Australia's new tax on large superannuation balances, known as Division 296, is now more than four months into its first year. Since July 1, 2026, earnings linked to the part of a member's total super balance above A$3 million attract an extra 15 percentage points of tax, and earnings on the part above A$10 million attract a further 10 points.

For Australians working in Hong Kong, Singapore or elsewhere in Asia who still hold large balances at home, the timing matters. The first income year under the rules ends June 30, 2027, and the Australian Taxation Office (ATO) is expected to issue the first assessments in the 2027-28 income year, according to the Commonwealth Superannuation Corporation (CSC), which runs the federal public-sector schemes.

How Division 296 got through Parliament

The Senate passed the two bills on the evening of March 10, after the House of Representatives approved them on March 5, SMS Magazine reported. The Greens backed the package without amendment. The main act, the Treasury Laws Amendment (Building a Stronger and Fairer Super System) Act 2026, received royal assent on March 13, according to the federal legislation register.

Treasurer Jim Chalmers said at the time that the policy would affect fewer than 0.5% of Australians in 2026-27, the magazine reported. He described the package as delivering more super for low-income workers and "more sustainable tax breaks for people with the biggest balances."

The same act also changes the Low Income Superannuation Tax Offset. Under the legislation, the fixed A$37,000 income limit and A$500 cap give way to amounts set by formula, with the cap linked to the superannuation guarantee rate, starting from the 2027-28 income year.

The rates on super earnings above A$3 million

Ordinary super fund earnings in the accumulation phase are taxed at 15%. Division 296 layers extra tax on top, but only on the share of earnings that corresponds to the slice of the balance above each threshold, not on the whole account.

According to CSC, the effective rate in accumulation accounts is 30% on earnings attributable to the band between A$3 million and A$10 million, and 40% on earnings attributable to the amount above A$10 million. For balances in the retirement phase, where earnings are normally tax-free, the corresponding rates are 15% and 25%.

Both thresholds will be indexed in future years, Kidmans Partners, an Australian accounting firm, said in its guide to the rules. The test uses the total superannuation balance, which counts most interests including accumulation, retirement-phase and defined benefit accounts. CSC said interests in foreign super funds are excluded, a point relevant to expatriates who also hold pension savings outside Australia.

Earnings are measured under a set framework that takes in realised gains and changes in value over the year, adjusted for contributions and withdrawals, CSC said. Negative earnings can arise if a member's interests fall in value. For self-managed super funds (SMSFs), Kidmans said the calculation starts from the fund's taxable income, with adjustments for items such as assessable contributions, exempt pension income and non-arm's length income. An actuary then works out how much of the result belongs to each member, and the ATO uses that share to assess the individual.

Who pays, and how

The tax is levied on the person, not the fund. An individual can pay the bill from personal money or elect to have it released from a nominated super interest, according to both CSC and Kidmans. CSC said members of defined benefit schemes can defer the liability into a debt account, and that defined benefit interests are valued using prescribed methods and actuarial principles, so earnings can be recognized even without an underlying account balance.

There are carve-outs. Kidmans said child recipients of death benefit pensions are excluded, as are people who made structured settlement contributions from personal injury compensation. A person with a balance above the threshold at the start of the year they die may still receive an assessment for that year, though the firm said this does not apply in 2026-27. Because super does not form part of an estate, it recommended that members review estate plans.

For SMSF trustees, Kidmans said capital gains in the Division 296 calculation may be adjusted where the fund has made the small-fund capital gains election, a choice that affects how gains built up before July 1, 2026 are treated.

Readers following the wider super changes can also see how payday super is set to change contribution timing for employers and workers.

The next fixed date is June 30, 2027, when the first Division 296 income year closes. Balances and earnings measured to that day will drive the first ATO assessments in 2027-28.

This article is general information, not financial advice.