Division 296 tax & SMSF property valuations in 2026

Division 296 tax is a new tax on the earnings of very large superannuation balances, due to start on 1 July 2026. It adds an extra 15% tax on the portion of earnings that relates to a total superannuation balance above $3 million, with a further tier above $10 million. If your self-managed super fund holds property, Division 296 makes your annual market valuation more important than ever, because it feeds the balance the tax is measured against. This article explains what Division 296 tax is, how it works, and what SMSF property owners should be doing about valuations now.

The rules have changed since Division 296 was first proposed, so it is worth understanding the current design rather than the earlier version. The information below reflects the Government's revamped measure as at July 2026. Division 296 is significant tax law, so treat this as general information and confirm the current legislative status and your own position with a qualified adviser.

Key takeaways

• Division 296 tax is due to start on 1 July 2026 and applies an extra 15% tax on earnings linked to a total superannuation balance above $3 million.
• A second tier adds a further 10% on earnings linked to a balance above $10 million, and both thresholds are now indexed to inflation.
• The revamped measure applies to realised earnings and no longer taxes unrealised gains.
• Your SMSF's total superannuation balance depends on the market value of its assets, so annual property valuations directly affect whether and how much Division 296 you pay.
• A 30 June valuation is the foundation for getting your total superannuation balance right, and for any cost base election available before Division 296 starts.

What is Division 296 tax?

Division 296 is an additional tax on superannuation earnings for people with very large super balances. It sits on top of the existing 15% tax that already applies to super fund earnings.

The Government describes it as a measure to reduce the tax concessions available on very large balances. In plain terms, if your total superannuation balance is above the threshold, the earnings that relate to the amount above that threshold are taxed at a higher rate.

It is assessed on the individual, based on their total superannuation balance across all their super interests, not just on a single fund. For SMSF members with property in the fund, that total balance is driven in part by the value of that property.

Who does Division 296 apply to?

Division 296 applies to individuals whose total superannuation balance exceeds the relevant thresholds. Most people will not be affected, because the first threshold is high.

There are two tiers in the revamped measure:

• A first threshold of $3 million, above which the extra tax begins.
• A second threshold of $10 million, above which an additional amount of tax applies.

Importantly, both thresholds are now indexed, so they are intended to rise over time with inflation rather than staying fixed. This was one of the key changes from the original proposal.

How is Division 296 tax calculated?

The tax targets the earnings that relate to the part of your balance above each threshold, not your whole balance.

• For a total superannuation balance above $3 million, an extra 15% applies to the earnings attributable to the amount over $3 million.
• For a balance above $10 million, a further 10% applies to the earnings attributable to the amount over $10 million.

Combined with the existing 15% tax on super earnings, that means a headline rate of around 30% on the relevant earnings above $3 million, and around 40% above $10 million.

A crucial change in the revamped design is that the tax now applies to realised earnings based on taxable income, and no longer captures unrealised gains. Under the original proposal, paper gains on assets that had not been sold could have been taxed; the revised measure removes that.

What counts as earnings under Division 296?

Division 296 is a tax on earnings, not on your balance itself. Under the revamped measure, earnings are based on the fund's realised, taxable income for the year, attributed to the member.

Because unrealised gains are excluded, a rise in your property's market value does not by itself create Division 296 earnings until gains are actually realised. The value still matters, though, because it feeds your total superannuation balance and therefore how much of your earnings fall above the threshold.

How your total superannuation balance is calculated

Your total superannuation balance is essentially the value of all your superannuation interests at a point in time, across every fund you have. For an SMSF, that means the market value of the fund's assets, including property, attributed to each member.

This is exactly why the ATO requires assets to be valued at market value each year, and why an accurate property valuation is central to knowing where you sit relative to the $3 million and $10 million thresholds.

When does Division 296 start? Key dates

Timing matters, especially for valuations. These are the key dates for the revamped measure as announced.

• 1 July 2026: Division 296 is due to commence, a year later than the originally proposed 1 July 2025 start.
• 30 June 2027: the first measurement of total superannuation balance for the new tax.
• 2027 to 2028: the first Division 296 assessments are expected to be issued.

Because the measure is still being finalised in legislation, these dates and details are subject to change. Confirm the current position before making decisions.

Why property valuations matter for Division 296

This is where Division 296 connects directly to your SMSF property. Your total superannuation balance is calculated from the market value of your fund's assets. If the fund holds property, the value of that property is a major part of your balance.

That has two consequences. First, an inaccurate or unsupported valuation could push your balance across a threshold, or misstate how much of it sits above one. Second, because the ATO already requires SMSFs to value their assets at market value every year, the valuation you use for your financial statements is the same figure that feeds your Division 296 position.

