Your superannuation balance does not need to exceed $3 million for Division 296 to deserve your attention.
While much of the discussion surrounding the new legislation has focused on individuals who have already crossed the $3 million threshold, an important planning consideration is emerging for those who sit below it today. For some mining and resources professionals, decisions made before the lodgement of their 30 June 2027 tax return could influence how Division 296 applies many years into the future.
That is particularly relevant for executives, business owners and professionals who have accumulated significant wealth through long careers, employee share schemes, investment properties or private business interests. While Division 296 may not affect them today, future investment growth, changing family circumstances or succession planning outcomes could make the rules relevant at a later date.
For SMSF members, there is an additional consideration that may warrant attention now: a cost-base election that could affect how future Division 296 liabilities are calculated.
What is Division 296?
Division 296 introduces an additional level of tax for individuals with larger superannuation balances.
From 1 July 2026, an additional 15% tax applies to the proportion of taxable superannuation earnings attributable to balances above $3 million. A further 10% tax applies to the proportion of taxable superannuation earnings attributable to balances above $10 million.
Importantly, both thresholds are subject to future indexation.
While Division 296 has generated considerable discussion, it is important to understand that the legislation does not impose a separate tax on unrealised gains. Rather, it applies additional tax to the relevant proportion of taxable superannuation earnings where the applicable balance thresholds are exceeded.
While the thresholds may appear relatively high, future investment growth, business interests and changing personal circumstances can all influence whether Division 296 becomes relevant over time.
Not to Be Confused With Division 293
Although the names are similar, Division 293 and Division 296 are very different measures.
Division 293 applies an additional 15% tax to concessional superannuation contributions where an individual’s income and contributions exceed $250,000 in a financial year.
Division 296, by contrast, applies an additional tax to the relevant proportion of taxable superannuation earnings where a person’s total superannuation balance exceeds the applicable threshold.
For some mining and resources executives, both provisions may apply at different stages of their wealth creation journey.
An executive with a high salary package, annual incentive payments and employee share scheme benefits may already be familiar with Division 293. Over time, as wealth continues to accumulate within superannuation, that same individual may also find Division 296 becomes relevant.
One is linked to income and contributions. The other is linked to accumulated superannuation wealth.
Why It Matters Even If Your Balance Is Below $3 Million
One of the biggest misconceptions surrounding Division 296 is that people with balances below $3 million do not need to think about it.
That may not be the case.
A superannuation balance represents a point in time, not a permanent position. For many professionals in the mining and resources sector, their highest earning years may still be ahead of them, or they may hold assets capable of appreciating substantially over time.
Consider a mining executive in their 50s with a superannuation balance of $2.5 million. While they remain below the threshold today, they may still have many years of investment growth ahead of them. Depending on market performance, contributions and future earnings, the balance they hold in ten years’ time could look very different.
The same principle applies to couples.
A husband and wife may each hold approximately $2 million in superannuation and conclude that Division 296 is not relevant to them. However, if one spouse were to pass away and the surviving spouse ultimately received those superannuation benefits, the combined balances could become concentrated in a single member account.
Mining and resources professionals often have additional factors that can accelerate wealth growth. Employee share schemes, investments in private companies, unlisted company shares and investment properties can all produce substantial capital growth over time.
An individual may therefore find themselves below the threshold today while still being a likely candidate to exceed it in the future.
That is why Division 296 is not simply an issue for those who already have very large superannuation balances. It is increasingly a strategic planning consideration for those whose wealth continues to grow.
The SMSF Cost-Base Election
One aspect of the legislation that has received less attention is the cost-base election available to SMSFs and small APRA funds.
Importantly, there is no requirement for a member to already have a balance above $3 million to consider making this election.
For investors in retail or industry superannuation funds, there is generally no election to make. While Division 296 may still apply to them in future years, the cost-base election is only available to SMSFs and small APRA funds.
For SMSF members, the election allows the fund to establish a new cost base for Division 296 purposes based on the market value of all fund assets at 30 June 2026.
