Division 296: the new tax on super balances over $3 million, and the one-way decision behind it

The new tax on large superannuation balances has had no shortage of coverage. The headline is simple enough: more tax on big super. The part that actually demands a decision from owners with a self-managed fund is narrower, more technical, and tied to a deadline that is closer than it looks.

How Division 296 works

From 1 July 2026, Division 296 applies an additional 15% tax on the earnings attributable to the portion of an individual’s super balance above $3 million. It sits on top of the existing tax on fund earnings, so the rate on the affected slice of earnings rises accordingly.

A few features matter for owners. The first assessment is based on your total super balance at 30 June 2027, with assessments expected to start from around March 2028. The bill is issued to you personally, not to the fund, although you can choose to release money from super to pay it. Exactly how earnings are measured for this tax has been the most argued-over part of the design, so confirming the current calculation method with your adviser is worth doing rather than assuming.

The decision with a hard edge is the cost base reset. A self-managed fund can elect to reset the cost base of its assets to their market value as at 30 June 2026. That election is irrevocable, applies across the fund’s assets, and has to be lodged by the due date of the 2026-27 annual return. Once it is made, it is made.

What it means for you

This lands on a very specific owner: the one who poured cash into the business for years, ran their own super lean, and now holds significant value inside a self-managed fund. For a lot of family businesses, the biggest asset in that fund is the commercial property the business operates from. That is exactly the kind of asset where a cost base reset decision has real consequences, and exactly the kind of decision you cannot walk back.

The trap is treating Division 296 as a problem for 2028, because that is when the bill arrives. The election that shapes how much you pay has to be made against a 30 June 2026 value and lodged with the 2026-27 return. Leave it until the bill shows up and the window to make a sensible choice has already closed.

There is also an exit dimension. Business premises held in super, the timing of a sale, and how this new tax interacts with your eventual transition are all connected, and they are hard to untangle once the irrevocable election is locked in. An owner thinking about succession is better off mapping this now, while every option is still open, than discovering the constraint later.

You don’t need to make the call yourself. You do need to put it in front of your accountant well before the 2026-27 return, with enough time to model it properly rather than tick a box under deadline pressure.