Federal Budget 2026: Division 296, Indexed Caps, and What It Means for Super

The three changes that affect super members directly:

Division 296 — an additional 15% tax on superannuation earnings attributable to balances over $3 million — starts 1 July 2026.
Indexed contribution caps rise on 1 July 2026: concessional from $30,000 to $32,500, non-concessional from $120,000 to $130,000 (bring-forward to $390,000), Transfer Balance Cap from $1.9M to $2.1M.
Total Super Balance threshold for non-concessional contributions rises from $2.0M to $2.1M on 1 July 2026, with bring-forward bands also shifting.

Division 296: the new 15% tax on balances over $3 million

Division 296 is the most significant change to superannuation taxation since the introduction of the Transfer Balance Cap in 2017. It was passed by Parliament under the previous government (the Treasury Laws Amendment (Better Targeted Superannuation Concessions) Act) and takes effect from the 2026-27 financial year.

How it works

For super accounts with a Total Super Balance above $3 million at 30 June each year, an additional 15% tax applies to the proportion of annual earnings attributable to the balance over $3 million. This sits on top of the existing 15% tax on super earnings, meaning the effective tax rate on those earnings is 30%.

"Earnings" for Division 296 purposes is defined as the change in Total Super Balance during the year, adjusted for contributions and withdrawals. This is the controversial part: it includes unrealised capital gains — increases in the market value of assets that haven't been sold. Critics argue this taxes paper gains; the government's response is that the alternative (taxing only realised gains) would be administratively impractical for the ATO at scale.

Who's affected

Treasury estimates approximately 80,000 Australians will be affected by Division 296 in its first year. For the average super-fund member (median balance around $50,000–$150,000 depending on age), Division 296 has no impact whatsoever. The change is targeted squarely at very-high-balance accumulation accounts, including most SMSFs holding business real estate or large equity portfolios.

What to do if you're approaching the threshold

If you're near or above $3M, take advice before 30 June 2026. Common strategies under consideration:

Withdraw and recontribute below the cap if you're aged 60+ (preservation age met) and the withdrawal won't push you past the contribution caps.
Pause concessional contributions for high-balance members so the balance doesn't grow further into Division 296 territory.
Spouse-splitting remains available — concessional contributions can be split with a lower-balance spouse to keep both accounts under the threshold.
SMSF restructuring — for SMSF members with illiquid assets (business real property), the Division 296 cash-payment timing rules create real liquidity planning challenges. Discuss with an SMSF specialist.

This is general information, not personal advice. The interaction of Division 296 with your wider financial position is complex and almost always benefits from a sit-down with a licensed financial adviser before 1 July 2026.

Contribution caps lift from 1 July 2026

Super contribution caps are indexed to Average Weekly Ordinary Time Earnings (AWOTE), not Budget decisions. The Budget formally confirmed the indexed values for FY 2026-27:

Cap	FY 2025-26	FY 2026-27 (from 1 July 2026)
Concessional contribution cap	$30,000	$32,500
Non-concessional contribution cap	$120,000	$130,000
Non-concessional bring-forward (3 years)	$360,000	$390,000
Transfer Balance Cap (general)	$1,900,000	$2,100,000
Total Super Balance threshold for non-concessional	$2,000,000	$2,100,000

The full contribution caps guide walks through the rules for each cap, the bring-forward eligibility tapering for balances near the threshold, and the excess-contribution tax consequences.

What didn't change in the Budget

Super Guarantee (SG) rate stays at 12% — the legislated phase-up to 12% was completed in 2025.
Stage 3 tax cuts remain in place: 30% bracket from $45,001 to $135,000, 37% to $190,000, then 45%. These were re-tweaked in the May 2024 Budget but unchanged in May 2026.
Preservation age stays at 60 for everyone born on or after 1 July 1964.
Low Income Super Tax Offset (LISTO) threshold and rules unchanged.
Government co-contribution threshold lifts on 1 July 2026 to $46,488 (lower) and $61,488 (upper) — also indexation-driven, not a Budget decision.

Reviewed by Jarrod, Editor · DecisionLab Last reviewed: April 2026 · Methodology

Important information The information on SuperFind is general in nature and does not take into account your personal financial situation, needs, or objectives. It is not personal financial advice. Before making any financial decisions about your superannuation, consider whether the information is appropriate for your circumstances and consider seeking advice from a licensed financial adviser. Super fund data including fees and performance returns shown on this site were current as of April 2026 — always verify figures on the fund's website. Past performance is not a reliable indicator of future performance. Data sourced from APRA, ATO, and individual fund disclosures. Read our methodology for how figures are calculated and our about page for editorial policy. SuperFind is a DecisionLab publication.