From 1 July 2026, the taxation of superannuation earnings for individuals with larger balances will change. If you or your fund may be affected, we encourage you to take five minutes to understand these changes.
What has changed
The new law introduces an additional tax on fund earnings, which is applied in addition to the tax your fund already incurs. This is how it works.
If your total superannuation balance exceeds $3 million at the end of a financial year, you will incur an additional 15% tax on the earnings attributable to the amount above that threshold.
If your balance is above $10 million, an additional 10% applies to earnings on the portion exceeding this level.
Both thresholds will rise over time with inflation, increasing by $150,000 at the $3 million mark and by $500,000 at the $10 million mark.
This tax is charged to you personally, rather than to your super fund. You can submit a release authority to the ATO for your super fund to release the amount via SuperStream to cover this though, similar to how the Division 293 tax system operates.
Who this affects
If your total super balance across all your accounts is approaching or above $3 million, this is relevant to you. It does not matter whether your super sits in a self-managed fund or with a retail or industry fund. The calculation works a little differently depending on the fund type, but the outcome is the same: earnings above the threshold are taxed at the higher rate.
This can also affect couples with reversionary pensions or balances unexpectedly if a spouse passes away. Speak to our team if this applies to you.
If you are well under $3 million and do not expect to approach that figure, this will likely not directly affect your tax position. However, there is still something worth knowing below, especially if you run a self-managed fund.
A one-off opportunity for SMSF trustees
If you have a self-managed super fund, there is a one-time choice worth understanding now, regardless of your current balance.
SMSFs can elect to make a cost base adjustment on the fund’s directly held assets, to their market value as at 30 June 2026. This means any growth occurring before that date will be excluded when calculating future Division 296 tax; only growth from 1 July 2026 onwards will be included.
It is important to understand what this election does and does not do. It applies exclusively to the Division 296 earnings calculation for an individual member. It has no effect on your fund’s ordinary tax position. When the fund eventually sells an asset, the standard capital gains tax calculation still uses the original cost base, exactly as it always has. Trustees who make this election will need to maintain two separate cost bases for the same asset going forward, one for ordinary CGT and one for Division 296 purposes only.
A few important details
- This is optional. The choice must be made prior to the due date for lodging your fund’s 2026–27 annual return. It is not submitted to the ATO directly; it needs to be properly documented and kept in your fund’s records.
- It applies to the entire fund; you cannot select individual assets. Every directly held asset will be adjusted, including any that have fallen in value.
- Once made, this choice cannot be reversed.
- You don’t need to be near $3 million now to consider this. If your balance is likely to grow over time, locking in today’s value could reduce your future Division 296 tax. It won’t change what your fund pays in tax day to day, only what counts toward this specific tax later on.
What this means for you
If you are unsure of your total super balance or whether adjusting the cost base is right for you and your fund, it is worth weighing up the pros and cons to see if it is in your best interest.
Making this decision well means knowing exactly what your fund holds and the value of each asset as at 30 June 2026, along with a clear view on whether making this adjustment suits your fund overall. Book a time to talk with our team.