In other words, Division 296 raises the stakes on getting your annual SMSF property valuation right. A defensible, well-evidenced market value is no longer just an audit requirement; it is part of your tax position.

The 30 June valuation and cost base considerations

A 30 June valuation does two jobs for a fund affected by Division 296.

It establishes the market value of the property for the total superannuation balance calculation at each measurement date. And it provides the evidence base if any transitional cost base election is available before the tax starts.

The ATO has indicated that SMSFs may be able to elect to reset the cost base of certain CGT assets to their market value as at 30 June 2026, to recognise value accrued before Division 296 commences. Where such an election is available, it is typically irrevocable and must be made by a set date, so a supportable 30 June 2026 valuation is the foundation for making it properly. This is a technical area, so get advice specific to your fund before relying on it.

What SMSF trustees should do now

You do not need to panic, but a few sensible steps put your fund in a strong position.

• Know your total superannuation balance. Understand roughly where you sit relative to the $3 million threshold across all your super, not just this fund.
• Get an accurate 30 June valuation. Make sure your SMSF property is valued at market value on objective, supportable evidence, not a rough estimate.
• Keep the evidence. Retain the comparable sales and market evidence behind each year's valuation, because the figure now matters for tax as well as audit.
• Talk to your adviser about the cost base election. If you may be affected, ask whether a 30 June 2026 cost base election is relevant to your fund.
• Plan ahead. If a large balance or a lumpy asset like property could tip you over a threshold, factor Division 296 into your strategy early.

Common misconceptions about Division 296

Because the rules changed, some earlier concerns no longer apply.

• "It taxes unrealised gains." The revamped measure applies to realised earnings and no longer taxes paper gains on unsold assets.
• "The threshold will never move." Both the $3 million and $10 million thresholds are now indexed, so they are intended to rise over time.
• "It applies to everyone with an SMSF." It only applies to individuals whose total superannuation balance is above the thresholds, which is a minority of members.
• "It has already started." It is due to start on 1 July 2026, with the first balance measurement at 30 June 2027.

How Valato helps SMSFs prepare

Valato provides independent, evidence-based SMSF property valuations across Australia, built for exactly this kind of compliance. Each report pairs a market value with comparable sales evidence, and where relevant a rental assessment, in an audit-ready format.

For a fund thinking about Division 296, that means a defensible 30 June figure for your total superannuation balance, prepared quickly and for a flat fee. Compare the SMSF valuation options or order an SMSF valuation ahead of your next 30 June.

A simple worked example

The following is a simplified illustration only, not a calculation for any real fund.

Suppose an individual has a total superannuation balance of $4 million, including an SMSF property. Division 296 would apply only to the earnings attributable to the $1 million above the $3 million threshold, not to the whole balance.

If those attributable earnings were, say, $50,000 for the year, an extra 15% would apply to that portion, on top of the existing 15% fund tax. The exact figures depend on the fund's actual earnings, the proportion of the balance above the threshold, and the final legislated method.

Use this only to understand the shape of the tax, not to estimate your own liability. Get advice specific to your circumstances.

How the revamped Division 296 differs from the original proposal

The measure was significantly changed from the version first proposed in 2023. The table below summarises the main differences.

These changes matter, because the original design drew criticism for taxing paper gains and for a threshold that would not move with inflation. The revamped measure addresses both.

Options if your balance is near the threshold

If your balance is close to a threshold, there are general strategies people discuss with their adviser, such as reviewing the timing of contributions and withdrawals, how assets are held across the fund, and when gains are realised.

None of this is one-size-fits-all, and some options carry their own tax and compliance consequences, so any strategy should be worked through with a licensed professional. What is universal is that an accurate valuation is the starting point, because you cannot plan around a threshold without knowing your true balance.

Division 296 and estate planning

Division 296 also has estate planning implications, because large balances are often central to how wealth passes to the next generation. Death benefits, the timing of pensions, and how property is held in the fund can all interact with the tax.

These are complex, member-specific questions for your adviser. Like everything else with Division 296, they rest on knowing the market value of the fund's assets.

The bottom line

Division 296 tax is due to start on 1 July 2026, adding an extra 15% on earnings linked to balances above $3 million and more above $10 million, on realised earnings rather than paper gains. For SMSFs that hold property, the practical takeaway is clear: your annual market valuation now shapes your tax position as well as your audit, so it pays to get it right with proper evidence. Because this is significant and still-evolving tax law, confirm the current rules and your own position with a qualified professional.

Frequently asked questions

General information only: This article is general in nature and does not take into account your individual circumstances. It should not be relied on as tax, financial or legal advice. Division 296 is significant and evolving tax law; confirm the current rules and your own position with a qualified professional before making decisions about your property, tax position or investment strategy.