Super vs Investment Companies: Structuring Wealth Above $3 Million

For Australians with substantial superannuation balances, the introduction of Division 296 tax from 1 July 2026 has changed the way high-balance investors need to think about building and structuring wealth.

If your superannuation balance is approaching or already above $3 million, the key question is no longer simply whether super remains tax effective.

The bigger question is:

Should future investment capital continue to be accumulated inside super, or could building wealth outside super provide a better long-term outcome?

Superannuation can still be one of the most tax-effective environments for long-term investment, even with balances above $3 million. However, as balances increase, other considerations become increasingly important, including:

• Access to capital
• Investment flexibility
• Retirement income planning
• Estate planning
• Tax consequences for beneficiaries

For some investors, an investment company may become part of their broader wealth strategy. For others, continuing to build wealth inside super may still provide the better outcome.

There is no single strategy that works for everyone. The right approach depends on individual circumstances, investment goals and long-term objectives.

Division 296 Super Tax: What Changed in 2026?

From 1 July 2026, Division 296 reduces some of the superannuation tax concessions available to individuals with large super balances.

For the 2026–27 financial year:

• The first threshold is $3 million
• A second threshold applies at $10 million
• Both thresholds will be indexed in future years

Broadly, the tax treatment works as follows:

Super Balance Portion	Additional Tax Treatment
Up to $3 million	Normal superannuation tax treatment continues
Between $3 million and $10 million	Additional 15% Division 296 tax may apply
Above $10 million	Additional 10% Division 296 tax may apply

This means:

• Your entire super balance is not automatically taxed at 30% once it exceeds $3 million.
• Your entire super balance is not automatically taxed at 40% once it exceeds $10 million.

The additional tax applies only to the relevant proportion of earnings attributable to balances above the applicable thresholds.

How Division 296 Calculates Tax

An important change in the final Division 296 rules is that they are based on realised earnings, rather than simply taxing annual increases in investment values.

This means an increase in the value of an investment that has not been realised is not automatically taxed simply because the market value has increased.

However, the calculation remains complex, particularly for:

• Self-managed super funds (SMSFs)
• High-balance members
• Investments with capital gains
• Pension interests

The final outcome can depend on factors such as:

• Type of income earned
• Realised capital gains
• Pension interests
• Proportion of balance above thresholds

Superannuation vs Holding Wealth Outside Super

Division 296 reduces some tax advantages for individuals with large super balances, but this does not mean super is no longer an effective investment structure.

Super can still provide significant tax benefits:

• Accumulation phase earnings are generally taxed at 15%
• Eligible retirement-phase pension earnings may be tax-free

The more important question is:

Where will your next investment dollar produce the best long-term after-tax result?

For some investors:

• Continuing to build wealth inside super may still be beneficial.

For others:

• Building additional investments outside super may provide greater flexibility and strategic advantages.

Key Differences Between Super and Investments Outside Super

Consideration	Superannuation	Outside Super
Tax environment	Generally concessional tax treatment	Depends on structure used
Access to funds	Restricted until conditions of release are met	Generally more accessible
Investment flexibility	Subject to super rules	Greater flexibility
Estate planning	Specific super death benefit rules apply	Depends on ownership structure
Long-term strategy	Retirement-focused	Broader wealth accumulation

Tax is only one factor.

Money held outside super generally provides greater access and flexibility, while super is designed primarily for retirement purposes and has restrictions around accessing benefits.

Could an Investment Company Be an Alternative?

For some individuals with significant super balances, an investment company may form part of their overall wealth strategy.

An investment company commonly pays tax at 30%, particularly where income comes from passive investments such as:

• Interest
• Dividends
• Rental income
• Capital gains

One key advantage is that after-tax profits can generally remain inside the company and be reinvested.

This can be useful for investors who:

• Are still accumulating wealth
• Do not require all investment income personally each year
• Want greater control over investment capital

Advantages of an Investment Company

Greater Access to Capital

Unlike superannuation, company-held investments are outside the superannuation system.

This generally provides greater flexibility regarding access to funds.

