Highlights

  • As the ATO describes it, a further 10% applies to the share linked to balances above $10 million, about 40% in total on that portion.
  • For 2026–27, the parliamentary Bills Digest on the legislation says liability depends solely on TSB at 30 June 2027.
  • The ATO's guidance for APRA-regulated funds describes the same test: for 2026–27, the TSB at the end of the income year must exceed the threshold.
  • In practice, a balance brought below $3 million by 30 June 2027 becomes the opening reference point for 2027–28.

For members near the three-million-dollar threshold, the closing super balance in June 2027 carries unusual weight. Division 296 is enacted law. It adds an extra 15% tax on the share of a member's super earnings linked to the part of their total superannuation balance (TSB) above $3 million, taking the effective rate on that share to about 30%. As the ATO describes it, a further 10% applies to the share linked to balances above $10 million, about 40% in total on that portion. Both thresholds are indexed to CPI, the $3 million figure in $150,000 increments and the $10 million figure in $500,000 increments. Only realised earnings count. For 2026–27, the parliamentary Bills Digest on the legislation says liability depends solely on TSB at 30 June 2027. It notes members "can reduce balances before then to avoid the tax". The ATO's guidance for APRA-regulated funds describes the same test: for 2026–27, the TSB at the end of the income year must exceed the threshold. Amounts relating to limited recourse borrowing arrangements are disregarded for this purpose. Because the test is a snapshot, anything that moves a balance in the final weeks of June 2027, from share market swings to the timing of a fund's revaluation of unlisted assets, could tip a member either side of the line.

From 2027–28, two dates count

The single-date test is a first-year feature only. From 2027–28, the law uses a "TSB reference amount", which is the higher of the member's TSB at the end of the year and their TSB just before the start of the year. In practice, a balance brought below $3 million by 30 June 2027 becomes the opening reference point for 2027–28. If the balance then grows back above the threshold by 30 June 2028, the higher closing figure would be used. The Bills Digest records that the SMSF Association and IFPA criticised this higher-of-two-balances approach. For members whose balances hover around the threshold, it means a reduction made late in one year only keeps working if the balance stays lower. The TSB also counts all of a person's super interests, not just one account. Someone with an SMSF and a large fund account needs to add the two together.

What reducing a balance involves

Taking money out of super to get under $3 million is not open to everyone. A withdrawal requires a condition of release, such as retiring after reaching preservation age. For people aged 60 and over who have retired, lump sums from a taxed fund are tax-free. But money taken out leaves the concessionally taxed super environment, and the non-concessional contributions cap limits how much can later go back in. Spouse equalisation, where a member withdraws money and recontributes it for a partner with a lower balance, is a commonly discussed strategy. It remains subject to the non-concessional cap and TSB tests, so it is not unlimited. Each household's position is different, so consider speaking with a registered tax agent or licensed financial adviser before withdrawing money for tax reasons.

Hypothetical example: either side of $3 million

Hypothetical example: a retired member aged over 60 has a TSB of $3.2 million at 30 June 2027 and Division 296 earnings of $200,000 for 2026–27. On that basis the share is ($3.2 million − $3 million) ÷ $3.2 million, or 6.25%.