Division 296 Superannuation Tax Changes for Australians Living Overseas from 1 July 2026
- Mitchell Kelsey
- 2 hours ago
- 6 min read
Key points
Division 296 introduces additional tax rules for Australians with superannuation balances above $3 million, regardless of whether they currently live in Australia or overseas.
Becoming a non-resident does not necessarily remove your exposure to Division 296, making it important for Australian expats with substantial superannuation balances to understand how the new rules may apply.
Proactive planning can help expats manage the potential impact of Division 296, including reviewing contribution strategies, asset structures and broader retirement plans before balances approach the relevant thresholds.
Division 296 Superannuation Tax Changes for Australians Living Overseas from 1 July 2026
For many Australians living overseas, superannuation often becomes an "out of sight, out of mind" asset. While you're focused on building your career internationally, your Australian super continues to grow in the background. However, from 1 July 2026, significant new legislation known as Division 296 (Div 296) has introduced additional tax rules for individuals with very large superannuation balances.
Understanding these superannuation tax changes for Australians living overseas is important, even if you have permanently relocated overseas or no longer make regular contributions to your Australian super fund. While most Australian expats won't be directly affected today, those with substantial retirement savings or who intend to return to Australia in the future should understand how the new rules work.
What is Division 296?
Division 296 introduces an additional personal tax on certain earnings relating to superannuation balances above prescribed thresholds. The legislation applies from 1 July 2026, with the first assessments expected after the end of the 2026-27 financial year. The Australian Taxation Office (ATO) will calculate any liability and issue assessments directly to affected individuals.
Importantly, this is not a tax paid by your super fund. Instead, it is a personal tax liability that you may choose to pay personally or have released from your superannuation balance, subject to the applicable rules.
Who is affected?
The new rules only apply to individuals whose Total Superannuation Balance (TSB) exceeds $3 million.
Your Total Superannuation Balance includes the combined value of all your Australian superannuation interests, including:
Industry funds
Retail funds
Self-managed super funds (SMSFs)
Retirement phase pensions
Certain defined benefit interests
It is your combined balance, not the balance of an individual fund, that determines whether Division 296 may apply.
The Government estimates that only a relatively small percentage of Australians currently exceed this threshold, but many successful professionals and business owners living overseas may accumulate balances approaching these levels over time.
Why should Australian expats care?
Many people assume these superannuation tax changes for Australians living overseas only matter if they currently live in Australia.
That isn't the case.
Division 296 is based on your Australian superannuation balance, not where you currently reside.
If you are:
living overseas temporarily;
a long-term Australian expat;
a returning expatriate; or
maintaining Australian super while working internationally;
your superannuation may still be subject to the new rules if your balance exceeds the relevant thresholds.
Even if you no longer make contributions, investment earnings can continue increasing your balance over many years.
Does becoming a non-resident avoid Division 296?
No.
Australian tax residency and Division 296 operate under different rules.
If you hold Australian superannuation, the Division 296 provisions may still apply regardless of whether you are considered an Australian tax resident or a foreign resident for income tax purposes.
For Australian expats, this highlights the importance of reviewing superannuation as part of your broader international financial planning rather than viewing it in isolation.
How is Division 296 calculated?
One of the biggest changes introduced by Division 296 is that it applies only to realised superannuation earnings, rather than unrealised capital gains as originally proposed. This was one of the key changes made before the legislation was enacted.
The calculation occurs in three broad steps.
Step 1: Determine your Total Superannuation Balance (TSB)
The ATO first determines your Total Superannuation Balance (TSB) across all Australian superannuation interests at the relevant testing date.
For the 2026–27 financial year, the first year the rules apply, your balance is measured at 30 June 2027.
From 2027–28 onwards, the legislation generally uses the higher of your opening or closing TSB for the financial year as the reference balance, reducing the effectiveness of withdrawing benefits shortly before year-end simply to avoid the tax.
Step 2: Calculate your superannuation earnings
Your super fund reports your Division 296 earnings to the ATO. These earnings are broadly based on the fund's realised taxable investment income, including items such as:
interest
dividends
rental income
realised capital gains
The calculation excludes unrealised gains and is adjusted for certain contributions, pension income and other prescribed items under the legislation.
