For self-managed super fund trustees with larger balances, a new layer of tax is now part of the Retirement Planning picture. Division 296 applies from the 2026–27 income year, with the tax commencing on 1 July 2026 and the first assessment landing at 30 June 2027. For those near or above the $3 million mark, the enacted rules raise practical questions about liquidity, timing and how Earnings are taxed that may be worth thinking through well ahead.

Where the thresholds bite

The starting point is familiar to anyone tracking the reform. Earnings attributable to the balance band between $3 million and $10 million are effectively taxed at 30%, combining the existing 15% concessional rate with an additional 15% under Division 296. Earnings attributable to balances above $10 million are effectively taxed at 40%, reflecting the existing 15% plus a 25% Division 296 component.

Both the $3 million and $10 million thresholds are indexed to Inflation under the legislation, which is intended to prevent more people being drawn in over time simply as balances and prices rise.

Realised earnings, not paper gains

A crucial feature of the enacted model is that it captures only realised earnings. The earlier 2023 proposal, which would have taxed unrealised capital gains, did not proceed in that form, and the taxation of unrealised gains was removed from the revised law.

For trustees holding Assets that fluctuate in value, such as property or long-held shares, this distinction matters. It means the additional tax is tied to earnings actually realised rather than to on-paper movements, which changes how trustees might think about when gains are crystallised within the fund.

The Liquidity question

Perhaps the most practical consideration for wealthier trustees is how the tax gets paid. Division 296 is assessed to the individual, not to the fund. Individuals can elect to have the amount released from their super fund to pay it, through a mechanism similar to the existing Division 293 release process.

That election is where liquidity comes in. A fund heavily weighted to Illiquid assets, a commercial property, say, may find it harder to free up cash to fund a release than one holding listed shares or cash reserves. Trustees near the thresholds may wish to consider, with a qualified professional, whether their fund's asset mix leaves enough flexibility to meet a Liability when it falls due, or whether paying from outside super is preferable depending on their circumstances.

How the balance is measured

The relevant balance test uses the higher of an individual's total Superannuation balance at the start and end of the financial year. A special option applies for the first year, 2026–27, allowing the 30 June 2027 position to be used. Because the assessment is tied to these point-in-time figures, the timing of contributions, withdrawals and realised earnings around year-end may influence an outcome, which is another area where tailored guidance could help.

Planning considerations, not recommendations

None of this points to a single right course of action. Whether and how Division 296 affects a particular Trustee depends on their total balance, their fund's composition, their broader tax position and their retirement timeline. These are the kinds of issues trustees with higher balances may wish to raise with an accountant, licensed adviser or SMSF specialist, rather than act on general information alone.

The bottom line

For wealthier SMSF trustees, Division 296 introduces higher effective rates on earnings above $3 million and $10 million from 2026–27, but only on realised earnings, with indexed thresholds and a tax assessed to the individual. The standout practical themes are liquidity and timing: ensuring a fund can meet any release election, and understanding how year-end positions drive the assessment. Given the complexity, professional advice may be appropriate for those affected.