While the concept is technical, its purpose is relatively straightforward. Depending on an individual’s circumstances, the election may reduce the extent to which investment growth that occurred before 1 July 2026 forms part of future Division 296 calculations when fund assets are eventually sold.
Importantly, the election does not change the capital gains tax treatment that would otherwise apply to assets held within the fund. Instead, it creates a separate cost base for Division 296 purposes, based on asset values at 30 June 2026.
Trustees should also be aware that the election applies to all assets held within the fund. It cannot be applied selectively and once made it cannot be reversed. Depending on the fund’s circumstances, this may reduce the amount of future Division 296 tax that could arise if a member later becomes subject to the regime.
Who May Wish to Investigate Further?
Whether the election is appropriate will depend on individual circumstances, and professional advice is essential before making any decision.
However, further investigation may be worthwhile where an SMSF member:
- Has a balance approaching or exceeding $3 million.
- Has a spouse and a combined superannuation position approaching or exceeding that level.
- Holds assets with significant unrealised capital gains.
- Owns appreciating assets such as investment properties, private business interests or unlisted company shares within the fund.
For these individuals, understanding the implications of the election before 30 June 2026 may be particularly important.
When the Election May Be Less Relevant
Equally, there are circumstances where the election may offer little benefit.
This may include individuals who are unlikely to ever become subject to Division 296, those expecting assets to be sold before the rules become relevant, or those with limited unrealised gains within their fund.
Practical considerations may also come into play. Making the election may require valuations of unlisted assets, additional record keeping and ongoing administrative work. Some trustees may conclude those costs outweigh any potential benefit.
What Should Investors Do Now?
For SMSF trustees and investors considering whether Division 296 may affect them in future, now may be an appropriate time to review their position.
That involves looking beyond a current balance and considering where wealth accumulation may be heading over the next decade or more.
For SMSF trustees, this may include reviewing unrealised capital gains, identifying assets that have experienced significant growth and understanding how a cost-base election may affect future outcomes.
The timing also matters.
If an SMSF wishes to make the election, it must be made when the super fund completes the fund’s 2026-27 SMSF annual tax return. While the election is based on the market value of fund assets at 30 June 2026, it is generally made as part of the fund’s reporting obligations for the 2026-27 income year. Depending on the fund’s circumstances and lodgement arrangements, that may mean a deadline as early as 31 October 2027 or as late as 15 May 2028.
While that may seem some time away, meaningful planning often requires much earlier analysis, particularly where property, private business interests or other unlisted assets are involved.
Looking Beyond the Headlines
The headlines surrounding Division 296 have understandably focused on the $3 million threshold. However, that threshold should not be the sole focus of the conversation.
For many mining and resources professionals, the more relevant question is whether future growth, family circumstances or significant assets held within superannuation could result in Division 296 becoming relevant at some point down the track.
For SMSF members, the cost-base election introduces an additional layer of complexity that may warrant consideration well before the election deadline. Decisions made in relation to asset values at 30 June 2026 could ultimately influence how Division 296 applies in future years.
If you are uncertain how the changes may affect your superannuation strategy, SMSF or broader wealth planning objectives, it may be worth seeking professional advice. Understanding the implications today may help inform the decisions you make long before Division 296 ever applies.
If you would like to explore how these considerations apply to your own circumstances, contact James Marshall, Brett Cribb or the Resources Unearthed team on +61 (0) 7 3007 2000 or email contact@resourcesunearthed.com.au.
To learn more about James, visit this link.
Resources Unearthed is a solutions hub that connects senior executives, established professionals, and business owners in mining and resources with proven specialist advisers.
Stratus Financial Group and its advisers are Authorised Representatives of Fortnum Private Wealth ABN 54 139 889 535 AFSL 357306. This advice is general and does not take into account your objectives, financial situation, or needs. You should not act on it without first obtaining professional financial advice specific to your circumstances.
*Please note: For financial advice and services relating to this matter that are not offered under the Fortnum Private Wealth AFSL, in accordance with our collaborative advice model, when required, such matters are referred to appropriately qualified professionals.
