One Superannuation reform stands out among recent changes affecting self-managed super funds: Division 296, the new tax on large superannuation balances, is now law and commences from 1 July 2026.

While the measure directly applies only to members above certain thresholds, its operation relies on accurate total super balance reporting, which is built from fund valuations and reporting information.

This means the change reinforces obligations that already apply to every SMSF trustee, including maintaining reliable records, supporting asset values and ensuring member balances are accurately reported.

What Division 296 actually does

Division 296 passed Parliament in March 2026 as part of the Building a Stronger and Fairer Super System reforms and is enacted law rather than a proposal.

The measure commences on 1 July 2026, making the 2026–27 financial year the first affected income year. The first assessments are expected from the financial year beginning 1 July 2027.

Division 296 applies an additional tax on Earnings attributable to the portion of an individual’s total superannuation balance above $3 million.

For the portion between $3 million and $10 million, an additional 15% tax applies, resulting in an effective tax rate of up to 30% on that portion when combined with the standard superannuation tax rate.

For the portion above $10 million, a further additional 10% applies, resulting in an effective tax rate of up to 40% on that portion.

The thresholds are subject to indexation over time.

Two points are important. The enacted version applies to realised earnings only, meaning unrealised capital gains are not taxed under the final measure. The Liability is assessed personally to the individual, who may pay personally or elect to release funds from superannuation.

Why it matters even below $3 million

The $3 million threshold may lead some trustees to assume Division 296 does not concern them. However, the mechanism behind the measure relies on total superannuation balance calculations.

Total superannuation balance is based on reported fund information and asset values. This means accurate valuations and reporting remain important across the SMSF sector.

Total super balance already affects several existing superannuation rules.

For example:

  • the non-concessional contribution cap may be reduced to nil where total super balance at the previous 30 June meets certain thresholds;
  • access to carry-forward concessional contributions depends on total super balance requirements;
  • bring-forward arrangements for non-concessional contributions are also affected by total super balance.

In each case, fund reporting information influences what members can contribute and how they manage their superannuation.

Division 296 adds another reason to ensure those values are accurate. A member currently below the threshold still relies on correct valuations for contribution planning, while future changes in asset values may affect their position over time.

The relationship also extends to the transfer balance cap, which increased to $2.1 million from 1 July 2026. The amount a member can move into retirement phase and certain contribution opportunities depend on figures derived from reported balances.

This is why the change reinforces obligations that apply beyond members who may be directly affected by the new tax.

The valuation and reporting focus

The ATO has highlighted market valuations of SMSF Assets as an auditor compliance focus area for 2026–27, particularly where valuations are relevant to Division 296.

A recurring issue identified by regulators is insufficient audit evidence supporting the ownership, existence or Market Value of fund assets.

Every SMSF must undergo an annual audit by an ASIC-registered SMSF auditor before lodging its annual return. Trustees must also ensure assets are recorded at appropriate market values under superannuation requirements.

For listed investments, valuation evidence may be relatively straightforward. For property, private company shares and unlisted investments, trustees may need stronger supporting information.

Maintaining valuation evidence throughout the year can help trustees respond to audit requirements and ensure reported balances are reliable.

What trustees should check and understand

Consider a hypothetical SMSF with two members whose balances are currently below $3 million. The fund holds a rental property and managed investments.

The members may assume Division 296 is not relevant to them. However, the value assigned to the property at 30 June still affects their total super balance, which may influence contribution eligibility and future superannuation planning.

If the valuation evidence is weak, the fund may face audit questions regardless of whether Division 296 currently applies.

This example is hypothetical and intended only to illustrate why accurate valuations matter.

Common misunderstandings include assuming Division 296 affects only high-balance members, believing unrealised gains are taxed under the enacted rules, and overlooking valuation requirements because current balances are below the threshold.

Because valuations and tax outcomes depend on individual circumstances, professional tax or valuation advice may be appropriate for complex situations.

What to watch next

The first Division 296 assessments are expected from the financial year beginning 1 July 2027, based on relevant total super balance information.

The thresholds will be indexed over time, meaning future changes in balances and limits may affect members differently.

Trustees should continue monitoring ATO guidance, maintain current valuation evidence and ensure fund reporting remains accurate.

The information supporting Division 296 calculations also supports other superannuation rules trustees already rely on.

Key Insights

Division 296 may not apply directly to every SMSF member, but it highlights the importance of accurate valuations and reliable total super balance reporting across the system.

The measure introduces additional tax for certain large balances from 1 July 2026, but its broader impact is a reminder that accurate fund records and asset valuations are essential for all trustees.

Maintaining supportable valuations and understanding how reported balances affect contribution and pension rules can help trustees manage their SMSF obligations more effectively.