The Div 296 tax bill has now passed the House of representatives. Its passage through the Senate is not guaranteed so fingers crossed. Anyhow, we have become aware that there is a lack of understanding about how this tax would be calculated so we thought it useful to provide this simplistic example. We will ignore add backs, adjustments and the art of calculating the members total super balance – these are subjects to address if the tax becomes real – and concentrate on the bare numbers.

The tax would begin in the 2025/2026 financial year. It would apply to any member whose total super balance is over $3m as 30 June 2026 and apply to a portion of the fund “earnings” for that year. Note that, unlike other measures where the trigger is the previous year’s TSB, for this tax, the trigger is at the end of the year that will be taxed.

Let’s consider Jack. His 30 June 2026 TSB is $7m. (He’s over the $3m cap so tax will need to be considered). His 30 June 2025 balance was $6m.

We must firstly calculate Jack’s Div 296 earnings for the 2026 financial year.

Earnings = TSB at end of the financial year – the greater of TSB at start of the financial year or $3m = $7m – $6m = $1m

Note that the TSB at end of financial year will be adjusted by contributions (removed) and withdrawals (added back), as well as a couple of other items that will not be considered in this simple example.

The percentage that will be taxed is:

{$7m (TSB at end of FY) – $3m (large balance threshold)} ÷ $7m (TSB at end of FY) = 57%

So, tax is 15% of ($1m x 57%) = 15% of 570,000 = $85,500

If Jack’s balance had remained at $6m the Div 296 tax would be nil as there would be no earnings.

If Jack’s balance had fallen to $5m then he would also pay no Div 296 tax plus he would have a carried forward “loss” of $1m so if, in the next financial year, his balance grew from $5m back to $6m, there would also be no tax.

We provide a current overview of the passage of this legislation and a calculator you may find of use on our website.