The New $3 Million Super Tax: Does It Touch Your SMSF?
A new tax on large super balances passed into law this year. It starts on 1 July 2026.
If you run a self-managed super fund, especially one holding your business premises, this is worth a careful look now.
What Division 296 Actually Is
Division 296 is a new, additional tax. It applies to individuals with a total super balance above $3 million.
It sits on top of the tax your super fund already pays. It is assessed personally, not at the fund level.
The Two Thresholds
Balances between $3 million and $10 million face an extra 15 percent tax on the relevant earnings. This brings the total tax on that portion closer to 30 percent.
Balances above $10 million face a further 10 percent on top of that. The total reaches around 40 percent on the highest portion.
Both thresholds will rise over time in line with inflation. They are not fixed forever at today’s figures.
Why Business Owners with an SMSF Should Pay Attention
Many small business owners hold their business premises inside a self-managed super fund. This is a common, legitimate structure.
The risk here is liquidity, not just tax. If your fund’s value sits mostly in one property, the fund may have little spare cash sitting around.
Division 296 tax is payable in cash, even if the underlying earnings were never paid out to anyone. A property-heavy fund can find this genuinely difficult to manage.
How the Tax Is Actually Calculated
The tax applies to realized earnings, not unrealized paper gains. This means dividends, interest, rent, and gains made when an asset is actually sold.
Your total balance across every fund you hold is combined for this test. Splitting money across several funds does not avoid it.
The portion of your earnings above the threshold is taxed at the higher rate. Earnings below the threshold are not affected.
A Simple Example
Imagine a fund with a $4.1 million balance, including a commercial property used by the owner’s business. If the fund sells an asset and realizes a gain, part of that gain sits above the $3 million line.
Only that portion above the line attracts the extra tax. The fund still needs the cash on hand to actually pay it.
What This Means If You’re Close to the Threshold
If your total super balance sits near $3 million, this is genuinely worth reviewing now, not after the new financial year begins.
A balance just under the threshold today could drift over it through normal investment growth. The earlier you understand your position, the more options you have.
What to Do Now
Check your total super balance across every fund you hold. This includes both accumulation and pension phase balances combined.
Review your SMSF’s liquidity if it holds property. Confirm whether the fund could actually pay a division 296 assessment in cash if one arose.
Get professional advice if you are within reach of either threshold. This is genuinely complex legislation, and the right approach depends entirely on your specific structure.
Do not make a major decision based on this article alone. This is general information, not financial or tax advice for your specific situation.
Frequently Asked Questions
Does Division 296 apply to most small business owners? No. It only applies to individuals with a total super balance above $3 million, which affects a relatively small share of account holders.
Does it tax unrealized gains, like a property that has increased in value but not been sold? No. The final law taxes realized earnings only, such as rent, interest, dividends, and gains actually realized when an asset is sold.
Can couples combine their thresholds? No. The threshold applies to each individual separately, so a couple can hold up to $6 million combined without either person being affected, provided it is split appropriately.
Get Your Business Structure Reviewed Talk to a Professional
If your SMSF holds business property and you are unsure how this affects you, professional advice now is far better than finding out at assessment time.
Edulink Payroll Services supports small business owners across greater Sydney and Campbelltown with bookkeeping and compliance, with pricing from $750 per employee, per year. For SMSF and personal tax advice specific to Division 296, we recommend speaking with a licensed financial adviser or your accountant.
📞 Call us today: 04 044 71 816
Edulink Payroll Services | Campbelltown & Greater Sydney | Call 04 044 71 816
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