Division 296 tax from 1 July 2026
From 1 July 2026, Division 296 tax will reduce the tax concessions available to individuals through their super. Division 296 tax can generally be paid from the individual’s super fund(s).
It applies at a rate of 15% to an individual’s taxable super earnings. Broadly, this is a portion of the earnings on all your super interests determined by the extent that your total super balance (TSB) exceeds the large super balance threshold (LSBT).
An additional rate of 10% will also apply to an individual’s very large super balance earnings component. Broadly, this is a portion of the earnings on all your super interests, determined by the extent that your TSB exceeds the very large super balance threshold (VLSBT).
For the 2026–27 income year, the LSBT is $3 million and the VLSBT is $10 million. Both thresholds may increase due to indexation in future years.
For the 2026–27 income year, for Division 296 tax to apply it is the TSB at the end of the income year that must be greater than the LSBT or VLSBT. For subsequent income years, it will apply if either the TSB just before the start of the income year or at the end of the year exceeds these thresholds.
Limited recourse borrowing arrangement (LRBA) amounts are disregarded when determining a member’s TSB for calculating Division 296 tax purposes.
For more information, refer to Division 296 tax.
APRA regulated funds and Division 296
Although Division 296 tax is assessed on the individual, Australian Prudential Regulation Authority (APRA) regulated super funds must calculate their Division 296 fund earnings, attribute relevant super earnings to their members that have a TSB exceeding the LSBT (in-scope members) and report those members' relevant super earnings to the ATO.
We will identify which of your members have a TSB exceeding the LSBT. We will then notify you through a request for information process in Online services for business that you have members for whom you need to report relevant super earnings.
You may receive more than one request for information as these will be sent progressively as we receive the information necessary to calculate your member's TSB – this may include information from other funds. For example, if they are a member of an SMSF as well, we need to wait until the SMSF lodges its annual return for the year to get the information necessary to calculate your member's TSB.
The 2026–27 income year is the first year in which Division 296 tax will be applied and funds will need to report their in-scope members' relevant super earnings to the ATO.
For defined benefit interests not in retirement phase and other prescribed interests that will use a prescribed formula based on the change in the TSB value of the member's interest to calculate the member's relevant super earnings, we will start issuing requests for Division 296 information in November 2027. These funds will have 10 business days to respond.
All other APRA-regulated funds can expect to start receiving requests for Division 296 information in April 2028 and will have 28 calendar days to respond.
Requests for information for subsequent years will follow a similar pattern.
We will provide more information on how funds will report their member's relevant super earnings to the ATO as we design this process.
Division 296 fund earnings
To determine relevant super earnings attributable to the interests of your in-scope members, you will first need to calculate your fund's Division 296 fund earnings.
The law prescribes the formula that funds will need to use to calculate their Division 296 fund earnings. There are also modified rules for providers of pooled super trusts and retirement savings accounts.
Capital gains tax (CGT) adjustment for Division 296 tax
Large APRA funds
A CGT adjustment is available when calculating Division 296 fund earnings, to recognise the level of accrued value of assets prior to the commencement of the law. This only applies for Division 296 purposes. It does not otherwise affect the fund's own calculation of income tax.
Funds will calculate an adjusted net capital gain for Division 296 fund earnings purposes. This will feed into the relevant taxable income or loss element of the Division 296 fund earnings calculation.
For complying super funds (other than small super funds), the net capital gain of the fund for the relevant year is taken to be the amount of that gain, multiplied by a factor prescribed by the regulations. This modified amount is then used to work out the Division 296 fund earnings for an income year.
The prescribed factors are:
- 2026–27 income year: 0.2
- 2027–28 income year: 0.4
- 2028–29 income year: 0.6
- 2029–30 income year: 0.8
There are no further adjustments after the 2029–30 income year.
Small APRA funds
To calculate Division 296 fund earnings, a small APRA fund (SAF) can elect to make a CGT adjustment to the cost base or reduced cost base of its CGT assets to the market value of those assets as at the end of 30 June 2026. This recognises the level of accrued value prior to the commencement of the Division 296 tax.
The CGT adjustment election applies to all CGT assets held by the SAF at the end of 30 June 2026. Generally, it is only available to assets that the SAF holds or owns directly, and not to those held indirectly, other than through a custodian or tax look-through (for example, LRBA trust) arrangement.
The CGT adjustment election only applies for the purpose of working out Division 296 fund earnings for the SAF for a year, to the extent that it is affected by the cost base or reduced cost base of the CGT asset.
The election:
- must be in the approved form (an approved form will be provided in due course)
- must be made by the due date of the annual return for the 2026–27 income year
- cannot be revoked.
The election does not need to be provided to the ATO.
SAFs must keep a record of the choice:
- for each CGT asset to which the election applies, records of each element of its cost base and reduced cost base (as affected by the election)
- in plain English or be readily accessible and convertible into English.
- for 5 years after it becomes certain that there can be no further CGT events occur in relation to any of the CGT assets to which the election applies
SAFs that apply the CGT adjustment will adjust the cost base of all its CGT assets (for Division 296 tax purposes) as follows:
- The first element of the cost base or reduced cost base is taken to be the asset’s market value as at the end of 30 June 2026.
- Each other element of the cost base or reduced cost base is taken to have been adjusted to nil at the end of 30 June 2026 (such that any amounts that formed part of the cost base or reduced cost base on or before that day are disregarded).
Defined benefit interests and other prescribed interests
A member's relevant super earnings for defined benefit interests that are not in retirement phase and other prescribed interests will be calculated based on a change in the TSB value of the interest in accordance with a formula specified in the law, taking into consideration certain contributions and withdrawals that occur during the income year.
Further guidance
We are currently drafting a law companion ruling that will support funds with calculating their Division 296 fund earnings and members' relevant super earnings, including content on the CGT adjustment. For more information, refer to the regulationsExternal Link and the following relevant legislation: