This one has had a long and noisy journey. It was announced in 2023, redrafted after a great deal of industry criticism, and the two bills implementing it passed Parliament on 10 March 2026. It commenced on 1 July 2026.
The version that became law is meaningfully different from the version people got upset about, so if you formed a view in 2023 or 2024 it is worth updating.
The basics
Division 296 applies an additional tax based on your total superannuation balance, which is all of your super across every fund, not just your SMSF.
Where your total superannuation balance exceeds $3 million, an additional 15 per cent applies to the proportion of your superannuation earnings attributable to the amount above that threshold. Where it exceeds $10 million, an additional 25 per cent applies to the proportion attributable to the amount above $10 million.
Two things to hold onto there. It is proportional, so it does not apply to your whole balance, only the share attributable to the excess. And it is a personal tax, assessed to you as an individual, not to your fund. You can elect to have the money released from your super to pay it, in the same way Division 293 works.
The three changes that made it much less painful
Unrealised gains are out. The original design deemed earnings from the movement in your total superannuation balance, which captured paper gains on assets you had not sold. The enacted version uses realised earnings: interest, dividends, rent, and realised capital gains, calculated on principles broadly aligned with ordinary income tax. If your fund holds a property that goes up in value and you do not sell it, that increase is not taxed under Division 296.
Both thresholds are indexed. The $3 million threshold moves in $150,000 increments and the $10 million threshold in $500,000 increments. This was the other big complaint, that the threshold would quietly capture ordinary people over twenty years. It has been addressed.
The start date moved. It applies from 1 July 2026, not 1 July 2025. The first assessments are expected after 30 June 2027.
The parts that still need attention
Your total superannuation balance still includes the full value of your assets, unrealised gains included. So while unrealised gains are not taxed, they still push you across the threshold. Annual valuations still matter, and for funds holding property they matter a great deal.
Capital gains are included in the year the fund includes them in taxable income. That means Division 296 can produce a large number in a year when a major asset is sold, even if the balance was comfortable in every other year.
There is no refund for negative Division 296 earnings in a loss year, although losses can generally be carried forward.
There are transitional rules, including optional capital gains tax cost base resets for gains that built up before 30 June 2026. Whether those are worth using depends entirely on the fund.
What this means for you
If your total superannuation balance is nowhere near $3 million, this is background noise. Read it, file it, move on.
If you are approaching the threshold, or your fund holds a single large asset that could be sold in one year, the timing of that sale now has an additional tax consequence that did not exist before. That is a conversation to have with a licensed adviser well before the year in which you sell, not after.