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The ‘new Div 296’ – exposure draft legislation released today

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As discussed here and here, the Treasurer confirmed by media release that the former Division 296 Bill would not be reintroduced in the same form as the draft legislation introduced to Parliament in November 2023.

Since that media release in October 2025, we have been awaiting details of the new draft Div 296 legislation.

The exposure draft legislation was released by Treasury today for consultation.

Submissions on the draft legislation will close on 16 January 2026. This gives a consultation period of just 28 days, during a time of Christmas and New Year public holidays and the related shutdown periods for many businesses.

What was the ‘old Div 296’?

By way of brief refresher, the ‘old Div 296’, as originally introduced to Parliament in November 2023:

  • Had a start date of 1 July 2025;

  • Sought to impose a Div 296 tax of up to an additional 15% on members with a $3 million or more total super balance (with the $3 million threshold not subject to indexation); and

  • taxed unrealised ‘paper gains’.

What is the ‘new Div 296’?

As announced in the October 2025 media release, the biggest changes from the ‘old Div 296’ are:

  • start date pushed back to 1 July 2026;

  • instead of one unindexed threshold of super balances of $3 million, there will be two thresholds, both of which will be indexed:

    • $3 million (indexed), referred to as the ‘large superannuation balance threshold’;

    • $10 million (indexed), referred to as the ‘very large superannuation balance threshold’;

  • For both thresholds, the Div 296 tax will apply to income and realised earnings, at a rate of up to 30% (earnings on balances between $3 million and $10 million) and up to 40% (earnings on balances over $10 million)

The exposure draft material confirms the detail of points previously flagged under earlier material, including: 

  • The $3 million and $10 million thresholds will be indexed to CPI each year;

  • The super fund will be responsible for calculating the amount of the realised earnings attributable to an individual member and reporting that amount to the ATO;

  • The ATO will calculate a Div 296 liability and notify individuals of their tax liability for a given income year;

  • Individuals will have the option of paying their Div 296 tax liability from super or using amounts outside super.

Major changes under the ‘new Div 296’

The exposure draft material also introduces some major changes under the ‘new Div 296’, set out below.

‘Total superannuation balance reference amount’ instead of ‘total superannuation balance at the end of the year’

The ‘old Div 296’ introduced the concept of ‘taxable superannuation earnings’, where an individual has taxable superannuation earnings for Div 296 purposes for an income year if their total super balance at the end of that year is greater than $3 million and the amount of their superannuation earnings for the year is greater than nil.

This meant that where an individual’s total super balance was below $3 million at the end of the income year, Div 296 could not apply for that income year.

This is no longer the case under the ‘new Div 296’.

Instead of ‘total super balance at the end of the year’, the draft legislation introduces the concept of ‘total super balance reference amount’. An individual’s ‘total super balance reference amount’ is either an individual’s total super balance at the end of the year or an individual's total super balance just before the start of the year, whichever is greater.

Paragraph 1.35 of the explanatory memorandum to the exposure draft legislation (EM) states that ‘this approach acts as an integrity measure to ensure the liability for Division 296 tax cannot be avoided by reducing the TSB prior to the end of the income year.’

However, transitional arrangements will apply for the 2026-27 income year so that, for the first year following commencement on 1 July 2026, Div 296 tax will be determined solely by reference to an individual’s total super balance at the end of the 2026-27 income year.

Key takeaway: Div 296 planning strategies may need to be adjusted but noting the ‘grace period’ that applies for the 2026-2027 income year.

Difference in calculation methodology for APRA-regulated funds and SMSFs

Once a superannuation entity has calculated its Div 296 earnings for the year, the entity must attribute those earnings to individual superannuation interests in that entity.

For APRA-regulated funds (i.e., public offer funds, including retail and industry super funds), Div 296 fund earnings must be attributed to individual superannuation interests on a fair and reasonable basis, having regard to the matters prescribed by the regulations. The principles prescribed by the regulations will provide for the earnings attribution to consider the investment strategies and tenure of members across different products or investment options.

For SMSFs, it is likely that regulations will prescribe a single consistent approach for attribution of earnings, rather than relying on a set of principles. That is, due to SMSFs not having the same variety of structures and products compared to APRA-regulated funds, SMSFs will typically be able to calculate the exact amount of earnings subject to Div 296 tax. The regulations may:

  • require these calculations to be based on an actuary’s certificate; and

  • provide for the attribution to be calculated according to the following formula:

 
 

Key takeaway: How Div 296 earnings are attributed to each member of a super fund will differ between APRA-regulated funds and SMSFs. More specific details of the approach for SMSFs will be provided in proposed regulations (still to come).

Treatment of gains attributable to pre-1 July 2026

As discussed here, it wasn’t clear how, in relation to the calculation of realised earnings, whether gains attributable to the period pre-1 July 2026 will be excluded.

Detail on this has now been provided in the exposure draft legislation.

Specifically, a transitional CGT adjustment will allow SMSFs to choose to adjust the cost base of the fund’s CGT assets that it held on 30 June 2026 to the market value of those assets on that day. The choice will apply to all CGT assets held by the fund on 30 June 2026.

While this is welcome news for SMSFs holding direct interests in assets, the EM confirms that the transitional CGT adjustment does not apply to indirectly held interests of an SMSF (apart from where existing look-through tax treatment applies where a CGT event occurs, such as assets held on bare trust). For example, where an SMSF owns units in a unit trust which holds real estate, the SMSF can adjust the cost base of the units it owns, but it cannot adjust the cost base of the real estate held by the unit trust.

Where an SMSF elects to apply the CGT adjustment, the cost base of its CGT assets will be adjusted for Div 296 purposes only. That is, the asset will have an adjusted cost base for Div 296 purposes, and an original cost base for non-Div 296 purposes.

Key takeaway: An SMSF can elect to adjust the cost base (for Div 296 purposes) of its CGT assets held on 30 June 2026 to the market value on that day, but this transitional CGT adjustment does not extend to assets held by an entity that an SMSF invests in – for example, unit trusts and companies.

What’s next?

In the very limited consultation period, which spans over the Christmas/New Year break, it will be difficult for industry to make meaningful submissions in respect of the draft legislation.

We’ll provide further commentary in the new year.

Phil Broderick
Principal
T +61 3 9611 0163 l M +61 419 512 801  
E pbroderick@sladen.com.au    

Philippa Briglia
Special Counsel
T +61 3 9611 0174 | M +61 449 404 801
E: pbriglia@sladen.com.au

Philippa Briglia