Is Your Super over $3 Million? What the Proposed ‘Super Tax’ Could Mean for You

by | Oct 14, 2025 | Tax Law

Is Your Super over $3 Million? What the Proposed ‘Super Tax’ Could Mean for You

Introduction

If your superannuation balance is above $3 million, you could soon face new tax rules. Division 296 is the proposed “super tax” targeting large super funds. From 1 July 2025, earnings on balances above this threshold may attract an additional 15% tax, significantly increasing your overall liability. Here’s what Division 296 means and how to prepare.

What Is Division 296?

Division 296 is the government’s proposed measure to apply an extra 15% tax on superannuation earnings linked to the portion of a person’s total super balance (TSB) above $3 million.

Example:

  • If your TSB is $3.5 million, the Division 296 super tax applies to the earnings on $500,000.

  • If your TSB is under $3 million, you won’t be impacted by the new rules.

👉 Related reading: Common Tax Deduction Mistakes & How to Avoid Them

Why Division 296 Super Tax Is Different

Unlike current rules, Division 296 includes both realised and unrealised gains. That means even if you don’t sell an investment, an increase in value could still be taxed.

This presents challenges for:

  • SMSFs with property holdings – difficult to sell quickly to cover tax.

  • Unlisted shares and private investments – often illiquid and complex to value.

Taxing “paper profits” has raised concerns about fairness and liquidity. For further detail, see the ATO’s guidance on superannuation for thresholds and updates.

When Will Division 296 Start?

Division 296 is proposed to begin from 1 July 2025. However, the legislation is not yet finalised. Amendments and delays are possible, but waiting until the rules are confirmed could leave you exposed.

How to Prepare for Division 296 Super Tax

If your superannuation balance is above or approaching $3 million, now is the time to act. Steps to consider include:

  • Review your portfolio – identify illiquid or hard-to-sell assets.

  • Plan for liquidity – ensure you can cover any unexpected tax liabilities.

  • Seek professional advice – a tailored strategy can reduce exposure to the Division 296 super tax.

Conclusion

The Division 296 super tax proposal could significantly impact Australians with large super balances. If you are likely to exceed the $3 million threshold, early planning is essential. Speak with a financial adviser now to review your structure, protect your liquidity, and explore strategies that may reduce future tax exposure.