Key Highlights

  • Division 296 imposes extra tax on the share of a member's super earnings linked to balances above $3 million, with a higher rate applying above $10 million.
  • Trustees must first work out the fund's "Division 296 fund earnings", which is essentially an adjusted version of the fund's taxable income.
  • Trustees must "engage an actuary to work out the attributable amount, unless an exception applies (for example, where Division 296 fund earnings are nil)".
  • A member is in scope where the total super balance value of their interest in the SMSF exceeds $3 million, the large super balance threshold.

The new tax on large super balances has been law since 1 July 2026, and for self-managed super funds with a member above $3 million, ATO guidance makes one requirement clear: most will need an actuary. With 2026–27 the first year Division 296 applies, and member balances tested at 30 June 2027, trustees are working through mechanics that differ markedly from the rules for large funds.

What Division 296 Asks of SMSF Trustees

Division 296 imposes extra tax on the share of a member's super earnings linked to balances above $3 million, with a higher rate applying above $10 million. For SMSFs, the ATO's page "About Division 296 tax for SMSFs", last updated on 29 June 2026, sets out how the fund-level calculation works.

Trustees must first work out the fund's "Division 296 fund earnings", which is essentially an adjusted version of the fund's taxable income. They then attribute a portion of those earnings to each member who is in scope, described as that member's "relevant super earnings".

Trustees must "engage an actuary to work out the attributable amount, unless an exception applies (for example, where Division 296 fund earnings are nil)".

The attribution step reflects how SMSFs work. Earnings are generally calculated at fund level, across assets that may be pooled for several members, while the Division 296 liability belongs to each individual member. Someone has to bridge that gap, and the ATO's answer is an actuary.

Who is in Scope: the $3 Million and $10 Million Tests

A member is in scope where the total super balance value of their interest in the SMSF exceeds $3 million, the large super balance threshold. The very large super balance threshold is $10 million.

For 2026–27 only, the ATO says total super balance is tested at the end of the year, on 30 June 2027. Amounts relating to limited recourse borrowing arrangements are disregarded when working out total super balance for Division 296 purposes, so borrowing-related amounts that can otherwise form part of a member's total super balance are left out of this test.

The ATO describes the year-end test as applying to 2026–27 only, which means the timing of contributions, withdrawals and valuations during this first year can affect whether a member is caught.

Hypothetical example: Grace has $2.8 million in her SMSF on 1 July 2026. Investment gains and contributions lift it to $3.05 million by 30 June 2027. Because the 2026–27 test is applied at year end, she would be in scope for that year.

Reporting Through the SMSF Annual Return

Relevant super earnings are to be reported on the SMSF annual return from the 2026–27 year.

If they are not reported, the ATO says it will notify the trustee, who must then amend the annual return. Notices will be sent through Online services for agents where the fund has a registered tax agent, or by post where it does not.

Assessments for 2026–27 are expected to be issued "in the latter half of 2027–28", according to the ATO's SMSF newsroom update of 2 July 2026. Members may elect to release money from their fund to pay the tax, rather than paying it from personal savings. At that time, the ATO said its law companion rulings on the regime were still being drafted.