How to navigate Australia’s new super landscape, calmly and strategically
If you’ve seen the headlines about “super tax changes”, you’re not alone. For many Australians, the talk about new rules—especially Division 296—feels complicated, even a bit confronting. Our job at Roger Boghani is to cut through the noise, explain what’s changing, and show you how to respond with confidence.
A new chapter for super
Australia’s super system is undergoing its biggest reset in a decade. The government’s signal is clear: the primary purpose of super is to help Australians retire with dignity, not to function as an open-ended, tax-advantaged estate-planning vehicle. The policy goal is sustainability and fairness—tightening generous concessions at the very top while strengthening support at the base.
For Melbourne’s professionals, business owners, and wealth builders, that means strategy matters more than ever. What worked in the last decade won’t necessarily be optimal in the next.
Meet Division 296: the new 15% tax on part of earnings above $3 million
At the centre of the reform is Division 296. In short: an additional 15% tax applies to the portion of annual earnings that corresponds to the portion of your total super balance (TSB) above $3 million at year-end. It is not a tax on every dollar you hold, and it is not a blanket wealth tax. It’s a targeted, proportionate charge on earnings attributable to balances above the threshold.
Treasury and ATO documents explain the purpose and how it works: the rule cuts benefits for very large balances; your total super balance (TSB) is looked at across all your super accounts and stages (saving and retirement); and the extra 15% charge is calculated based on your personal situation, which you can pay directly or take out from your super.
How the calculation works (made simple)
Imagine your super starts the year at $3 m and ends at $5 m after earning $300,000.
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The share of your balance above $3 m is: (5.0−3.0)÷5.0(5.0 − 3.0) ÷ 5.0 = 40%.
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Apply that 40% to your earnings: $300,000 × 40% = $120,000.
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Apply the Division 296 rate: $120,000 × 15% = $18,000 (your additional tax).
This tax is assessed to you, not to the fund. The ATO issues the assessment; you can pay it personally or ask your fund to release the amount. (Exact drafting and worked examples appear in the Explanatory Materials and industry fact sheets.)
Two practical notes you’ll see in the fine print:
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Division 296 looks at year-end TSB. If markets swing and you sit just under or just over $3 m at year-end, it can change outcomes.
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Draft materials have also canvassed treatment of negative earnings across periods to avoid perverse outcomes in down years. (Always check current guidance as design details have evolved.)
Why acting now matters
For high-balance members, this is a genuine turning point. The “set-and-forget” playbook isn’t enough.
Take Sarah, a Melbourne business owner with $4.2 m in super. Under previous settings, her full balance could compound within the super’s concessional environment. Under Division 296, roughly a quarter of her earnings will attract the extra 15% charge—modestly reducing annual net returns but compounding to a meaningful drag over time. That doesn’t mean panic. It does mean planning.
At a city level, Melbourne has many sophisticated SMSF trustees and business owners with larger balances—especially in professional services and medical practices. For those clients, decisions about contribution timing, pension commencements, asset location, and succession structures now deserve a fresh look.
The bigger picture: tightening at the top, support at the base
While Division 296 targets very high balances, the government is also improving fairness at the other end. The Low Income Super Tax Offset (LISTO) refunds the 15% contributions tax for eligible low-income workers (historically up to $37,000 income, with policy announcements to lift thresholds and caps from 1 July 2027). This helps part-timers, return-to-work parents, and younger workers keep more of their super working for them.
The direction of travel is clear: make superannuation tax concessions better targeted. Reduce leakage at the top, strengthen foundations at the base.
Your strategic playbook
1) Stay the course—consciously
You can keep your balance where it is and treat Division 296 as a cost of doing business inside super. This suits those who still value super’s protections, asset mix, and governance and are comfortable with the trade-off. Build the extra cost into your forward projections and cash-flow planning.
2) Rebalance above $3 m—right asset, right vehicle
For many, trimming balances above the threshold and reinvesting outside super will improve overall flexibility without abandoning super entirely. Consider:
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A family investment trust for equities, property syndicates, or private business interests, giving you distribution planning flexibility and clearer estate pathways.
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Debt reduction on the family home (non-deductible) or conservative principal reduction on investment loans—this “guaranteed return” can be highly attractive in a higher-rate world.
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Business reinvestment: many Melbourne operators can generate superior after-tax returns within their operating companies or unit trusts compared with tying incremental capital inside super. (Structure carefully; document commercial purpose.)
3) Rethink contributions—optimise, don’t just maximise
If your TSB is near/over $3 m, the old instinct to “tip in the maximum” may no longer be efficient. Re-run the numbers on concessional vs non-concessional flows, spouse contributions, downsizer contributions, and timing. Aim to optimise within an ecosystem (super + trust + personal) rather than maximising one silo. Industry bodies and professional firms have published modelling that shows how marginal benefits shift as TSB approaches $3 m.
4) Refresh estate planning—especially for adult children
Death-benefit taxes and cashing rules were complex even before Division 296. Now, the interaction between large balances, adult non-dependants, reversionary pensions and tax components makes asset location critical. Keeping some assets outside super can provide beneficiaries with more options and, in some cases, lower overall tax frictions. (Specialist SMSF and technical houses stress this point.)
5) Protect against “threshold cliff” risk
Because Division 296 looks at TSB at year-end, plan for market volatility around 30 June. Asset-mix, pension commencements/commutations, and one-off events (e.g., property settlements) can push you just above or below the line. Scenario-test with your adviser to avoid accidental exposure.
Melbourne-specific watch-outs
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Business owners with lumpy income: Consider how retained profits, director loans, and dividend policy interact with contributions and personal tax. In some years, super may still be the right home for incremental savings—but not automatically.
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Property-heavy SMSFs: Recheck gearing covenants and cash-flow buffers if you expect a Division 296 assessment; liquidity to fund personal assessments (if you choose to pay from super) matters.
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High-growth equity portfolios: Large, concentrated equity exposures can swing TSBs across the threshold at 30 June—plan rebalancing windows thoughtfully.
Frequently asked questions (in plain English)
Is Division 296 “on top of” normal super tax?
Yes. Think of it as an additional 15% applied to the slice of annual earnings that corresponds to the part of your TSB above $3 m. Normal settings (15% in accumulation; 0% on pension-phase earnings up to transfer balance cap) still apply first; Division 296 tops up the effective rate on the above-threshold slice.
Does it matter if my balance is in retirement phase?
Your TSB includes both accumulation and retirement-phase interests. Even if part of your earnings is ordinarily tax-free in pension phase, the TSB test can still trigger Division 296.
Who pays and how?
The ATO assesses you personally. You can pay from personal funds or request a release from super—processes are outlined in ATO guidance when in force.
What about negative years?
Design papers and explanatory materials discuss how negative earnings can be recognised to avoid taxing “phantom gains”. Check the latest Treasury/ATO releases each year—rules have evolved following consultation.
What’s changing for low-income earners?
LISTO refunds the 15% contributions tax for eligible low-income workers, with policy announcements to lift the income threshold and cap from 1 July 2027, increasing the maximum benefit (coverage particularly improves for women and part-time workers).
The bottom line
Division 296 doesn’t end wealth creation—it ends complacency. The “super-only” mindset is giving way to a more balanced approach: the right assets, in the right vehicles, for the right goals.
Don’t wait for the first assessment to land. If your balance is approaching or above $3 million, now is the time to revisit structure, contributions, asset location, and estate planning. We’ll help you model scenarios, weigh trade-offs, and choose a pathway that keeps your wealth working for you—across super and beyond it.
Ready to talk through your options?
Let’s map a strategy that fits the new rules and your long-term goals.
