Real Conversations on the New Div296 Super Tax Proposal
You may have heard about the Government’s updated plan to reduce tax concessions for people with large super balances. Known as Div296 or the Better Targeted Superannuation Concessions, the proposal introduces an additional tax of up to 25% on certain super earnings (it is usually 15% tax), starting 1 July 2026.
Here’s what it means in plain terms:
If your super is above $3 million, earnings on the portion between $3 million and $10 million will attract an extra 15% tax (on top of the standard 15%, bringing it to 30%).
If your balance is above $10 million, an extra 10% tax applies to earnings on that portion too—bringing the total to 40%.
Still no clarity on how defined benefit schemes such as DFRDB, MilitarySuper, PSS and CSS will be valued for Div296 purposes nor how the additional tax will be calculated and applied (read my former article here about it).
Importantly, following industry feedback, this tax will now apply only to realised gains—meaning you won’t be taxed on the value of assets like property, shares, or farms unless they’ve actually been sold.
The government has also confirmed the thresholds will be indexed over time, and the start date has been pushed back to 1 July 2026 to allow for further consultation and clarity.
Naturally, this has raised a lot of questions. Here are three conversations I’ve had just this past week:
A client with $12 million in super asked: “Should I be doing anything now to reduce future tax?”
Another, with around $3.5 million, wondered: “Is this tax reason enough to move some money out of super?”
A senior public servant with a defined benefit pension said: “How will they even work out my balance?”
Here’s what I’ve been sharing with them:
First, this is not law yet. While the direction is clear, the fine print is still being worked through—especially for defined benefit schemes.
For clients with large balances in accumulation or pension accounts, we’re starting to explore some early options. That might include staying the course and paying the tax if and when gains are realised or reviewing whether investment bonds or personal investment accounts offer greater flexibility
For defined benefit members—particularly those still contributing and not yet retired—we’re considering whether a part pension instead of a full pension might make more sense under the new rules, especially if it helps manage the impact of the proposed tax.
Here’s a quick example to show how it might work:
Megan is 58 and has a total super balance of $4.5 million split between an APRA-regulated fund and her SMSF. Last year, she had $300,000 in realised earnings across both.
Only the portion of her balance above $3 million is affected—which is 33.3%.
So, the additional tax works out to 15% × 33.3% × $300,000 = $15,000.
For Megan, the bulk of her super earnings are still taxed at the concessional 15% rate (0% tax for the part she can have in pension phase), but anything above the threshold gets hit with the extra layer.
It’s also worth noting that defined benefit balances may still be valued using family law formulas (or something similar) as mentioned in my former article. If that happens, many people with these benefits may that appear under $3 million on paper could still be impacted by this tax.
As always, we’re watching this space very closely. And once the details are confirmed, we’ll ensure impacted Thomson Wealth clients receive clear, timely advice tailored to their situation.
If you’re wondering how this might affect your own super setup or retirement plan, now’s a good time to receive advice.