My super is over $3 million — will I be taxed more now? The new Division 296 rules just became law

You've spent the better part of a working life building up your superannuation — maybe a self-managed fund with a business premises inside it, a parcel of shares, a commercial property that has done well. The balance now sits somewhere north of $3 million. And for the past year the headlines about a new tax on large super balances have been hard to read calmly: a lot of noise, some of it frightening, much of it about being taxed on money you hadn't actually made yet.

It's worth separating what became law from what was proposed and then changed, because they're quite different. The tax is real, it starts from 1 July 2026, and for most people it's narrower and later-arriving than the early alarm suggested.

What Division 296 actually is

From 1 July 2026, if your total superannuation balance is above $3 million, an extra 15% tax applies to the earnings attributable to the part of your balance that sits above $3 million. This is on top of the concessional 15% that already applies to earnings inside super — so that portion is effectively taxed at around 30%. It is now law: the Treasury Laws Amendment (Building a Stronger and Fairer Super System) Bill 2026 passed Parliament and received Royal Assent on 13 March 2026.

There's a second tier for very large balances. For the part of a balance above $10 million, the additional tax rises to a total of 25%. And the rule isn't only for self-managed funds — it applies to everyone's superannuation, including industry and retail funds, though in practice it's SMSF members who most often reach these balances.

One structural point matters: the tax is assessed on you personally, not on your fund. The ATO will issue you an assessment, and you can either pay it from your own money or elect to have your super fund release the amount to cover it.

The 'tax on unrealised gains' fear — and what changed

The version that caused most of last year's outcry would have taxed unrealised gains — paper increases in the value of assets you still held. If a property or a farm inside your fund simply rose in value on 30 June, you could have faced a tax bill on that growth without having sold anything or received a cent of cash. For SMSF owners holding a single lumpy asset, that was the genuinely worrying part.

After consultation, the government redesigned the measure on 13 October 2025, and the final law limits the tax to realised earnings from 1 July 2026 — dividends, interest, rent, and capital gains on assets that have actually been sold. The paper-gain trap that dominated the debate is not in the law that passed. If your fund holds an asset that keeps appreciating but you don't sell it, that appreciation on its own doesn't trigger Division 296.

Two things people are getting wrong

First: '$3 million is a fixed line, and my whole balance gets taxed once I cross it.' Neither half is right. The $3 million and $10 million thresholds are indexed to CPI — the $3 million rising in $150,000 steps and the $10 million in $500,000 steps — so the line moves over time. And the extra tax only touches the earnings attributable to the balance above the threshold, not your entire fund. A balance of $3.2 million isn't taxed on $3.2 million; only the earnings on the $200,000 above the line are in scope.

Second: 'it starts on 1 July 2026, so I'll owe it in the return I'm doing now.' You won't. The 2026–27 financial year is the first year the tax applies, but your total super balance is first measured at 30 June 2027, and the first assessments fall due in the 2027–28 year. There is nothing about Division 296 to pay in the 2025–26 return most people are lodging right now.

So the calm version is this: if your super is near or above $3 million, the tax is real but it's confined to the earnings on the amount above the threshold, it spares unrealised paper gains, the thresholds move with CPI, and the first bill is still a couple of years away. The year that matters for looking at your position is this one — before 30 June 2027 sets the first measurement — because whether to keep contributing, and whether some assets sit better inside or outside super, are decisions best made with time rather than in a rush.

This is general information current as at July 2026, not advice for your situation — how Division 296 applies depends on your total super balance, what your fund holds, and your broader circumstances. If you have a self-managed fund or a balance approaching $3 million, working out where you actually stand before the first measurement date is far more useful than reacting to a headline. That is what our individual tax return service and a proper consultation are for.