Tax changes to high super balances
What the changes could mean for you
The Australian Government has introduced an additional tax on higher super balances, known as Division 296.
If your total super balance is more than $3 million, an additional tax may apply to the proportion of your realised earnings above the thresholds below.
Additional tax rates
| Total super balance | Additional tax on realised earnings above the threshold |
| $3 million to $10 million | 15% |
| Over $10 million | 25% |
When it starts
The tax applies to realised earnings from 1 July 2026, with your balance at 30 June 2027 used to assess how much you’ll pay.How it works
If your total super balance is more than $3 million, an additional tax may apply to the proportion of your realised total superannuation earnings above that amount.
More than $3 million in super: You’ll pay an additional 15% tax on the realised total superannuation earnings on the proportion of your balance above $3 million up to $10 million.
More than $10 million: A 25% tax will apply on the realised total superannuation earnings on the proportion of your balance above $10 million.
The tax is based on your total super balance across all your super accounts, including accumulation and retirement income accounts.
The ATO will give you the option to pay the tax from your super, or you can pay it personally.
How much you could pay
Meet Alex
Super balance over $3 million
On 30 June 2027, his total super balance is $3.25 million. The realised total superannuation earnings for the 2027 income year are $150,000.
As only a small proportion of his earnings is above $3 million, his additional tax for the year is around $1,730.
What this means
If you’re only slightly above the threshold, the tax applies to a small portion of your earnings – not your full super balance.
Meet Janet
Drawing down in retirement
She’s retired and makes regular withdrawals from her super. By 30 June 2027, her balance is $3.65 million, which includes $400,000 in withdrawals. The realised total superannuation earnings for the 2027 income year are $250,000.
Even though Janet’s balance goes down due to withdrawals, Janet’s total superannuation balance as at 30 June 2027 is still above the $3 million threshold. Because of this, Janet’s additional tax for the year is around $6,700.
What this means
Even if you’re already retired, you’re still subject to the additional tax – but only for the proportion above the $3 million threshold.
Proportionate earnings below the $3 million threshold don’t count towards the additional tax in retirement phase.
Meet Craig
Higher balances and ongoing contributions
He’s still working and making regular contributions to his super. On 30 June 2027, his total super balance is $7.95 million. The realised total earnings for the income year are $650,000.
While contributions aren’t treated as earnings, they increase his overall balance – meaning a larger portion of his earnings sits above the $3 million threshold. As a result, Craig’s additional tax for the year is around $60,700.
What this means
The higher your balance, the greater the portion of your earnings that may be subject to the additional tax.
FAQs
Before making any changes to your super, you should consider:
- the types of investments you hold
- your income outside super
- whether you can re-contribute later if you withdraw some of your super now (limits and age rules may apply)
- whether you could achieve similar returns outside super
- the tax that would apply to realised earnings outside superannuation.
There’s no need to make any changes until you understand your position. It’s best to speak with a qualified financial planner to better understand your financial situation.
One of the differences with investing outside super versus inside super is the tax rate.
Earnings are often taxed at an overall lower rate inside super (even after these changes).
Using the same figures as Craig’s example above:
- Tax on earnings inside super: around $158,208 (ordinary superannuation tax rate at 15% on realised total superannuation earnings + $60,700)
- Tax on the same earnings if earned outside super: around $305,500 (assuming top marginal rate and Medicare levy, and excluding proposed changes to the CGT discount proposed in the 2026-27 budget)
This means that even with the Division 296 tax, super can be a more tax-effective way to invest compared to outside super.
Speak with an expert
You don’t need to take action right now – but it’s important to understand how the changes may affect your super. Before making any changes to your super, it’s best to fully understand your situation. If you’d like, we can connect you with one of our qualified financial planners for a closer look at your finances.Advice is provided by one of our financial planners who are Authorised Representatives of Industry Funds Services Limited (IFS). IFS is responsible for any advice given to you by its Authorised Representatives. Industry Fund Services Limited ABN 54 007 016 195 AFSL 232514.
All information, rates and/or fees are current at the time of production and are subject to change. Changes to government legislation and superannuation rules made after this time may affect the accuracy of the information provided. You may wish to obtain professional advice before acting on any of the information contained in this document.