$3M Super Tax: Understanding the new rules
Note: This article was last updated on 20/03/26 after legislation passed both Houses of Parliament and is awaiting Royal Assent. Once finalised, the changes will apply from next financial year.
After months of consultation and concern from industry and community groups, the Federal Government has now passed the final Division 296 superannuation tax legislation.
Encouragingly, the Government has stepped back from several of the most controversial elements of the original proposal and adopted a more workable, pragmatic framework.
In summary, details of the final legislation are as follows:
- The tax applies only to realised earnings (such as interest, dividends and realised capital gains)
- Unrealised gains will not be taxed
- The $3 million threshold will be indexed over time
- A new $10 million tier has been introduced, with a higher tax rate applying only to earnings above that level
- The tax is assessed at an individual level, regardless of how many super funds you hold
- The start date has been deferred to 1 July 2026
Important note: The ATO will not assess super balances under the new legislation until the end of the 2026/27 financial year, so there is plenty of time to discuss any potential implications at your next review meeting and make any planning adjustments that may be needed.
Who is impacted
- If your total super balance exceeds $3 million, some of your earnings — such as dividends, rental income, or realised capital gains — may attract the higher tax.
- The rules apply per individual, not per fund.
- For most Australians, these updates will have no impact at all.
How it is proposed to work
Each year the ATO will determine each member’s liability for Division 296 tax based on their Total Super Balance at the end of the year. The ATO will then contact an impacted member’s super funds to request the member’s share of the fund’s realised earnings and will use these figures to calculate the member’s additional tax liability. Those members will then have the option of paying the tax directly or from their superannuation funds.
A worked example
If for example, you have a Total Super Balance of $5 million at the end of the 2026/27 financial year and that year you are attributed with $200,000 of realised earnings for Division 296 tax purposes:
- The proportion of your balance above the $3 million threshold is 40%.
- Your Division 296 tax liability is therefore $12,000 (15% x 40% x $200,000).
What to consider
Even with these changes, super remains one of the most tax-effective ways to build wealth. For clients approaching or above the new thresholds, now’s the time to review:
- How your assets are structured and where income is generated
- Whether partner balances can be used to share assets more evenly
- The timing of withdrawals or asset sales
- Estate-planning implications for larger super balances
What these changes mean for you
While the new framework still introduces higher taxes for very large balances, it also reflects a more pragmatic and politically sustainable approach. Superannuation remains one of the most tax-effective wealth vehicles available, and the removal of the unrealised gains tax from the orginal draft legislation, combined with indexation and a longer lead time, means clients can continue investing in super with confidence.
If you would like to discuss what the new rules might mean for your superannuation or retirement strategy, please contact your FMD Adviser.
General advice disclaimer: This article has been prepared by FMD Financial and is intended to be a general overview of the subject matter. The information in this article is not intended to be comprehensive and should not be relied upon as such. In preparing this article we have not taken into account the individual objectives or circumstances of any person. Legal, financial and other professional advice should be sought prior to applying the information contained on this article to particular circumstances. FMD Financial, its officers and employees will not be liable for any loss or damage sustained by any person acting in reliance on the information contained on this article. FMD Group Pty Ltd ABN 99 103 115 591 trading as FMD Financial is a Corporate Authorised Representative of FMD Advisory Services Pty Ltd AFSL 232977. The FMD advisers are Authorised Representatives of FMD Advisory Services Pty Ltd AFSL 232977. Rev Invest Pty Ltd is a Corporate Authorised Representative of FMD Advisory Services Pty Ltd AFSL 232977.