If you’ve been following the proposed changes to superannuation for balances over $3 million, you’d be forgiven for thinking there was still plenty of time to deal with it.
Until recently, most commentary suggested this was something to worry about closer to 30 June 2027.
That assumption is now wrong.
The latest draft legislation and explanatory materials released on 19 December 2025 materially change how the new tax works, and more importantly, when it starts to bite. For many people with higher super balances, the time to act is now, not later.
A quick refresher: what is the $3 million super tax?
The new rules (often referred to as Division 296) introduce an additional tax for individuals whose total superannuation balance exceeds $3 million.
In simple terms:
- Earnings on the portion of your super balance above $3 million will be taxed at an additional 15%. If you have a balance over $10 million, then it is a further 10% on top of that again.
- This is on top of the existing superannuation tax rules.
This is not a tax on your entire super balance – but it is a tax that can become significant very quickly once you’re over the threshold.
What has changed in the latest legislation?
It’s no longer just about your balance at 30 June
Originally, the rules were widely understood to apply based on your super balance at the end of the financial year.
The new draft legislation goes further.
Instead of only looking at your balance on 30 June, the calculation now uses the higher of:
- your super balance at the start of the financial year, or
- your super balance at the end of the financial year.
In plain English:
- being under $3 million at 30 June no longer guarantees you are outside the tax.
- If your balance is higher at any of these key points, that higher number can now drive the tax outcome.
This is a deliberate shift that removes many traditional “year-end tidy-up” strategies. But they have allowed us the time in the first year to get out strategies sorted before 30 June 2027 with a transitional rule for “year 1” which is going to look at the End of Year number ONLY.
Franking credits are not properly adjusted for
Another major concern is how the rules treat franking credits.
Under normal tax rules:
- franking credits recognise company tax already paid, and
- ensure profits are not taxed twice.
Under the current Division 296 drafting:
- the franking credit uplift is included when calculating earnings,
- but there is no corresponding adjustment for the tax already paid at the company level.
The practical effect is that some people may end up paying tax on what is effectively tax that has already been paid. This is a clear departure from long-standing Australian tax principles and is something we are actively raising with Treasury and professional bodies.
Why 30 June 2026 now matters
Here’s the most important takeaway.
Because of how the legislation is drafted:
- 2026–27 is the first year the tax applies, and
- balances and decisions made during the 2025–26 year directly affect that outcome.
Many people assumed they could wait until closer to 30 June 2027 to act. That is not necessarily the case.
Strategies that may need to be considered before 30 June 2026 include:
- contribution timing and contribution caps,
- pension commencements or restructures,
- equalising balances between spouses,
- reviewing investment and asset allocation strategies inside super, and
- understanding how SMSF-specific rules now apply.
Not every strategy suits every person – but doing nothing is not an option.
Who should be paying close attention?
You should consider getting advice now if:
- your super balance is already over $3 million, or
- you are approaching $3 million, especially with investment growth, inheritances or business sale proceeds in play, or
- you have an SMSF, where the rules are more complex and less flexible than for large industry funds.
What we’re doing and how we can help
At TAG, we’re deep in the detail of the new legislation and are actively involved in:
- analysing the technical changes,
- working with professional bodies on submissions to Treasury, and
- helping clients understand what actually matters for their situation.
This is not about rushing into drastic decisions.
It is about understanding your position early enough to:
- avoid unintended tax outcomes, and
- prioritise the strategies that still work under the new rules.
The $3 million super tax is no longer a distant issue.
The way it now operates means decisions made before 30 June 2026 matter, and waiting until later could remove options that are still available today.
Get in touch with us to work through what this means for you and which strategies, if any, should be prioritised before the rules take effect.
Division 296 & the $3 million super tax are making headlines
The Australian Financial Review has published a Q&A highlighting an important issue we’ve been flagging: how franking credits are treated under the new rules. TAG Partner Michelle Griffiths shared her insights on what this could mean for your super and retirement planning.
Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686). Copyright 2026. Please do not reproduce without the expressed written consent of the author.