A revised tax on very large Superannuation balances is now law, and it hinges on two numbers: $3 million and $10 million. From the 2026–27 income year, with the first assessment falling at 30 June 2027, Division 296 introduces extra tax on Earnings tied to the largest balances. For self-managed super fund members wondering whether they are in scope, the thresholds are where the story starts.

How the two thresholds work

The enacted legislation sets a large superannuation balance threshold of $3 million and a very large superannuation balance threshold of $10 million.

The design is a banded one. Earnings attributable to the portion of a balance between $3 million and $10 million are effectively taxed at 30% — the existing 15% concessional rate plus a further 15% under Division 296. Earnings attributable to the portion above $10 million are effectively taxed at 40%, being the existing 15% plus 25%.

Only realised earnings are captured. The revised model removed the taxation of unrealised capital gains that had drawn criticism in the earlier 2023 proposal, a change described as significant.

Both thresholds are indexed

A feature that matters over time is indexation. Both the $3 million and $10 million thresholds are indexed to Inflation under the legislation. That is intended to limit "bracket creep" in super, so that rising nominal balances alone do not steadily pull more members into the net as the years pass.

Indexation does not remove the tax, but it does mean the real value of each threshold is meant to hold up rather than erode. It marks a clear difference from earlier commentary about fixed thresholds, and this Factor could keep the affected group relatively narrow over time.

Which balance is tested

Division 296 is assessed against an individual's total superannuation balance, not a single fund. The relevant test uses the higher of the individual's total superannuation balance at the start and end of the financial year. A special option applies for the 2026–27 year, using the 30 June 2027 position.

Importantly, the tax is assessed to the individual rather than to the fund. Individuals can elect to have the amount released from their super fund to help pay it, through a mechanism similar to the existing Division 293 arrangements.

Who is, and isn't, likely to be affected

For the large majority of SMSF members, the thresholds sit well above their balances. Data shows the average new Trustee profile skews younger — those aged under 50 account for nearly 70% of new funds, and the average age of a new trustee is 47 — cohorts that are typically still building, not sitting above $3 million.

Members with balances approaching or beyond $3 million are the ones for whom the detail counts. Because the test looks across all superannuation, someone with balances split between an SMSF and an APRA-regulated fund could still be captured on a combined basis.

What members may wish to consider

For those near the thresholds, the mechanics — how earnings in the band are calculated, the higher-of-start-or-end test, and the release election — could shape planning around Liquidity and timing. None of this should be read as a signal to act in any particular way, and the appropriate response depends on individual circumstances.

Trustees uncertain about where they stand may wish to seek appropriately qualified professional advice before the first assessment date approaches.