New Division 296 Tax – Changes to Key Aspects

The Treasurer released a statement on 13 October 2025 providing some welcome news for the superannuation fund industry. The release confirmed that the former Division 296 Bill will not be reintroduced into parliament in the same form that it previously took.

The key changes with the new legislation will be as follows:

• In place of an unindexed threshold of super balances of $3 million and above, there will be two thresholds, subject to indexation:

  • $3 million; and

  • $10 million.

• The Div 296 tax will apply to income and realised earnings, at a rate of up to 30% (earnings on balances between $3 million and $10 million) and up to 40% (earning on balances over $10 million). Unrealised gains will not form part of the Div 296 tax calculation.

• The start date for the commencement of the Div 296 Tax will be 1 July 2026, instead of 1 July 2025.

 The government has provided a fact sheet which includes the below comparison table:

Previously announced measure	New measure
Identification of high-balance members and ATO reporting process
Superannuation funds submit individuals’ balances to the Australian Taxation Office (ATO) for all members. The ATO would add all the superannuation interests of an individual to calculate an individual’s Total Super Balance (TSB). The ATO would then contact a super fund for contribution and withdrawal data for any individual with a TSB above the legislated threshold. Funds provide this information (based on existing data). The ATO would calculate the tax liability.	Superannuation funds submit individuals’ balances to the ATO for all members. The ATO will add all the superannuation interests of an individual to calculate an individual’s Total Super Balance (TSB). The ATO will then contact a super fund for the proportion of the fund’s applicable realised earnings for any individual with a TSB above the legislated threshold. Funds undertake calculation of earnings and the share attributable to in-scope individuals, and provide this information back to the ATO. The ATO will calculate the tax liability.
Calculating superannuation earnings
Individuals’ superannuation earnings calculated based on changes in TSB, adjusted for withdrawals and contributions. Calculation applied equally to all superannuation interests (including accumulation and defined benefit interests) in both APRA-regulated funds and self‑managed superannuation funds (SMSFs).	Revised methodology will be based on superannuation fund’s realised earnings, attributed to members with a TSB above the large balance threshold. Fund’s realised earnings will be based on its taxable income, adjusted for elements such as contributions and pension phase income. Calculations closely aligned to existing tax concepts. In-scope members will then be attributed an appropriate share of the fund’s realised earnings based on existing reporting mechanisms or on a fair and reasonable basis. This would be supported by guidance from the ATO.
Indexation of large balance thresholds
$3 million threshold not indexed.	$3 million threshold indexed to the Consumer Price Index in $150,000 increments, maintaining alignment with movements in the Transfer Balance Cap (TBC). Second threshold of $10 million (see below) indexed in $500,000 increments, maintaining alignment with the Transfer Balance Cap.

The fact sheet does not provide an exhaustive definition of “realised earnings” or “total earnings”, but it does include the following:

• Realised earnings will be based on the fund’s taxable income, adjusted for elements such as contributions, pension phase income, etc.

• In-scope members will be attributed a share of the fund’s earnings based on existing reporting mechanisms or on fair and reasonable basis.

• The ATO will contact the super fund for a proportion of the fund’s applicable earnings for the specific member who has a total super balance above the relevant threshold.

• Funds calculate the earnings and proportionate share of gains for members and relay this back to the ATO.

Subject to what is actually included in the new legislation, “realised gains” may have a broad definition which may be added to and clarified over time with ATO Rulings, cases and further legislation.

The fact sheet appears to indicate that the calculation will need to be made by the trustee of the superannuation fund after a notice has been issued by the ATO.

Items that we do not know about include the following:

• the treatment of gains pre-1 July 2026.

• whether public offer funds will be able to make this calculation across its membership base.

• how much of the previous bill will be retained.

• how the measure will apply to defined benefits.

The government has indicated that they plan produce the new bill in 2026, so we will wait to receive more detail on the new Div 296 Tax.

Alasdair Woodford
Principal
T: 03 5225 5217 | M: 0436 456 144
E: awoodford@ha.legal

Joseph Flanagan
Senior Associate
T: 03 5226 8504 | M: 0491 307 550
E: jflanagan@ha.legal