Both the Treasury Laws Amendment (Building a Stronger and Fairer Super System) Bill 2026 and the Superannuation (Building a Stronger and Fairer Super System) Imposition Bill 2026 passed the Parliament on 10 March 2026 and received Royal Assent on 13 March 2026. As a result, the Division 296 Tax is now law and will commence from 1 July 2026.

The Treasury has subsequently released the draft Income Tax Assessment (1997 Act) Amendment (Building a Stronger and Fairer Super System and Other Measures) Regulations 2026 on 17 March 2026 and is in consultation with submissions until 7 April 2026.

When is the commencement date of this reform?

• Commencement date will be from 1 July 2026 for the 2026/27 financial year.

How do you calculate Division 296 tax?

• The calculation of the Division 296 Tax will be based on:

proportion of TSB above relevant threshold x earnings x relevant tax rate

• The relevant threshold and tax rate are as follows: 

• $3million: 15% extra tax on realised earnings for the proportion of the TSB value above this threshold

• $10million: further 10% extra tax (25% in total) on realised earnings for the proportion of the TSB value above this threshold 

In 2026/2027, the TSB value that will be used for this purpose will be the TSB value at the end of the financial year (i.e. 30 June 2027). From the 2027/28 financial year onwards, an individual’s TSB at both start and end of the financial year will be assessed for the Division 296 Tax purposes, with the higher of the two balances used in the calculation.

Will the relevant thresholds be indexed?

• Both thresholds will be indexed with inflation (increasing in steps of $150k for the $3 million threshold and in steps of $500,000 for the $10 million threshold). 

How do you work out earnings?

• Earnings will be based on taxable income, adjusted for elements such as assessable contributions and net exempt current pension income. Modified rules apply to pooled superannuation trusts, retirement savings account providers and defined benefit accounts.

What are the CGT adjustments?

• The Government acknowledges the value that has accrued in superannuation prior to the commencement of the Bill. To ensure Division 296 Tax applies only to future earnings, the transitional CGT adjustments is granted to recognise this pre-commencement value. 

For small superannuation funds (SMSFs and SAFs)

This provision will allow small superannuation funds, such as a self-managed superannuation fund (SMSF) or a small APRA fund (SAF) to elect to adjust the cost base of the fund’s CGT assets that it held on 30 June 2026 to the market value of those assets on that day.

The election must be:

• made in the approved form,
• be for all CGT assets held by the small superannuation fund at the end of 30 June 2026 and
• be made by the end of the due day for the lodging of the income tax return for the 2026-27 income year.
• Assets indirectly held via a Unit Trust or a Company by a superannuation fund must be reviewed with your tax advisor.

Once a nomination is done, it cannot be revoked and will apply to all assets for every member within the fund.

For larger superannuation funds

For larger funds (e.g. APRA regulated funds), the realised capital gains for working out the Division 296 earnings for the first 4 financial years (2026/2027 financial year to 2029/2030 financial year) will be adjusted by multiplying them with a prescribed factor, rather than a cost-base readjustment. The prescribed factors are as follows:

• 2026/27: only 20% of actual capital gains are taxed;
• 2027/28: 40% are taxed;
• 2028/29: 60% are taxed;
• 2029/30: 80% are taxed

The superannuation funds will work out the net capital gains which will be included as part of the Division 296 earnings and report the amount to the Australian Taxation Office (ATO).

The Division 296 Tax will apply if an individual’s TSB before the start or at the end of the financial year is above $3 million and their superannuation earnings are more than nil.

During the transitional arrangement for the 2026/27 financial year, only an individual’s TSB at the end of this first financial year (i.e. 30 June 2027) will be assessed against the relevant thresholds.

This means: 

• Individuals with high superannuation balances (i.e. exceeding or soon likely to exceed $3 million) across all phases (accumulation and retirement) may be impacted.
• Even if part of the balance is in a tax-free retirement phase, it still contributes to the TSB and may trigger the tax.
• The measure is designed to target members with large superannuation balances. 

The commencement date is 1 July 2026, with the first relevant date being 30 June 2027 (under the transitional arrangement). This provides individuals with time to consider their options once the regulations are finalised. 

In the meantime, if you are a member of a self-managed superannuation fund (SMSF) or a small APRA fund (SAF) and your fund holds unlisted assets, such as real property, please ensure that accurate valuations for these unlisted assets are obtained for the 2026 financial year. In addition, you should ensure the cost bases of all investment holdings within the fund are properly documented and up to date.

Individuals with superannuation balances approaching or exceeding $3 million may wish to understand how the proposed measures could apply to their circumstances.

You should consider seeking tailored tax and financial advice if you are in any of these situations: 

• Single-asset Self Managed Super Fund
  Particularly if the asset is illiquid, such as property or unlisted investments 
• Significant balance but no access to super 
  For example, if you haven’t met a “’condition of release’” you may wish to may wish to obtain financial advice regarding any contribution strategies relevant to your circumstances.
• Significant balance and able to access your super
  You may have options that may influence how the proposed tax could apply to you, depending on your personal circumstances. . These options should be reviewed holistically in conjunction with your overall investment strategy and any asset holdings and incomes outside of superannuation. 
• Individuals with specific estate planning requirements
  Any strategies with regard to your superannuation balance should be considered in conjunction with any estate plans that you and your family have in place.