How your super fund calculates your relevant super earnings
If you have defined benefit interests that are not in retirement phase and other super interests as prescribed by the regulations, your fund will calculate your relevant super earnings based on a change in the TSB value of the super interest. The calculation is performed in accordance with a specific formula under the law, taking into consideration certain contributions and withdrawals that occur during the income year.
For more information, see About Division 296 tax for APRA funds
Deferred Division 296 tax debt
You generally can’t use super from your defined benefit interests to immediately pay your Division 296 tax debt. If your Division 296 tax relates to a defined benefit interest and no end benefit has been paid from that interest yet, your Division 296 tax will be automatically deferred until an end benefit is payable from that interest. We will tell you how much of your Division 296 tax for an income year has been deferred to a Division 296 deferred debt account when we issue your notice of assessment.
To work out how much of your Division 296 tax for a defined benefit interest is deferred, we use the following calculation:
Division 296 tax for the year × (your relevant super earnings for the year for the defined benefit interest ÷ your total super earnings for the year)
For information on how to pay, see Paying your Division 296 tax deferred debt.
Division 296 tax deferred debt account
When your Division 296 tax liability in relation to a super interest is deferred, we establish a Division 296 tax deferred debt account for that interest.
We will create a separate debt account for each defined benefit interest you hold. Interest is calculated and applied annually. You will receive a statement of account for each debt account whenever the account balance changes, allowing you to keep track of your deferred debt.
Paying your Division 296 tax deferred debt
Defined benefit interests typically restrict you from accessing your super to pay the tax. If you have a defined benefit interest and an end benefit has not been paid from that interest, any Division 296 tax that relates to that interest will be automatically deferred.
The deferred Division 296 tax debt becomes due and payable at the end of 21 days after the day on which an end benefit is paid from that defined benefit interest. This will apply separately to each defined benefit interest you have.
However, you can choose to pay your deferred Division 296 tax debt at any time (to avoid or minimise interest). You can do this by either:
- paying the amount using your own money at any time
- electing to release money from another super interest within the prescribed time limit.
If you choose to release money from another super fund, you must make this election within 60 days of the date of your Division 296 tax notice of assessment.
See further information on Paying Division 296 tax.
Example: defined benefit interest and accumulation account
Gina has 3 super interests – an interest in Retiring Today SMSF and 2 defined benefit interests in Defined Super Fund and DB Super Fund.
Gina has a TSB of $5,000,000 on 30 June 2027. Her defined benefit interests have TSB values of $1.5 million and $2.5 million respectively. Her relevant super earnings from Defined Super fund is $37,000 and DB Super Fund is $19,000 and from Retiring Today SMSF is $10,000, making her total super earnings for the 2026–27 income year to be $66,000.
As Gina's TSB at the end of the 2026–27 income year is greater than the LSBT and her total super earnings is greater than nil, she will have taxable super earnings for Division 296 tax purposes.
Gina's TSB reference amount is $5,000,000 which will be used to determine the proportion of her TSB that is over the LSBT.
The proportion of Gina's TSB above the LSBT is 40%, calculated as:
((TSB reference amount − LSBT) ÷ TSB reference amount) × 100
(($5,000,000 − $ 3,000,000) ÷ $5,000,000) × 100.
Gina's taxable super earnings are $26,400, calculated as:
- Total super earnings × proportion of TSB above the LSBT
$66,000 × 40% = $26,400.
Gina's Division 296 tax is $3,960, calculated as:
- Taxable super earnings × 15%
$26,400 × 0.15 = $3,960.
The amount of Gina's Division 296 tax that is deferred is $3,360, calculated as:
- Division 296 tax for the year × (defined benefit relevant earnings for the year for the super interest ÷ total super earnings for the year).
Deferred Division 296 tax relating to Gina's interest in Defined Super Fund is $2,220, calculated as:
- $3,960 × ($37,000 ÷ $66,000) = $2,220.
Deferred 296 tax relating to Gina's interest in DB Super Fund is $1,140, calculated as:
- $3,960 × ($19,000 ÷ $66,000) = $1,140.
Gina has a Division 296 tax due and payable amount of $600 that relates to her interest in Retiring Today SMSF. This will need to be paid within 84 days from the date of the Division 296 tax notice of assessment.
In addition to paying the due and payable amount Gina can choose to pay her deferred Division 296 tax debt. She can pay either:
- with her own money at any time
- by electing to release money from her SMSF. (This must be done within 60 days from the date of the Division 296 tax notice of assessment).
End of year interest
Deferred Division 296 tax debts not paid by 30 June each year will incur end of year interest. This interest will be calculated on the account balance (including interest from previous years) at the long-term bond rate for that financial year.
By voluntarily paying your deferred Division 296 tax by 30 June each year, you can avoid incurring end of year interest.
How to voluntarily pay your deferred Division 296 tax
You can voluntarily pay deferred Division 296 tax liabilities either:
- with your own money – see how to pay
- by releasing money from one or more of your other super interests.
Most defined benefit funds cannot release amounts for you, so check with your fund before electing via ATO online services. You may have other super funds from which you can release money. If you want to pay your deferred Division 296 tax debt by releasing from your other super interest(s), you need to elect to do this within 60 days from the date of your Division 296 tax assessment.
Taking an end benefit
If you have a deferred Division 296 tax debt, you must pay this amount within 21 days after the end benefit becomes payable from the interests that the deferred Division 296 tax debt account is for.
An end benefit is generally the first super benefit to become payable from the interest. This may occur due to retirement, resignation, death, disability, or reaching a scheme-specific maximum age. Fund specific rules apply in relation to when an end benefit can be paid.
The following super benefits are not end benefits:
- rollovers to a successor fund (when 2 or more super funds merge)
- severe financial hardship payments
- funds released on compassionate grounds
- family law super payments
- amounts otherwise prescribed by legislative instrument.
If you plan to pay your deferred Division 296 tax debt out of your defined benefit super account when taking an end benefit, discuss this with your fund as soon as possible. This will allow them to consider this amount when finalising your retirement plan.
When you request a super benefit that is an end benefit from your super fund, and you have a deferred Division 296 tax debt account attributable to that account, your fund will advise us of your request via an end benefit notice.
Your fund must provide the end benefit notice to us within 14 days of the earlier of the date the:
- fund receives a request to pay the end benefit
- end benefit becomes payable.
Once we have processed the end benefit notice, we will issue you a debt account discharge liability notice. This notice will provide details of the amount you need to pay and instructions on how to make the payment. It will include a release authority you can give to your defined benefit fund so that they can release money to pay your Division 296 deferred debt.
Paying your debt account discharge liability
You can pay the debt liability, either:
- with your own money – see how to pay
- by using the release authority issued with the debt account discharge liability notice, to pay the debt out of your super account.
You can only give the release authority to the defined benefit fund in which you have the interest that the deferred debt was attributed to.
Payment is due 21 days after the day your end benefit becomes payable. Interest will accrue if it isn't paid by the due date.