Highlights

  • Division 296 could influence how high-net-worth families view superannuation within broader wealth, estate and succession planning frameworks.
  • The proposed measure applies at an individual level, meaning different super balances between partners may create uneven exposure within the same household.
  • Estate and intergenerational wealth strategies may receive greater attention as families assess how assets are distributed across generations.
  • The absence of indexation in the original proposal has prompted discussion about how more Australians could potentially fall within the scope of the measure over time.

Superannuation has long sat at the centre of how Australian families think about long-term wealth and what they leave behind. For households with balances approaching or above $3 million, the proposed Division 296 measure introduces a new variable into that thinking. The policy is often discussed as a tax question, but for many families its more lasting effect may be on planning: how wealth is held across generations, how estates are arranged, and how a family views its assets as a whole rather than fund by fund.

This article takes that wider planning view. It explains the measure plainly, then explores how it intersects with estate planning, family balance sheets and the long arc of intergenerational wealth, without making recommendations or predicting outcomes that are not yet settled.

Direct answer: a quick summary

Division 296 is a proposed Australian measure that would apply an additional 15 per cent tax on the earnings attributable to the portion of an individual's total superannuation balance above $3 million. It is assessed per person across all funds at year-end. The original design measured earnings via the change in balance, potentially including unrealised gains, and did not index the $3 million threshold. Timing and design have moved during debate, so final detail should be confirmed against the legislation.

Why this matters now

For families planning across decades, a change to the relative attractiveness of super is significant precisely because super has been so reliable. Many households have deliberately built large balances on the assumption that the environment would remain stable. A proposal that targets balances above a fixed figure invites a reassessment of that assumption, particularly where super was expected to pass to a partner or the next generation.

The timing also matters because the proposal is still forming. With design and start date subject to final legislation, families have an opportunity to think calmly about structure before any change takes effect, rather than reacting after the fact. Considered planning generally produces better outcomes than rushed restructuring.

There is a demographic backdrop as well. A substantial transfer of wealth between generations is underway in Australia, and super is a meaningful part of it. Any measure touching large balances therefore lands at a moment when families are already thinking hard about succession and legacy.

Who may be affected

The measure targets individuals whose total superannuation balance exceeds $3 million, tested at year-end across all their funds. Because the test is individual rather than household, families often find that one member is affected while another is not, which itself shapes planning.

Common profiles include long-term savers whose balances have compounded over careers, business owners who contributed large sums around a sale, and members whose fund assets have appreciated strongly. Initially the affected group is a small share of all account holders, in the tens of thousands, though commentators note this could widen over time given the threshold was not indexed in the original design.

From a wealth-planning perspective, the more important point is not just who is affected today, but how balances are distributed within a family. Two partners with very different super balances may have very different exposure, and that asymmetry becomes a planning consideration in its own right.

What investors should understand

The additional tax is proportional. It applies only to earnings attributable to the part of a balance above $3 million, calculated as the amount above the threshold divided by the total balance. A balance just over the line is exposed on a small slice; a much larger balance is exposed on a greater share.

The most discussed feature of the original proposal is the way earnings are measured. Rather than relying only on realised income and gains, the original design looked at the year-on-year movement in balance, adjusted for contributions and withdrawals. Because asset values can rise without a sale, this could draw unrealised gains into the calculation. This element was widely debated and should be treated as an original-proposal feature rather than settled law.

Liability rests with the individual, who can generally elect to pay personally or from super. For families thinking about preserving wealth for the next generation, how and from where any liability is funded affects how much capital remains invested and compounding.

SMSF and managed super fund considerations

Families with large balances often hold them in self-managed superannuation funds (SMSFs), sometimes alongside a family home held outside super, investment properties, or interests in a family business. SMSFs can hold illiquid and hard-to-value assets, which makes both the measurement of earnings and the funding of any liability more consequential. Where an SMSF is intended to pass value to the next generation, valuation discipline and clear records become central to planning.

Members of large APRA-regulated funds are subject to the same rules, but the fund and the relevant authorities handle much of the reporting and aggregation. The practical experience is more hands-off, though the individual-level test still applies.

