Abstract
The Australian Government’s Division 296 legislation represents the most significant structural change to the taxation of superannuation since the introduction of the transfer balance cap in 2017. Scheduled to commence from 1 July 2026, the measure introduces a progressive tax overlay on superannuation earnings attributable to large balances, fundamentally altering the long-standing assumption that superannuation provides a uniformly concessional tax environment irrespective of balance size. Under the legislation, individuals with a Total Superannuation Balance (TSB) exceeding $3 million will be subject to an additional 15 per cent tax on earnings attributable to the portion of their balance above that threshold. For balances exceeding $10 million, a further 10 per cent tax applies. When combined with existing superannuation taxes, this results in effective marginal tax rates of up to 30 per cent and 40 per cent respectively on affected earnings.
While the Government has refined the design of Division 296 in response to industry feedback – notably by moving to a realised earnings framework, the legislation nonetheless establishes a clear precedent: superannuation will no longer operate as a single-rate tax environment for very large balances.
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