UPDATE: Division 296 Legislation Has Passed the Senate

This article updates our previous commentary on Division 296, originally published on 27 October 2025. 

On 10 March 2026, the Division 296 legislation passed the Senate and now awaits the rubber-stamp of the Governor-General. It will then be law. 

Division 296 legislation will come into effect from 1 July 2026 and the first year affected will be the 2026-27 financial year.

The key confirmed features of the Division 296 superannuation tax, as outlined below, remain accurate. 

CGT Cost Base Reset (30 June 2026)

A one-off, optional cost base reset will be available to self-managed super funds (SMSFs), allowing trustees to reset the cost base of all fund assets to their market value as at 30 June 2026. This transitional measure is designed to ensure that capital gains accrued prior to 1 July 2026 are excluded from Division 296 calculations when those gains are later realised.

The Key Details

• Purpose: Excludes capital gains built up before 1 July 2026 from future Division 296 earnings calculations, reducing potential tax liability on realised gains

• Opt-in: Voluntary, not automatic. The election must be made via an approved form lodged by the due date of the 2026–27 SMSF annual return

• All-or-nothing: Applies to all CGT assets held by the fund on 30 June 2026; assets cannot be selectively chosen

• Division 296 purposes only: Does not change the actual cost base for standard income tax or ordinary CGT calculations; trustees will need to maintain two sets of records, with our assistance

• Irrevocable: Once the election is made, it cannot be reversed

Tax rates and thresholds

The thresholds for super balances are set at $3 million and $10 million, and will be indexed to inflation.
A 15% tax applies to earnings above $3m, and an additional 10% (totalling 25%) applies to earnings above $10m.
The Government refers to “headline” tax rates of 30% and 40% for balances over these thresholds, which include the existing 15% super fund tax.

Division 296 tax

This is a new tax levied on individuals (though it can be paid from super) and is in addition to normal superannuation taxes.
The tax is calculated as a percentage of earnings, subject to the applicable tax rate, and excludes unrealised gains.
Only ordinary earnings and realised capital gains will be taxed, with CGT discounting and carried-forward capital losses reducing taxable earnings.
For SMSFs, capital gains accrued before 30 June 2026 will be excluded from the Division 296 calculation and tracked using a notional cost base as at 30 June 2026.

Changes in tax calculation

The proportion of super above the $3m or $10m threshold will be based on the greater of the balance at the start and end of the year, preventing avoidance by withdrawing super before year-end.
A transitional rule in 2026/27 will base the tax on the balance as at 30 June 2027.

Capital gains relief for SMSFs

SMSFs must opt in to access capital gains relief for gains accrued before 30 June 2026, by the due date of the 2026/27 tax return.
The opt-in applies at the fund level, including for funds without members currently exceeding $3m.
This relief applies only for Division 296 purposes, not to the general taxation of realised gains.

Splitting earnings between members

For SMSFs, total earnings will be split between members using a special actuarial certificate, covering both pension and accumulation interests.

The proposed start date is 1 July 2026.