If your total superannuation balance is near or above $3 million, the decisions you make before 30 June 2027 could affect your first Division 296 assessment.
Division 296 became law in March 2026 and applies from 1 July 2026. For SMSF trustees, the focus has shifted from what might change to how the new rules affect balances, realised earnings, liquidity and longer-term wealth planning.
That makes the remaining months before 30 June 2027 an important planning window.
Division 296 applies additional tax to superannuation earnings attributable to the portion of an individual’s total superannuation balance above specified thresholds.
For the 2026-27 income year, the large superannuation balance threshold is $3 million. An additional 15% tax applies to taxable superannuation earnings attributable to the portion above this threshold.
A second threshold applies at $10 million. Earnings attributable to the portion above $10 million are subject to a further 10%, bringing the additional Division 296 tax on that portion to 25%. Both thresholds are indexed for future years.
The final legislation uses a realised-earnings framework rather than taxing unrealised gains. For SMSFs, Division 296 fund earnings are broadly derived from the fund’s taxable income, with legislated adjustments before relevant earnings are attributed to members.
The tax is assessed to the individual, not the fund. The ATO issues a notice of assessment after receiving the required information. The liability can be paid personally or, where permitted, the individual can elect to have money released from one or more super funds.
The super tax changes make several existing SMSF responsibilities more important.
Valuations can affect whether a member sits above a Division 296 threshold. SMSFs holding farmland, commercial property or unlisted investments need current, supportable market values. The valuation does not determine Division 296 earnings, but it can affect the member’s total superannuation balance and the proportion of earnings exposed to additional tax.
Member records also matter because Division 296 is assessed at the individual level. Funds need clear records supporting each member’s interest and the allocation of relevant earnings.
Asset concentration creates another practical issue. Many SMSFs, particularly those connected with farming families or regional businesses, hold one major property or another illiquid asset. A member may exceed a threshold even though much of the fund’s value cannot easily be converted to cash.
This is why Division 296 can affect more than tax. It can also influence investment structure, cash flow and broader wealth planning.
A transitional rule applies to the first assessment year.
For 2026-27, Division 296 is applied by reference to the individual’s total superannuation balance at 30 June 2027. The opening balance at 1 July 2026 is not used in the same way for this first year.
That makes the 30 June 2027 position particularly important for members near a threshold. From later years, both the balance before the start of the income year and the balance at year's end can be relevant.
There is no single Division 296 response that suits every SMSF. The right approach depends on the fund’s assets, member balances, liquidity needs and wider family or business structures.
SMSFs can make a one-off election to reset the cost base of CGT assets held at 30 June 2026 to market value for Division 296 purposes.
The election applies at fund level across the CGT assets held at 30 June 2026 rather than selected assets. It must be made in the approved form by the due date for lodging the fund’s 2026-27 income tax return and cannot be revoked.
For funds holding assets with substantial accrued gains, this can materially affect the Division 296 treatment of future realised gains. Importantly, the election does not reset the fund’s ordinary CGT cost base.
The ATO provides further guidance on Division 296 for SMSFs.
Further contributions can increase a member’s total superannuation balance. Where a member has met a condition of release, withdrawals can reduce it.
For members near the thresholds, these decisions should be considered alongside contribution caps, retirement income needs, transfer balance rules and the wider household position.
The aim should not simply be to reduce a balance before year-end. Any tax benefit needs to be weighed against the advantages of retaining wealth in super.
Superannuation remains concessionally taxed even when Division 296 applies. Moving money or future investments into a company, trust or personal ownership can produce different tax, asset protection and succession outcomes.
Asset location should therefore be considered as part of a broader wealth strategy, not as a direct response to one tax threshold.
SMSFs with concentrated or illiquid assets should consider how a future Division 296 liability would be funded.
If a member plans to release money from their super to pay the assessment, the fund needs enough cash or liquid assets available. Planning ahead may help avoid selling a long-term asset primarily to meet a tax liability.
For farming families and business owners, superannuation often sits alongside property, trusts and operating businesses in a broader succession plan.
Withdrawals, asset ownership decisions and future death benefits can all affect how wealth moves between generations. A strategy that improves the immediate Division 296 position should therefore be tested against estate planning and succession objectives.
Division 296 sits across tax, superannuation, investment structure, liquidity and succession. Looking at each issue separately can produce a technically correct answer that does not work for the wider family or business position.
Boyce brings those areas together. With more than 50 years serving regional Australian families and businesses, Boyce is the largest private professional services firm in regional Australia and has ranked in the AFR Top 100 Accounting Firms list every year since 2018.
Boyce tax specialists and Boyce Private Wealth advisors can work across the same client circumstances to model the Division 296 impact, review SMSF strategy and consider how each decision fits with business structures, investments and generational plans.
You can also explore the full range of our services across tax, business advisory and private wealth.
If your total superannuation balance is approaching or above a Division 296 threshold, now is the time to understand your position before 30 June 2027.
Book a conversation with our team to review your member balances, asset valuations, liquidity and available Division 296 tax strategies. The goal is not simply to manage the first assessment but to make decisions that continue to support your long-term wealth, business and family goals.
Disclaimer: This article contains general information only and does not take into account your personal objectives, financial situation or needs. Before acting, seek advice that considers your circumstances.
