Over $3 million or $10 million in superannuation?

Division 296 is now law. From 1 July 2026, individuals with total superannuation balances above $3 million will now incur an additional 15% tax on earnings attributable to the portion of their balance above $3 million.

If this applies to you, consider the following:

Equalise member balances between spouses

It is best to utilise both spouses transfer balance cap up to $3 million to ensure the exposure to div 296 is spread evenly within the family group. Depending on the members age, it may be possible to withdraw and re-contribute to a spouse to equalise balances.

Make effective use of personal tax rates

If the member is not utilising their marginal tax rates, it could be beneficial to withdraw some of their balance from superannuation and hold the investments in their personal name.

Confirm whether a condition of release has been met

It is difficult to make changes to members who have above $3 million if they have not met a condition of release as they cannot access their balance as a pension or lump sum payment.

Consider the member’s age and health

These factors may influence the timing and suitability of any strategy.

Consider the member’s spouse

A spouse’s superannuation balance, age and health is relevant when considering the best outcome for balances above $3 million.

Clarify the intended use of the money

For example, if the member plans to make gifts to grandchildren, bringing those gifts forward may reduce exposure to Division 296 tax.

Review the types of assets held and how returns are generated

Where returns are primarily from capital growth, the SMSF may continue to benefit from the capital gains tax discount.

Review asset values and records on 30 June 2027

Reliable valuations and well-maintained cost-base records will be important, particularly where an SMSF holds property, unlisted investments or other assets that are not valued daily.

Consider the CGT adjustment

SMSFs may be able to make a capital gains tax adjustment for eligible assets held on 30 June 2026. Members have time to make this decision, an election is not required until due date of 30 June 2027, for most SMSF’s that is 15 May 2028.  

Consider estate planning and death benefit tax

For those with large super balances, the tax consequences of superannuation passing to adult children and other non-tax dependants can be substantial. Reviewing binding death benefit nominations, estate planning arrangements and the broader family wealth structure may help improve outcomes for the next generation.

Consider liquidity in your SMSF

If your SMSF holds assets that may be difficult to sell quickly, such as property or private investments, it is important to think about how any future Division 296 tax may be paid. The tax is assessed to the individual and can be paid either personally or from the SMSF through a release authority. Members should consider whether they or their SMSF have enough cash available to cover the tax, particularly if both their personal investments and the SMSF contain assets that are not easily converted to cash.

If you have more than $10 million in superannuation

Division 296 introduces a second tax tier for members with total superannuation balances above $10 million, imposing an additional 10% tax on earnings attributable to the portion above that threshold.

In addition to the considerations for balances above $3 million, the following points should also be considered:

Consider whether to withdraw amounts above $10 million

As investment earnings attributable to balances above $10 million may be taxed at 40%, some members may consider withdrawing the excess and investing through another structure, such as an investment company. This may also reduce the tax payable on death benefits for older clients whose spouse has already died and whose superannuation will pass to the next generation.

Assess capital-growth assets

The effective Division 296 tax rate on capital gains attributable to balances above $10 million that are eligible for a discount is 26.67%. Because the SMSF continues to receive the one-third CGT discount, retaining capital-growth assets in superannuation may remain the most tax-effective option.

Review available capital losses

If the SMSF holds growth assets and has carried-forward capital losses, the member may prefer to retain their balance in the SMSF so those losses can be applied against future capital gains.

Next steps

There is much to consider. In light of the superannuation changes and measures announced in the 2026 Budget, wealthy individuals and families should seek advice and review their broader wealth structure, including their estate plan. Any decisions should support their overall strategy rather than focus solely on tax. A review may confirm that no changes are required, but an informed decision is better than taking no action without assessing the potential consequences.

This article was authored by Natalie Scott, SMSF & Superannuation Adviser.