Sell up and put the money in super? Your balance on 30 June 2027 now sets a tax bill

Most coverage of Division 296 has been written for people who already have millions in super. That is not the readership that gets caught. The owner who gets caught is the one who sells a business, does the completely normal thing of putting the proceeds into super under the small business CGT cap, and discovers that the balance the sale just created is the balance a new tax measures. The year it first applies is the year you are in. And for this first year only, the date that decides it is 30 June 2027, which gives you about ten months to make the decisions that matter.

The short answer

Division 296 is a tax on part of the earnings behind large super balances. It applies from the 2026-27 income year, which began on 1 July 2026, so it is running now.

If your total super balance is above $3 million, a proportion of your fund's earnings for the year gets taxed an extra 15%, and the bill is assessed to you personally rather than to the fund.

For 2026-27 only, there is no start-of-year test. The transitional rule says this year is decided on your total super balance at the end of the year, which is 30 June 2027.

That is what makes this a business sale story rather than a wealth story. Sell in the next ten months, put the proceeds into super, and the balance the tax measures is the one the sale created.

Do the sum on your own numbers

Here is an illustration on round figures. It is not a benchmark, just arithmetic you can copy.

Your super sits at $2.9m in August 2026. In March 2027 you sell the business and contribute $1.1m of the proceeds under the lifetime CGT cap. At 30 June 2027 your total super balance is $4m.

Step one, find the proportion in scope. Take the amount above the threshold and divide it by your balance. $4,000,000 less $3,000,000 is $1,000,000, divided by $4,000,000, which is 25%.

Step two, take the earnings your fund reports for the year. Say $300,000. Twenty five per cent of that is $75,000. That figure is your taxable superannuation earnings.

Step three, apply the rate. The tax is 15% of $75,000, so $11,250.

Above $10 million there is a further 10% on the component attributable to that part of the balance, so a very large balance carries 15% plus another 10% on that slice.

Three things about that $11,250 that catch people out

• It is not a tax on the $1.1m you contributed. It is a tax on a proportion of what the fund earned.
• It sits on top of the 15% the fund already pays on its own earnings.
• It is assessed to you, not the fund. The notice comes to you and the money is due 84 days after the Commissioner issues it. You can ask for it to be released from super, or pay it from outside.

You also cannot deduct it. The Act inserts a new section 26-99A into the tax law saying in terms that Division 296 tax cannot be deducted.

One genuine piece of good news. The calculation starts from the earnings your fund reports for tax, not from movements in the market value of what it holds. The version that would have taxed paper gains is not the version that passed.

Why sellers walk into this without being warned

The standard exit plan for an owner-operator has been the same for years. Sell, use the small business CGT concessions, put what you can into super under the lifetime CGT cap, which is separate from and much larger than the normal contribution caps, then draw a pension. Ask your accountant for the current cap amount, because it is indexed each year.

That plan still works. What changed is that the final step now carries a price, and the price is set by a balance measured on a single day.

The awkward part is that both spikes can land in the same twelve months. If your fund also sells something, the premises being the obvious candidate, the realised gain lifts the fund's earnings for the year at the same time as your contribution lifts your balance. A high proportion multiplied by high earnings.

And the thresholds do not move this year. They are indexed only from 2027-28, in steps of $150,000 for the $3 million threshold and $500,000 for the $10 million one. For 2026-27, $3 million means $3 million.

If your fund owns the shop, there is a one-off choice with a deadline

This is the part with a real date on it.

Where a small superannuation fund, which is where a self-managed fund sits, held an asset at the end of 30 June 2026 and still holds it when it is eventually sold, the trustee can choose to treat that asset's cost base as its market value at the end of 30 June 2026. Amounts in the cost base from before that day are disregarded. The effect is that growth up to 30 June 2026 does not feed into the Division 296 sum when the asset is finally sold.

The conditions matter as much as the choice:

• it has to be in the approved form
• it applies to every CGT asset the fund held at the end of 30 June 2026, not the ones you would pick
• it cannot be revoked
• it has to be made by the day the fund's 2026-27 income tax return is due
• the trustee must keep records of the choice and of each element of every affected asset's cost base, and there is an administrative penalty for not keeping them

So it is a decision, not a form. If the premises your fund bought in 2011 have doubled, the reset shelters that growth. If something the fund holds is worth less than it cost, the reset locks in the lower base for this purpose. All assets, one choice, no undo.

The practical step is to get a defensible 30 June 2026 valuation while the evidence is still fresh, then decide with your accountant.

The borrowing rule that quietly works in your favour

If your fund borrowed to buy the premises through a limited recourse borrowing arrangement, you may know that the outstanding loan amount can be added into your total super balance under a specific rule.

For Division 296, that add-back is switched off. The Act says to disregard it. A fund carrying a loan on the shop is not pushed over the line by the borrowing itself.

What it changes about how you sell

For the first time, the income year you complete in is a number in the deal rather than just a date on the contract.

Two consequences worth raising before you sign anything.

If the buyer wants the premises as well as the business and your fund owns them, you can end up putting the business gain and the property gain into the same twelve months. Splitting them across two income years is a conversation to have in advance, not in July.

And deferred consideration now behaves differently. An earnout that lands in a later year lands against a different balance, and possibly a different proportion.

None of this changes what a buyer will pay you. It changes what you keep.

So keep it in proportion. On the illustration above the tax is $11,250. Half a turn on the multiple of a business making $250,000 a year is $125,000, which is more than ten years of the tax. The tax is worth an afternoon with your accountant. The multiple is worth the rest of the ten months.