For families with assets in both an SMSF and managed funds, the key is that balances are aggregated per person. Estate and succession planning therefore needs a complete view across every fund, not a fund-by-fund snapshot.

How Division 296 could reshape wealth planning

The deeper story is not the tax line but the planning conversation it prompts. When super is no longer assumed to be uniformly optimal above a certain balance, families tend to widen their lens. Decisions about where to hold growth assets, how to balance super against trusts or personal holdings, and how to position wealth for the next generation all come back into view.

Estate planning is a natural focus. Super does not automatically form part of an estate and is dealt with through nominations and fund rules. A measure that changes the economics of large balances can prompt families to revisit beneficiary nominations, the interaction between super and the will, and the tax treatment of death benefits, particularly for non-dependent beneficiaries such as adult children.

A holistic family view also encourages couples to consider how balances are distributed between them and how assets sit across structures. None of this implies a particular action; rather, it reflects a shift from optimising one account to coordinating a whole family balance sheet, ideally with professional guidance.

Possible planning options to discuss with an adviser

These are areas commentators discuss generally. They are not recommendations and depend entirely on individual circumstances. Explore them only with a licensed adviser and tax specialist.

  • Reviewing beneficiary nominations and how super interacts with the broader estate.
  • Considering the distribution of balances between partners where eligible and appropriate.
  • Reviewing voluntary contribution plans in light of the threshold.
  • Considering partial withdrawal and recontribution strategies where a member qualifies.
  • Examining whether some wealth is better held in family or discretionary trusts.
  • Exploring investment (insurance) bonds and philanthropic structures as part of a legacy plan.

Risks and uncertainties

The central uncertainty is that the proposal is not final. Both its design and its start timing have shifted during debate, and the original earnings methodology and the absence of indexation have drawn particular attention. Restructuring a family's wealth around a feature that may change carries clear risk.

Restructuring itself can be costly. Shifting assets, changing ownership or establishing new vehicles can trigger capital gains tax, duties and ongoing compliance, and can have unintended estate consequences. A change made to manage one issue may create another.

It is also worth remembering that super remains concessionally taxed under the proposal and may still suit many families. The risk in a planning context is allowing a single measure to override a coherent, long-term strategy.

What to watch before 1 July 2026

The source frames a potential start around 1 July 2026, but this is indicative and subject to final legislation. Useful signposts include:

  • Whether the final earnings methodology retains any treatment of unrealised gains.
  • Whether the $3 million threshold is indexed in any final form.
  • The confirmed start date and transitional rules.
  • Any interaction with death benefit and estate provisions.
  • Guidance on valuing illiquid SMSF assets for the calculation.

Key takeaways

  • Division 296 proposes an extra 15 per cent on earnings attributable to the portion of a balance above $3 million.
  • It is assessed per person across all funds, so balance distribution within a family matters.
  • Its most lasting effect may be on planning, including estate and intergenerational arrangements.
  • Super does not automatically form part of an estate, making nominations a key review point.
  • The unrealised-gains methodology and un-indexed threshold are debated, original-proposal features.
  • Final design and timing remain unsettled; confirm against legislation with an adviser.

Definitions

Division 296

A proposed Australian measure applying an additional 15 per cent tax on earnings attributable to the part of an individual's total superannuation balance above $3 million.

SMSF

A self-managed superannuation fund, controlled by its members as trustees, who are responsible for investment, valuation and compliance.

Superannuation balance and TSB

Total superannuation balance is the combined value of an individual's super across all funds, used to test the $3 million threshold.

Tax-effective strategy

A lawful way of arranging investments and structures to manage tax outcomes, suitable only where it fits an individual's circumstances and advice.

Trusts

Legal arrangements in which a trustee holds assets for beneficiaries, including family and discretionary trusts often used in estate and wealth planning.

Bonds

Investment or insurance bonds: tax-paid investment structures where earnings are taxed within the bond, sometimes used in legacy planning.

Retirement planning

Organising savings, investments and structures to fund retirement and, often, to pass wealth efficiently to the next generation.