Div 296: Should You Withdraw Money From Super?

If you’ve spent years building a business and growing your super, Division 296 can feel like a penalty for doing exactly what you were encouraged to do. The natural reaction is to want to do something about it, and quickly.

My advice is to slow down. Division 296 tax doesn’t automatically mean you should withdraw money or restructure your super. If your balance is above $3 million, or heading that way, the first step is to understand three things: what the tax would cost you, what the alternatives would cost, and whether any change you make can be undone.

At North Advisory, we’re proactively working through our client base, because this is one of those pieces of legislation where there’s no blanket answer. The right response depends on each person’s tax position inside and outside super.

Division 296 became law in March 2026 and applies from 1 July 2026. It adds two layers of tax:

• an extra 15% on the share of super earnings that relates to a total super balance above $3 million
• a further 10% on the share above $10 million.

Both thresholds are indexed to inflation from 2027–28.

The final version is noticeably softer than the original proposal. It now applies to realised earnings, such as interest, dividends, rent and realised capital gains, instead of taxing paper gains on assets you haven’t sold. The thresholds also apply per person, so a couple’s balances aren’t combined.

The detail that catches people off guard is how the tax arrives. The ATO assesses your liability using information your fund reports, and you’ll simply get a letter in the mail telling you how much you owe, payable within 84 days. That’s not the moment you want to start reviewing your strategy.

The first year is assessed on your total super balance at 30 June 2027, so the end of this financial year is the date that matters. For more background on how the rules evolved, read our earlier Division 296 tax update.

Yes, particularly if you’re within reach of the threshold.

Take someone with $2.8 million in super. All it takes is one good year in the markets to push them over. They haven’t changed anything, but their tax position has.

That’s why I’d suggest anyone with around $2.5 million start paying attention now. One or two strong years could be enough to take you into $3 million territory. With the first assessment based on balances at 30 June 2027, this year’s returns are the first ones that count.

For business owners, super is usually one part of a bigger picture. That picture might include investments in your own name, property, the business itself and the eventual proceeds of a sale. A strong year in the markets should be good news. It shouldn’t be the moment you discover your retirement strategy needed another look.

The first question is simple: is your super balance above $3 million, or could it realistically get there in the next year or two? If the answer is yes, talk to us or your accountant before you change anything.

From there, a review should cover:

• your current balance, and how close the next 30 June test date could take you to the threshold
• your personal income, and how investments would be taxed if you held them in your own name
• your other structures, including any family trust or company investments
• your SMSF, if you have one, and whether the cost base choice makes sense
• when you’ll need access to the money, and how much flexibility you want to keep.

For someone with a large super balance, these are decisions worth modelling, not making on instinct. Sometimes a review uncovers a better structure. Sometimes it confirms that leaving your money where it is remains the right call. Either way, you’ll know before the letter arrives.

If you’ve worked hard to build your super, the last thing you want is to undo years of careful planning because of a tax change. Division 296 deserves attention, particularly if your balance is approaching $3 million. But the right decision needs to work for your whole financial future, not just your next tax assessment.

Division 296 may change how you approach your super, but any decision needs to make sense for your wider financial position and long-term goals.

At North Advisory, we’re reviewing clients’ superannuation strategies individually, looking at their tax position, investments and retirement plans before recommending any changes.

If you’re concerned about Division 296 or considering withdrawing money from super, get in touch with our team to discuss your options.

General information disclaimer: This article provides general information only and does not take into account your personal objectives, financial situation or needs. It is not personal financial, tax or legal advice. Please seek advice from a qualified adviser before acting.