years, Division 296 existed as a proposal, a draft, a debate. That’s over. The Better Targeted Superannuation Concessions Tax passed both houses of Parliament on 10 March 2026 and takes effect from 1 July this year.
Much of the commentary written during the bill’s passage was based on earlier draft versions — including the proposal that would have taxed unrealised capital gains. The final legislation is materially different. If you’ve been watching this from a distance and waiting for clarity, you now have it. This is what the law actually says.
The basics: what Division 296 does
Division 296 imposes an additional personal tax — separate from your fund’s existing 15% earnings tax — on realised superannuation earnings attributable to balances above the thresholds below.
| Total Super Balance (TSB) | Additional tax on earnings | Combined rate |
| $3m – $10m | +15% | 30% |
| Above $10m | +25% | 40% |
Three things worth noting about the final design: the tax only applies to realised earnings — dividends, interest, rent, and realised capital gains. Unrealised gains are out of scope. The standard one-third CGT discount continues to apply for assets held longer than 12 months. And both thresholds are indexed annually, so they won’t erode in real terms the way the $1.6m transfer balance cap effectively did in its early years.
The number that surprises most people
Division 296 sounds alarming at the headline rate. In practice, the impact depends heavily on your balance and the composition of your earnings. A member with a $4.5 million TSB generating $300,000 in realised earnings for the year pays approximately $15,000 in Division 296 tax — an effective additional rate on total earnings of 5%.
That changes significantly at higher balances. A $12.9 million TSB with $840,000 in realised earnings produces a Division 296 liability of around $115,000. For many investors, the tax is material but manageable and still lower than what they’d pay on the same earnings outside super.
The SMSF grandfathering election: the most time-sensitive item
For SMSF holders, there is one feature of the final legislation that requires immediate attention and it is more complex than most commentary suggests.
SMSFs may elect to reset the cost base of all CGT assets in the fund to their market value as at 30 June 2026. This means that when those assets are eventually sold, only gains accrued after 1 July 2026 count for Division 296 purposes — protecting years of embedded appreciation in property, equities or unlisted investments.
The catch: the election is all-or-nothing. If you elect, every asset in the fund gets its cost base reset — you cannot cherry-pick. For assets currently sitting at a capital loss, those losses are eliminated for Division 296 purposes, which can be actively disadvantageous. The decision therefore requires a complete CGT position review across the fund — overall net gain position, the expected growth trajectory of key assets, and the likely timing of future sales — before electing.
Key point
The grandfathering election is a fund-level decision, not asset-by-asset. A fund with large property gains but also unrealised equity losses may find electing is not in its best interest overall. The analysis needs to happen well before the FY27 tax return deadline — not at tax time. Members of industry or retail funds cannot elect; they instead receive a transitional CGT factor relief for FY27–FY30.
Why FY27 is a different year to every year after it
There is a structural asymmetry in how Division 296 operates in its first year versus all subsequent years that is underappreciated in most commentary.
In FY27, the tax is assessed on your TSB at 30 June 2027 only. If you withdraw funds before that date and bring your balance below $3 million, you can reduce or eliminate your Division 296 liability for that year. From FY28 onwards, the rules change: the higher of your opening or closing balance is used. If your balance on 1 July was already above $3 million, a withdrawal later in the year won’t reduce your exposure for that year.
In practical terms: if partial withdrawal is part of your strategy, FY27 is where that decision has the most leverage. The same decision deferred to FY28 has materially less effect.
The strategic options — and the biggest mistake to avoid
The response to Division 296 isn’t one-size-fits-all. Options include withdrawing to sub-threshold, accepting the tax and optimising earnings within super, restructuring to family trusts or companies, or adjusting estate planning strategies. Each has merit in different circumstances.
The biggest mistake we’re seeing is restructuring too fast. A withdrawal that avoids Division 296 can easily crystallise more in capital gains and income tax than it saves. The analysis requires a full comparison of after-tax outcomes across both scenarios — not just a comparison of headline tax rates. For most investors, super remains highly tax-effective even after Division 296.
The bottom line
Division 296 is now a permanent feature of the superannuation landscape. The strategies that will serve you best are those built on a clear understanding of the legislation as passed — not a rushed reaction to the headline number. FY27 is the planning window that matters most.
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Important Information: This article has been prepared by Barker Financial Pty Ltd (ABN 62 675 838 605), trading as Barker Wealth, a Corporate Authorised Representative (No. 1317193) of AFSL Holdings Australia Pty Ltd (AFSL 460940). The information is general financial product advice only and has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information, you should consider whether it is appropriate for you and seek personal financial advice. This document is intended for wholesale investors only as defined under section 761G of the Corporations Act 2001 (Cth). Past performance is not a reliable indicator of future performance. The information is based on legislation passed 10 March 2026 and may be subject to further regulatory guidance. Joshua Barker AR: 1274752. FSG available at www.barkerwealth.com.au or call (02) 8018 8998.