Division 296 Update: Government Confirms Final Design and Timeline

Last updated: 20 October 2025 (AEST)

This article follows on from our primer: Division 296 Explained — Examples, Calculations and Considerations.

The Australian Federal Government’s controversial Div 296 tax for superannuation balances above $3 million has been revised ahead of the proposed legislation being reviewed by the Senate.

Australian Treasurer Jim Chalmers announced the changes to the proposed tax reform on October 13, addressing what opponents have said were some of the biggest flaws in the original plan which included changing plans to tax unrealised gains and not having the thresholds indexed against inflation.

It is expected that with the below changes now in place, the legislation is expected to pass the Senate.

Here is what you need to know about the changes to Div 296.

Proposed changes to Div 296

• No tax on unrealised gains: Division 296 now applies to fund-level realised earnings only. Div 296 was previously going to apply to both realised and unrealised gains.
• Two thresholds: $3 million and $10 million, both indexed to inflation. Previously there was one threshold above $3 million and it was not indexed to inflation.
• Superannuation accounts with earnings attributable to between $3 million and $10 million will be taxed at a rate of 30% (the existing 15% rate plus the additional 15% Division 296 charge).
• Superannuation accounts with earnings attributable to above $10 million will now have a higher 40% tax rate. The $10 million threshold will be indexed in $500,00 increments.
• Start date: deferred to 1 July 2026, with first assessments expected after the 2026–27 income year.

Why were the changes made

Any tax changes are always controversial, but an attempt to tax unrealised gains was initially hit by lots of criticism.

The change to realised earnings removes earlier fairness and liquidity concerns for members holding property and other illiquid assets.

There were also concerns around the thresholds not being indexed to inflation and effectively being a tax on the younger generation. Indexing these current thresholds to CPI ensures the intent to tax larger balances remain without the threat of inflation.

Example of Div 296 on a balance of between $3million and $10million

Susan has a total superannuation balance of $5.5 million at 30 June 2026 and a further $3.5 million in unrealised earnings during 2026–27.
Under the original proposed scheme, her assessable increase is $9 million ($5.5 m + $3.5 m).

• The portion of her balance above $3 million is $6 million.
• The Div 296 tax applies only to the proportion of earnings relating to that excess.

Assume her total earnings for the year are $900,000 (a 10 % return).
The proportion of earnings relating to the excess is:
$6 million ÷ $9 million × $900,000 = $600,000.

This $600,000 would be subject to the additional 15 % Div 296 tax, giving a liability of:
$600,000 × 15 % = $90,000.

Under the revised proposal, if only unrealised gains are included and losses are deferred, Susan’s Div 296 tax may instead be calculated only on the unrealised portion ($3.5 million × 10 % = $350,000 of earnings), leading to:
$350,000 × 15 % = $52,500.

Hence, the proposed change reduces the immediate tax impact by $37,500.

Example of Div 296 on balances over $10million

David has a total superannuation balance of $12 million at 30 June 2026, which includes $9 million in realised assets and $3 million in unrealised gains.

During 2026–27, his superannuation fund earns $1.2 million (a 10 % return).

• The portion of his balance above $3 million is $9 million.
• Therefore, the proportion of earnings attributable to the excess is:
  $9 million ÷ $12 million × $1.2 million = $900,000.

This $900,000 would be subject to the 15 % Division 296 tax, resulting in an additional liability of:
$900,000 × 15 % = $135,000.

Under the revised proposal, if only unrealised gains are captured in the calculation (and unrealised losses can offset future years), the portion subject to the 15 % tax may reduce to the earnings related to the $3 million unrealised component:
$3 million ÷ $12 million × $1.2 million = $300,000.

$300,000 × 15 % = $45,000 Div 296 tax payable.

Thus, under the revised model, David’s Division 296 liability falls from $135,000 to $45,000, reducing the immediate tax impact by $90,000.

Unchanged Policy Intent

The goal remains to ensure fairness by limiting superannuation tax concessions on very large balances.
The earlier bill lapsed in mid-2025 and will need to be re-introduced before becoming law,
but the current design represents settled policy direction.

Who is Affected by Div 296 and the proposed changes

• Individuals with total super balances above $3 million will pay additional tax on realised earnings above that threshold.
• Individuals with super annuation balances exceeding $10 million will attract a higher marginal rate.
• SMSFs holding direct property or unlisted assets benefit from the removal of tax on unrealised gains but still need to plan for cash flow when realising assets.

Practical Steps for Trustees and Advisers

1. Review portfolios: model where realised gains may occur and assess post-tax outcomes.
2. Revisit contribution and pension strategies before 30 June 2026.
3. Enhance record-keeping to track realised earnings accurately by member.
4. Plan liquidity to avoid forced sales or unnecessary disposals.
5. Communicate early with clients approaching the $3 million or $10 million thresholds.

Key Dates

• 13 October 2025: Government confirms revised model.
• TBC: Parliament needs to approve and pass the legislation
• 1 July 2026: Proposed commencement; first Division 296 assessments expected after 30 June 2027.

FAQs about Division 296 Super Tax

Is Division 296 law yet?

Not yet. The earlier bill lapsed and the redesigned version must pass Parliament. The Government’s statement outlines the intended structure and timing.

Will unrealised gains be taxed?

No. Under the final design, only realised earnings will be included in the calculation.

Are the thresholds indexed?

Yes. Both $3 million and $10 million thresholds will rise with inflation.

When should planning start?

Now. With implementation from 1 July 2026, modelling and data-system adjustments should begin well before the first assessment period.

How MNY Group Can Help

MNY Group can assist with:

• Division 296 impact modelling for current super portfolios;
• Reviewing contribution and pension strategies;
• Liquidity and tax-timing analysis for SMSFs;
• Preparing trustee communications and compliance frameworks.

Contact us to discuss how these changes may affect your situation.

Sources: Treasury announcements (October 2025); Pitcher Partners and Perpetual commentary on Division 296 design and timing.