Key Takeaways

  • Division 296 tax — the so-called "$3 million super tax" — passed Parliament on 10 March 2026 and takes effect from 1 July 2026, applying to the 2026–27 earnings year.
  • The concessional contributions cap rises to $32,500 and the non-concessional cap to $130,000 from 1 July 2026, giving all Australians slightly more room to save.
  • The transfer balance cap increases to $2.1 million from 1 July 2026, expanding the amount retirees can hold in a tax-free pension phase account.
  • A CGT reset to market value as at 30 June 2026 is available for those with super balances above $3 million — an important planning window closing soon.

A Watershed Year for Australian Super

Mid-2026 marks the moment when years of legislative debate land as law, with real consequences for Australians with significant super balances or those actively building them. This article walks through every major change taking effect from 1 July 2026.

Division 296 Tax: What Finally Passed

The Division 296 tax passed Parliament on 10 March 2026. The detail matters — several misconceptions have circulated.

Who It Applies To

Division 296 affects individuals whose total super balance exceeds $3 million at the end of a financial year. It does not affect the vast majority of Australians.

How the Tax Works

An additional 15% tax applies to earnings attributable to the portion of a total super balance above $3 million; above $10 million, an additional 25% applies. This is on top of the existing 15% earnings tax inside super, bringing the effective rate to 30% between $3 million and $10 million, and 40% above $10 million. Both thresholds are indexed to CPI. The tax is assessed by the ATO at the individual level and can be paid personally or from the fund.

No Tax on Unrealised Gains

Unlike the original 2023 proposal, the legislation as passed does NOT tax unrealised capital gains. Division 296 applies to realised earnings only: dividends, interest, rent, and realised capital gains. This is a material distinction for holders of illiquid assets such as property or unlisted shares inside an SMSF.

The CGT Reset Opportunity

A CGT reset to market value as at 30 June 2026 is available for assets in affected super funds, resetting the cost base so only gains accruing after that date are taxed under the new regime. For SMSFs holding assets with significant embedded gains, acting before the window closes is important — explore this with a qualified adviser.

Contributions Cap Increases

From 1 July 2026, the concessional contributions cap rises from $30,000 to $32,500, giving working Australians more room within the tax-advantaged super environment.

The non-concessional cap rises from $120,000 to $130,000. Under the bring-forward rule, eligible individuals can contribute up to $390,000 in a single year from 1 July 2026 — meaningful for those deploying lump sums from an inheritance, property sale, or other after-tax savings.

The carry-forward concessional rule remains unchanged: unused cap space can be carried forward up to five years for those with a total super balance below $500,000.

Transfer Balance Cap Rises to $2.1 Million

The transfer balance cap increases from $2.0 million to $2.1 million on 1 July 2026, indexed to CPI in $100,000 increments. This allows an additional $100,000 to move into tax-free pension phase, where earnings are completely exempt from tax. Those who have already used their full $2.0 million cap will have access to the $100,000 increase — though the precise mechanics depend on individual circumstances.

Preservation Age and Access Rules: No Change

The preservation age is 60 for all Australians born from 1 July 1964. Super remains accessible at age 60 upon retirement, or at age 65 regardless of employment status. There are no changes to these rules in 2026.

Performance Testing Continues

The "Your Future, Your Super" annual APRA performance test continues to apply to MySuper products and certain choice products. Funds that fail consecutively face restrictions on accepting new members — a regime that has driven consolidation and fee competition across the industry.

What This Means for Your Planning

For those near or above $3 million, the remainder of 2025–26 is a critical planning window — particularly for the CGT reset. For everyone else, higher caps offer a genuine opportunity to accelerate retirement savings within super's tax-advantaged environment.