Understanding Division 296 Tax: Will You Hit the $3 Million Threshold?

Apr 15
3 min read

Updated: Jun 3

Division 296 tax starts in July 2026. If you earn $200k with SGC contributions throughout your career, will you trigger the $3 million threshold? The numbers tell a clear story: most high-income earners won't get close.

What Is Division 296?

Division 296 introduces a threshold, not a cap. Starting in July 2026:

If your total super balance exceeds $3 million, earnings on the excess portion will be taxed an additional 15%.
The normal super earnings tax is 15%. With Division 296, it becomes 30% on the portion above $3 million.
Only the earnings attributable to your balance exceeding $3 million will incur the extra tax. For instance, if your balance is $4 million and you earn $100k, the additional tax will be calculated as $100k 25% 15% = $3,750.
The threshold will be indexed in $150k increments.
This approach is softer than initially proposed since unrealised gains are excluded.

The Numbers: Who Actually Reaches the $3 Million Threshold?

We modelled a scenario for someone earning $200k (with full SGC contributions) across different return scenarios. Here's how much super you'd need at age 60 to hit the $3 million threshold, compared to the average Australian:

|-----------|--------------------------|---------------------------------|--------------------------------|-------------------------------|

| 30–34 | $52,700 | $1,197,600 | $516,400 | $234,700 |

| 35–39 | $85,100 | $1,424,600 | $734,900 | $422,700 |

| 40–44 | $118,700 | $1,583,200 | $935,400 | $616,600 |

| 45–49 | $151,900 | $1,824,400 | $1,215,200 | $890,100 |

| 50–54 | $190,500 | $2,051,200 | $1,517,400 | $1,209,500 |

| 55–59 | $234,700 | $2,250,800 | $1,831,500 | $1,570,800 |

| 60–64 | $263,400 | $2,514,700 | $2,236,900 | $2,051,100 |

Source: APRA Quarterly Superannuation Statistics(December 2025

At age 60-64, the average super balance is $263,400. Even with strong 8% returns, you'd need $2,051,100 (7.8 times the average) to trigger Division 296.

With more conservative 6.5% returns, you'd need $2,236,900, or about 8.5 times the average.

The $3 million threshold gets headlines, but the numbers show that most high-income earners won't reach it. Polis estimates that about 87,000 Australians have more than $3 million in super, which is roughly 1.4% of those with superannuation balances in Australia.

Implications for Financial Advisors

As financial advisors, understanding these thresholds is crucial. It allows us to guide clients effectively. Many clients may not be aware of how Division 296 could impact their retirement plans. By educating them, we can help them make informed decisions about their superannuation strategies.

Planning for the Future

Advisors should encourage clients to regularly review their superannuation balances and investment strategies. With the potential for increased taxation on super balances exceeding $3 million, proactive planning is essential.

Strategies to Consider

Diversification: Encourage clients to diversify their investments. This can help manage risk and potentially enhance returns.
Regular Contributions: Suggest making regular contributions to superannuation. This can help clients build their balances over time.
Investment Choices: Discuss the importance of selecting the right investment options within their superannuation fund. Higher returns can significantly impact their balance.

Conclusion

In summary, for most Australians, this threshold will not impact them under the current law. However, as financial advisors, we must remain vigilant. The landscape of superannuation is ever-changing, and our clients rely on us to navigate these complexities.

Notes on Our Calculations:

CPI and AWOTE are assumed to be 2.5%.
Salary is assumed to increase by AWOTE.
All numbers are shown in present value terms (discounted by CPI).
Super earnings are taxed at 15%.

By staying informed and proactive, we can help our clients achieve their financial goals while navigating the implications of Division 296 tax.