Recent indications from the ATO and Government regarding Division 296 reflect a meaningful recalibration from the original draft framework. Walsh Accountants welcomes certain key pivots, while noting that the revised measures continue to present intricate challenges and planning opportunities for high-balance superannuation clients.
Division 296 – Notable Improvements and Strategic Opportunities
No tax on unrealised gains
In simple terms, this means that the government has dropped its plans to tax unrealised (on paper) gains. This represents a major win and means that super funds holding assets like property or private investments won’t be forced to sell just to pay tax.
Indexation of thresholds
The $3 million and $10 million thresholds will now move with inflation. This prevents more people from being caught by the new tax simply because of rising asset values over time, keeping the system fairer for the future.
Dual-tier surcharge: 15 % > $3M; 25 % > $10M
While the additional tax is not ideal, it is more measured — acting as a scalable surcharge rather than a blunt instrument. Under the proposed structure, most individuals with total super balances above $3 million will face an additional 15% tax, on top of the standard 15% tax already paid by their super fund. The greater impact will fall on those with higher balances, as only individuals with more than $10 million in super will be subject to the higher 25% rate.
Individual Taxation
Under the proposed Division 296 rules, the surcharge liability will rest with the individual member, not their super fund. This will mirror the Div 293 and allows for strategy around the cashflow on who will pay this additional tax.
What We Don't Yet Know, and Why It Matters
Open Issue | Why It Matters |
Applicability of CGT discounts or concessions | Will conventional discounts (for assets held > 12 months) or other concessions still apply to the portion of gains subject to the surcharge? If not, the effective surcharge burden could be much more impactful than the nominal rate. |
Cost base reset / revaluation at commencement | When the regime begins (likely 1 July 2026), will existing assets be revalued so that only future gains are taxed? Without a reset, decades of pre-existing growth could be taxed under the new rules. This is an outcome that would undermine fairness. |
Loss carry-forwards / negative earnings rules | If a fund has a negative return in one year, will that loss carry forward to offset future surcharge liabilities or be lost entirely? Without symmetry, funds with fluctuating returns could be unfairly penalised. |
Apportionment / segmentation complexity | In mixed-asset portfolios, how will the taxable portion of earnings be apportioned between amounts beneath thresholds vs above? Transparent, robust apportionment rules will be essential. It is expected more clients may need actuarial certificates for the Div 296 tax. |
We see the latest version of Division 296 as far more practical and manageable than earlier drafts. The removal of unrealised gains, the introduction of indexation, and the use of a tiered surcharge all make the framework fairer and help reduce unintended impacts. That said, the final outcome will still depend on the detailed legislation.
Division 296: Key Insights and Considerations
We recommend clients avoid any rushed restructuring until the draft legislation is finalised but use this time to model different scenarios and plan. We’ll be focusing on strong valuation practices, thorough documentation, and compliance readiness, these will be key areas that will likely attract close auditor attention. For clients near the new thresholds, we can look at strategic timing of asset sales, pension conversions, asset allocation, and drawdowns where permitted.
How can Walsh Accountants help?
With ongoing uncertainty around key aspects of the Division 296 reforms, proactive planning is essential. Our SMSF Specialist, Jared Alford, can help you understand how these changes may impact your fund and develop tailored strategies to optimise your position. Contact Jared today for expert guidance on navigating Division 296 and managing your superannuation tax effectively.
As an SMSF specialist, I work with clients that are exploring the world of Self-Managed Super Funds by providing technical and administrative support along with strategy implementation.
Self-Managed Superannuation Funds aren’t just about managing wealth; they are about empowering individuals to take control of their financial future, navigate their own course, and secure their financial destiny with purposeful intent.
Areas of Expertise: Estate Planning and Administration. SMSF.
Qualifications: CPA Australia. Bachelor of Business (Accounting and Finance), Griffith Business School
