Division 296 Tax and Your Estate Plan

From 1 July 2026, a new superannuation tax rule known as Division 296 Tax is expected to take effect.

While primarily a tax measure, it has already triggered discussions across Australia about estate planning, beneficiary nominations, and how superannuation passes to loved ones.

For many Australians — particularly those with large super balances — this change has prompted people to review how superannuation fits into their overall estate plan.

Importantly, there is one fact many people do not realise:

Your Will does not control your superannuation.

Understanding how these systems interact can help avoid confusion and potential tax complications for your family in the future. For more detail on how super is paid after death, see what happens to your superannuation when you die.

What is Division 296 Tax?

Division 296 is a proposed measure introduced by the Australian Government to apply an additional 15% tax on earnings linked to superannuation balances exceeding $3 million.

The policy is being developed by the Australian Treasury and is designed to limit the tax concessions available to very large superannuation balances.

Key points Australians should understand:

• The additional tax only applies to the portion of a super balance above $3 million
• The tax rate is 15% on earnings associated with that portion
• The proposed calculation may include both realised and unrealised investment gains, based on annual changes in super balance
• The liability is expected to be assessed personally to the individual

While only a small percentage of Australians currently hold super balances above $3 million, the change has sparked wider discussions about how superannuation should be structured and passed to beneficiaries.

While the tax will only affect individuals with very large super balances, it has drawn attention to a broader issue: how superannuation fits into estate planning. Because super does not automatically pass through a Will, the way superannuation death benefits are structured and nominated can significantly affect how assets are distributed after death.

Why This Matters for Estate Planning

Superannuation is one of the largest assets many Australians hold, with total system assets exceeding $3.7 trillion according to APRA. Yet many estate plans overlook how it is distributed after death.

Unlike assets such as property or bank accounts, superannuation does not automatically form part of your estate. Instead, it is paid according to:

• A binding death benefit nomination (BDBN)
• The rules of the super fund
• Or the discretion of the super trustee

This means a person’s Will may have no control over who receives their superannuation.

When super balances are large, the consequences of incorrect or outdated nominations can be significant. For example:

• Adult children may face tax on super death benefits
• Executors may have limited control over the distribution
• Family disputes can arise if nominations are unclear or outdated

Because of these risks, financial advisers often suggest reviewing super nominations and Wills together as part of broader estate planning.

Your Will Does Not Control Your Super

One of the most common misunderstandings in estate planning is believing that a Will determines where superannuation goes.

In most cases, this is not correct.

Superannuation sits inside a separate legal structure — a super fund trust. As a result:

• Your Will controls assets you personally own (property, bank accounts, investments)
• Super is controlled by the trustee of your super fund
• The trustee will usually follow a binding death benefit nomination, if one exists and is valid
• If there is no binding nomination, the trustee may decide which eligible dependants receive the benefit under the fund’s rules

Your Will still matters for everything else: who manages your estate (executor), who receives your non-super assets, and who you name as backup beneficiaries if your first choices cannot inherit. Keeping your Will up to date and your super nominations in sync helps your full estate plan work as intended.

What Is a Binding Death Benefit Nomination (BDBN)?

A binding death benefit nomination (BDBN) is a formal instruction given to your super fund telling the trustee who should receive your super when you die.

Typically, you can nominate:

• Your spouse or partner
• Your children
• Other financial dependants
• Your legal personal representative (your estate)

If you nominate your legal personal representative, the super benefit can be paid into your estate and distributed according to your Will.

However, nominations must:

• Be properly completed
• Be signed and witnessed
• Often be renewed every three years, depending on the fund

Many Australians complete a nomination once and never review it again, which can cause problems decades later.

When Should You Review Your Estate Plan?

Major financial or policy changes are often a good time to review your estate planning documents.

Situations that often prompt people to review their arrangements include:

• Your super balance has grown significantly
• You have multiple super accounts
• Your family circumstances have changed (marriage, divorce, birth of children)
• Your beneficiary nominations are several years old
• Your Will was created many years ago

Estate planning professionals often recommend reviewing your arrangements every few years so they still reflect your intentions. If you are not sure where to start, see our guide I need a Will — where do I start?.

Common Superannuation Estate Planning Mistakes

Some of the most common issues in estate planning include:

Outdated beneficiary nominations
People often forget to update nominations after marriage, divorce, or the birth of children.

Assuming super is covered by the Will
Many Australians assume super will automatically follow their Will — it usually does not.

Not considering tax consequences
Super paid to certain beneficiaries — particularly adult children — may be taxable.

No coordination between super and your Will
Super arrangements and Wills should ideally be reviewed together, not in isolation.

How Will Hero Can Help

A Will remains one of the most important documents in any estate plan.

Even though superannuation may be distributed separately, your Will still determines how the rest of your estate — such as property, investments, and personal assets — will be managed and distributed. It also names your executor and backup beneficiaries, so your wishes are clear even when circumstances change.

Will Hero helps Australians create clear, legally compliant Wills that can be updated as their circumstances change. Many people review their Will at the same time they review their superannuation beneficiary nominations so their overall estate plan remains consistent.

The Key Takeaway

Policy changes like Division 296 are prompting many Australians to take a closer look at their finances and long-term plans.

Whether or not the tax directly affects you, it highlights an important estate planning principle:

Superannuation and Wills work together — but they are not the same thing.

Taking time to review both can help ensure your assets are passed on according to your wishes and reduce complications for your family in the future.

If you want to review your estate planning documents, you can learn more about creating an online Will in Australia.