Australia's Division 296 tax on large superannuation balances is now law and has applied from 1 July 2026.

That means the first income year under the new regime is already underway. However, the first notices of assessment are not expected until the later part of the 2027–28 income year, meaning many affected individuals may not receive their first Division 296 bill until 2028.

The delay is built into the way the tax is calculated. Division 296 depends on a full year of superannuation earnings and a member's total super balance across all relevant super interests.

Division 296 Has Applied Since July 2026

Division 296 was enacted in March 2026 and applies from 1 July 2026.

The new framework imposes additional tax on a proportion of superannuation earnings associated with balances above the relevant thresholds.

The first threshold is $3 million, with an additional tier applying above $10 million.

For the 2026–27 financial year, a transitional rule means the relevant balance test focuses on the member's total super balance at 30 June 2027.

Until that date passes, the final balance position for the first year cannot be known.

Why the First Assessments Are Delayed

The timing of the first bills reflects the information needed to calculate Division 296.

The tax depends on both a member's total super balance and the amount of superannuation earnings attributed to that member during the financial year.

For 2026–27, the first balance test occurs at 30 June 2027.

After the financial year closes, relevant super funds must complete their reporting obligations.

Self-managed super funds need to determine and report the information required for affected members through the annual return process.

Larger regulated super funds also have reporting obligations that feed into the final assessment process.

Only after the relevant balance and earnings information is available can an individual's position be calculated across all applicable super interests.

This creates a natural delay between the end of the first Division 296 year and the issuing of the first assessments.

Why 30 June 2027 Is the Key Date

For the first year, 30 June 2027 is especially important because the transitional test looks at the member's total super balance at the end of that day.

A person may begin the year above $3 million but finish below the threshold.

Likewise, someone who begins below $3 million may move above it because of investment performance, contributions or changes in asset values.

The final year-end position determines whether the threshold is exceeded for 2026–27.

From 2027–28, the balance test changes and considers the greater of the member's opening and closing total super balance.

This means the 30 June 2027 balance also becomes important for the following financial year.

The Assessment Goes to the Member

Division 296 is assessed to the individual rather than directly to the super fund.

This is different from the ordinary tax already paid within superannuation funds.

Once the assessment is issued, the member becomes responsible for paying the Division 296 liability.

Tax is generally due 84 days after the notice of assessment is issued.

The individual can pay the amount using money held outside super or, subject to the applicable rules, elect to have the amount released from one or more super funds.

An election to release funds must generally be made within 60 days of the assessment notice.

A Hypothetical Payment Timeline

Consider a hypothetical SMSF member, Margaret, whose total super balance is $4.2 million on 30 June 2027.

Her SMSF's 2026–27 financial year closes on that date.

The fund then completes its annual reporting obligations, including the information needed for Margaret's Division 296 calculation.

Assume a notice of assessment is issued on 1 March 2028.

Margaret would generally have 60 days to make an election to release the amount from super, meaning the election period would run to around the end of April 2028.

If she instead paid the liability directly, the 84-day payment period would extend to around late May 2028.

This illustrates why superannuation earnings arising during 2026 may not result in an actual cash payment until well into 2028.

The example is illustrative only. Actual assessment and payment dates will depend on reporting and processing timelines.

Defined Benefit Interests Are Treated Differently

Defined benefit members are subject to different payment arrangements.

Rather than requiring immediate payment in the same way as ordinary accumulation interests, Division 296 liabilities associated with certain defined benefit interests can be deferred.

The amount can be recorded in a debt account until the relevant benefit becomes payable.

Interest can accrue on the deferred amount using the applicable long-term bond rate.

This treatment reflects the fact that defined benefit members may not have the same ability to release money from their superannuation interest immediately.

Exemptions Can Apply

Certain individuals can receive exempt treatment under the Division 296 framework.

This includes some child recipients of superannuation income streams and recipients of qualifying structured settlements.

A transitional exemption also applies in certain circumstances where an individual dies during the 2026–27 financial year.

The application of an exemption depends on the individual's circumstances and the nature of the relevant superannuation interest.

The Delay Does Not Mean the Tax Is on Hold

The gap between the start of Division 296 and the first assessments does not mean the tax is deferred or optional.

The 2026–27 financial year already counts.

Superannuation earnings generated from 1 July 2026 form part of the first year's calculations.

The delay simply reflects the need to complete the full financial year, determine the year-end total super balance and collect the necessary fund-level reporting information.

Individuals who may be affected therefore need to consider the position well before the first assessment actually arrives.

Thresholds Can Change Over Time

The $3 million and $10 million thresholds are subject to indexation.

The first threshold is indexed in increments of $150,000, while the higher threshold is indexed in increments of $500,000.

This means the relevant threshold for later financial years may differ from the original levels.

Affected members should therefore look at the threshold applying to each individual financial year rather than assuming the original amounts will remain unchanged indefinitely.

SMSF Cost-Base Election

For self-managed super funds, a separate transitional measure also needs attention.

An eligible SMSF can make a one-off election to reset the cost base of qualifying CGT assets held at 30 June 2026 for Division 296 purposes.

The election uses market values associated with that date.

It is separate from the 30 June 2027 total super balance test, but the timing of the decision overlaps with the 2026–27 annual return process.

The election is irrevocable once made.

That makes accurate records and valuations important for SMSF trustees dealing with both the cost-base rules and the first Division 296 reporting year.

Key Dates to Watch

The next major date is 30 June 2027.

That is when the first Division 296 financial year ends and the first total super balance test occurs.

After that, super funds complete their reporting obligations for 2026–27.

The first Division 296 assessments are expected during the later half of the 2027–28 financial year, meaning many affected members may receive their first notice between January and June 2028.

Payment will generally fall due 84 days after the notice is issued unless an alternative release arrangement applies.

The long timeline therefore reflects the mechanics of the tax rather than a delay in its commencement.