Understanding Division 296: What it means for super balances above $3 million.

Superannuation remains one of the most tax-effective investment structures in Australia. However, as balances grow, so too does government scrutiny.

In our latest PKF Podcast episode, host Courtney Charleson speaks with Daniel Clements, Partner in our Superannuation team, to break down the proposed changes and what they mean in practice.

While recent headlines may sound concerning, the reality is more measured. Here’s a clear overview of what you need to know.

Why Division 296 has been introduced

Division 296 introduces an additional tax on superannuation earnings for individuals with balances above $3 million.

The aim is to reduce the level of tax concessions available to those with very high balances, without fundamentally changing how the superannuation system operates.

Who will be affected by Division 296’s implementation?

For most Australians, Division 296 will have no impact.

It is relevant only if:

· Your super balance is approaching or exceeds $3 million, or

· You expect future contributions or growth to push your balance beyond this threshold.

To put this into perspective, average retirement balances in Australia are significantly lower. As a general guide, the average superannuation balance for retirees (60-64 years) in Australia is $380,737 for men, and $300,717 for women (Australian Retirement Trust, 2026). This means the changes are targeted at a relatively small group of individuals.

If your superannuation balance is nearing or exceeding $3 million, we’d recommend seeking advice to understand how the rules may apply to your circumstances.

Explaining the 15% tax rate calculation

As explained on the PKF Podcast by Partner Daniel Clements, one of the most misunderstood aspects of Division 296 is the widely reported 15% tax rate.

In reality this rate,

· Is only applied to a portion of your earnings,

· And is based on how much your balance exceeds $3 million.

Whilst the 15% figure often grabs headlines with flashing lights, it’s important to understand this is not the effective tax rate you will pay.

As an example,

· Super balance: $5 million

· Earnings: $500,000

· Portion above $3 million: 40%

Meaning the resulting tax equates to a tax rate of 6% on your earnings, not 15%. This is an important distinction and highlights why the real impact is often less significant than headlines suggest.

What about unrealised gains?

One of the major concerns of the original Division 296 proposal was the taxing of unrealised gains. Thankfully this is no longer a part of the earnings calculation, which keeps the Division 296 legislation consistent with standard tax principles and is overall a positive outcome for those affected.

Moving forward

For individuals with superannuation balances of $3 million or above we recommend that you avoid rushing into any major changes and speak to your adviser about the best path moving forward.