If you have been putting off thinking about the “$3 million super tax”, now is the time. Division 296 is no longer a proposal being argued about — it passed Parliament in March 2026 and applies from 1 July 2026. The first year being measured is the one we are in right now.
The good news for most people is that the version that became law is a lot more sensible than the version that caused all the noise. The bad news is that if you run a self-managed super fund in Adelaide with a commercial property or a farm in it, the practical issues are still very real — and they are liquidity issues, not tax-rate issues.
Here is what Adelaide fund members actually need to know.
What Division 296 is
Division 296 is an extra layer of tax on the investment earnings of people with very large superannuation balances. It sits on top of the normal 15% tax the fund already pays.
Two thresholds matter:
- $3 million — an extra 15% applies to the share of your earnings attributable to the balance above this level, taking the effective rate on that slice to about 30%.
- $10 million — a further 10% applies to the share attributable to the balance above this level, taking that slice to about 40%.
Critically, both thresholds are now indexed — the $3 million figure moves in $150,000 steps and the $10 million figure in $500,000 steps. That was one of the biggest criticisms of the original design, and it has been fixed. A 35-year-old with $600,000 in super today is not being quietly dragged into this in thirty years’ time.
The change that matters most: no tax on unrealised gains
The original 2023 design taxed the movement in your balance, which meant a fund could be taxed on a paper increase in the value of a property it had no intention of selling. For SMSFs holding a factory at Wingfield or a vineyard in the Adelaide Hills, that was the deal-breaker — a tax bill with no cash to pay it.
That element is gone. Division 296 as legislated works off realised earnings, calculated by adjusting the fund’s actual taxable income: you start with the fund’s taxable income, subtract assessable contributions and non-arm’s length income, and add back exempt current pension income and the untaxed portion of capital gains. Rent, interest, dividends and gains you have actually crystallised are in. An unsold property going up in value is not.
If the fund makes a loss in a year, Division 296 earnings for that year are simply nil, and the loss is carried forward against future years.
How the calculation actually works
The tax is not levied on your whole balance, and it is not levied on the whole of your earnings. It applies proportionally.
Take a member with a total super balance of $4 million at 30 June, whose share of the fund’s Division 296 earnings for the year is $200,000.
- Proportion above the threshold: ($4,000,000 − $3,000,000) ÷ $4,000,000 = 25%
- Taxable earnings: $200,000 × 25% = $50,000
- Division 296 tax: $50,000 × 15% = $7,500
That is on top of the roughly $30,000 of ordinary 15% tax the fund would already have paid on those earnings. Meaningful, but not the confiscation the early headlines suggested.
Two mechanical points worth knowing. First, the balance used is normally the higher of your opening and closing total super balance for the year — so pulling money out in June does not sidestep it. There is a transitional concession for 2026/27 only, where the closing balance is used. Second, your total super balance counts every fund you are a member of, not just the SMSF. Plenty of people with an SMSF plus a legacy industry fund account are closer to $3 million than they think.
When the bill actually arrives
Not for a while. The 2026/27 year is the first measured, but the ATO cannot assess anyone until the funds have reported, which means assessments for 2026/27 will not be issued until the 2027/28 year — and for SMSFs, which often do not lodge until May, potentially later again.
When the assessment does come, it is issued to you personally, not to the fund. You then have two options:
- Pay it from your own money, or
- Elect to have the fund release the amount to cover it. That election has to be made within 60 days, the trustee has 10 business days to action it, and the tax itself is due within 84 days of the assessment.
Miss the deadline and the ATO will issue a release authority itself, with general interest charge accruing daily in the meantime.
There are also some sensible carve-outs: recipients of child death benefit income streams are exempt, defined benefit members can defer the debt until the benefit becomes payable (with interest at the 10-year Treasury bond rate), and no Division 296 liability arises if a member dies during 2026/27.
Why this is really a liquidity conversation for Adelaide SMSFs
The typical Adelaide SMSF we see with a balance in this range is not holding $3.5 million of listed shares. It is holding business real property — the client’s own warehouse, a consulting suite, a shed on the family block — often bought years ago and now worth considerably more than it cost.
Those funds have three characteristics that make Division 296 awkward even in its softened form:
- Lumpy assets. When the day comes that the property is sold, the realised gain lands in a single year, which can push Division 296 earnings up sharply in that one year even though the growth accrued over a decade.
- Thin cash. Rent covers the outgoings and not much else. A personal assessment of several thousand dollars means either finding it outside super or triggering a release from a fund that may not have the cash sitting there.
- Valuation pressure. Your total super balance depends on the market value of fund assets at 30 June. Casual valuations have always been a compliance risk; now they directly affect a tax calculation, so the evidence needs to be defensible.
What we are telling clients to do now
Not much, and deliberately so. The single worst response to Division 296 would be restructuring in a hurry — pulling assets out of super to avoid an extra 15% on a slice of earnings, and triggering capital gains tax at full personal rates to do it. For most people that is a large certain cost to avoid a smaller uncertain one.
What is worth doing in the next twelve months:
- Work out your actual total super balance across all funds. If you are under about $2.5 million, this is background noise for now.
- Look at the fund’s cash position and whether it could fund a release without a forced sale.
- Get the 30 June valuations right, particularly for property and unlisted assets.
- Think about timing if a fund asset is likely to be sold — which financial year the gain lands in now has an extra consequence.
- Consider balance equalisation between spouses where it makes sense. The same legislation expanded voluntary spouse contribution splitting, and two balances of $2.5 million are treated very differently to one of $5 million.
Worth noting too that the same package increased the Low Income Superannuation Tax Offset and its eligibility threshold — a reminder that this was a rebalancing of the super system, not simply a new tax.
Where to get help
We still need the final regulations and ATO guidance on some of the detail, particularly around how earnings are allocated between members of a multi-member SMSF. That is coming, and we will be watching it closely.
In the meantime, if you have an SMSF and a balance heading toward $3 million, the useful step is a proper look at your numbers rather than a reaction to a headline. Our SMSF accounting and audit team works with fund trustees across Adelaide and regional South Australia, and if you are not sure whether an SMSF is even the right structure for you, our honest guide to SMSFs is a good place to start.
Get in touch with our Adelaide office if you would like us to run the numbers on your fund.
This article contains general information only. It does not take into account your objectives, financial situation or needs, and it is not personal financial product advice. Superannuation rules are complex and the Division 296 regulations were not finalised at the time of writing. You should seek advice specific to your circumstances before acting.