However, extracting money from a company is not automatically tax-free.

The tax treatment depends on whether the payment is:

• Dividend
• Repayment of a genuine loan
• Return of capital
• Another type of payment

Limitations of Investment Companies

An investment company is not automatically a replacement for super.

Key disadvantages include:

• Companies generally do not receive the 50% CGT discount
• Additional accounting and administration costs apply

For some investors, the better approach may be:

• Maintain wealth inside super
• Gradually build additional investments outside super

The right structure depends on:

• Investment type
• Expected income and capital growth
• Future access requirements
• Wealth transfer objectives

Don’t Overlook Estate Planning and Death Benefits Tax

When deciding how much wealth to keep inside super, estate planning should be a key consideration.

Super does not automatically form part of your estate.

Who receives your super depends on:

• Beneficiary nominations
• Super fund rules
• Estate planning arrangements

Super Death Benefits Tax Considerations

A lump sum super death benefit paid to a tax dependant, such as a spouse, is generally tax-free.

However, the outcome can be different when super passes to adult children who are not financially dependent.

The taxable component may be subject to tax, with the taxed element potentially taxed at up to:

15% + Medicare levy

for payments made directly to non-dependants.

For individuals with large super balances, this can become a significant estate planning issue.

What Should High-Balance Super Members Do Next?

Reaching $3 million in super does not automatically mean you should stop contributing or withdraw funds.

Super can still remain a highly tax-effective structure even after Division 296.

However, as balances grow, it becomes increasingly important to review:

• Tax position
• Investment strategy
• Access requirements
• Retirement objectives
• Estate planning outcomes

The objective is not necessarily to move money out of super.

The objective is to determine whether future investments are better held:

• Inside super
• Outside super
• Across multiple structures

Frequently Asked Questions

Is super still tax effective if my balance is above $3 million?

Yes.

Division 296 reduces some tax benefits for larger balances, but it does not mean all super earnings are taxed at 30%. Super can still remain a tax-effective long-term investment environment.

Does Division 296 tax my entire super balance at 30%?

No.

The additional tax only applies to the relevant proportion of earnings attributable to the amount above the $3 million threshold.

Will Division 296 tax unrealised increases in property or shares?

Generally, no.

The final rules are based on realised earnings, meaning you are not simply taxed because your investments have increased in value but have not been sold.

Should I withdraw money from super once my balance reaches $3 million?

Not necessarily.

The decision should consider:

• Tax benefits
• Retirement needs
• Access requirements
• Investment plans
• Estate planning

Is an investment company better than super once I have more than $3 million?

Not automatically.

Investment companies provide greater flexibility and reinvestment opportunities, but they also have additional costs and generally do not receive the 50% CGT discount.

The best structure depends on individual circumstances.

Final Thoughts

For Australians with superannuation balances approaching or exceeding $3 million, the conversation around wealth accumulation is becoming more strategic.

Division 296 does not mean super is no longer valuable. Instead, it highlights the importance of considering the complete wealth structure.

The right approach may involve:

• Continuing to use super effectively
• Building investments outside super
• Considering an investment company
• Reviewing estate planning outcomes

Before making significant contributions, withdrawals or structural changes, a detailed review of your personal circumstances is essential.

Need Help Reviewing Your Wealth Structure?

If your super balance is approaching or already above $3 million, Investax can help review your current position and compare the potential benefits of:

• Retaining wealth inside super
• Building investments outside super
• Using alternative investment structures

Contact Investax to discuss whether a strategic review is appropriate for your circumstances.

Sources

• Australian Taxation Office (ATO) – Superannuation and tax guidance
• Australian Taxation Office – Superannuation death benefits guidance
• Income Tax Assessment Act 1997 – Division 296 legislation
• Treasury Laws Amendment (Building a Stronger and Fairer Super System) Act 2026
• Australian Government Budget 2026–27 materials

Disclaimer

This article is based on the Australian Government’s September 2026 Exposure Draft legislation and explanatory materials released for consultation on 3 September 2026.

The Exposure Draft is not yet law and may change following consultation or the legislative process.

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