Step 3: Apply the relevant tax rate
Division 296 introduces two additional tax rates, depending on the proportion of your Total Superannuation Balance above each threshold.
Total Superannuation Balance | Additional Division 296 tax |
|---|---|
Up to $3 million | Nil |
$3 million to $10 million (LSBT) | Additional 15% |
Above $10 million (VLSBT) | Additional 25% |
Importantly, these rates do not apply to your entire super balance.
Instead, the additional tax only applies to the proportion of earnings attributable to the part of your balance above the relevant thresholds. Someone with a balance of $3.2 million is therefore only taxed on the earnings attributable to the $200,000 above the $3 million threshold, not on the entire account balance.
The new LSBT and VLSBT thresholds
The legislation introduces two indexed balance thresholds:
LSBT (Large Superannuation Balance Threshold): $3 million
VLSBT (Very Large Superannuation Balance Threshold): $10 million
Unlike the original proposal announced in 2023, both thresholds are indexed annually in line with CPI, helping to reduce the long-term impact of inflation and "bracket creep". For the 2026–27 financial year, the thresholds are set at $3 million and $10 million, with future increases occurring as indexation applies under the legislation
What does this mean for Australians living overseas?
The practical impact of these superannuation tax changes for Australians living overseas depends on your individual circumstances.
For many expats, there may be no immediate impact.
However, you should consider reviewing your position if you:
have a large SMSF;
hold significant assets inside super;
have multiple Australian super accounts;
have accumulated substantial retirement savings during a long professional career overseas; or
expect your balance to exceed $3 million in the future.
Many Australians working in locations such as Singapore, Hong Kong, the UAE, the United Kingdom or the United States continue to retain Australian super while building wealth internationally.
For these individuals, proactive planning is often preferable to reacting once assessments begin.
Planning opportunities for expats
The introduction of Division 296 reinforces the importance of reviewing your overall wealth structure rather than focusing solely on superannuation.
Potential planning considerations may include:
Reviewing overall asset location
Rather than automatically directing additional investments into Australian super, it may be appropriate to consider whether future investments are better held outside super depending on your long-term residency intentions and retirement objectives.
Considering contribution strategies
If you continue to contribute to Australian super, it may be worthwhile reassessing future contribution strategies in light of the new rules.
Coordinating international tax advice
Australian superannuation interacts differently with overseas tax systems. In some countries, earnings or distributions from Australian super may receive different tax treatment. Coordinating Australian financial advice with overseas tax advice remains essential.
Returning to Australia?
Many Australians eventually return home after years working overseas.
If you're planning to repatriate, these superannuation tax changes for Australians living overseas should form part of your broader return-to-Australia financial planning.
A review before returning can help identify opportunities relating to:
contribution strategies;
investment structures;
pension commencement;
estate planning; and
future tax outcomes.
Planning before your return is generally more flexible than attempting to restructure after becoming an Australian tax resident again.
Conclusion
Division 296 represents one of the most significant changes to Australia's superannuation taxation framework for high-balance members in recent years.
While many Australian expats will not immediately exceed the relevant balance thresholds, internationally mobile professionals often experience rapid wealth accumulation over long careers abroad. Understanding these superannuation tax changes for Australians living overseas today can help avoid unexpected tax consequences tomorrow.
Every expatriate's situation is unique. Residency status, overseas tax systems, employer retirement schemes, Australian superannuation balances and future retirement plans all interact differently.
Obtaining personalised financial advice that considers both your Australian superannuation and your international financial position can help ensure your retirement strategy remains aligned with your long-term goals, regardless of where in the world you currently live.
Runway Wealth Management is the trusted Financial Adviser to the Australian Expat community. Our tailored advice is backed by expertise, education and experience, which allows us to be at the forefront of Australian Expat Financial Planning.
If you would like to speak to one of our Expat Financial Advisers about this blog or if you have other queries, we would be more than happy to speak with you. Feel free to send us an enquiry through the 'Contact Us' tab provided in the link below:
General Advice Disclaimer: The information contained herein is of a general nature only and does not constitute personal advice. You should not act on any recommendation without considering your personal needs, circumstances, and objectives. We recommend you obtain professional financial advice specific to your circumstances.