Division 296 starts on 1 July 2026. Most SMSF trustees with balances above $3 million know it's coming but few understand the impact and how to plan for it.
This isn't a flat 15% tax on everything in your fund, it is a new tax based on the proportion of your balance above the large superannuation balance threshold $3m and it's not designed to push people out of superannuation. But it does change the way members need to plan, and there are five decisions that need to be made before the start date.
What most people don't realise though, is how much the order matters. If you get the sequence wrong and decisions that would have been straightforward become difficult, and some become impossible to fix in time.
Division 296 applies from 1 July 2026 to anyone whose total super balance (TSB) exceeds $3 million – it counts every superannuation interest you hold, not just your SMSF.
The CGT cost base election is available to SMSF trustees only, is irrevocable, and can only be applied to all assets in the fund, you can’t be selective. - for funds with long-held appreciating assets, the tax saving can be significant.
Withdrawal from superannuation to avoid Division 296 is rarely the right move – members could incur increased costs and taxes and the total super balance tests (TSB) & contribution caps mean most impacted/affected people can't return funds to super.
Clients should review their death benefit nominations because some nominations can result in the surviving spouse creating a Division 296 tax liability immediately following the death of their partner.
Division 296 tax is a personal income tax liability of the member, but payment can be released from your super fund. If your super fund holds illiquid assets, liquidity planning needs to happen to ensure your fund can release the payment.
The first priority is to understand your Total Superannuation Balance (TSB). It's tested on 30 June each year, using the higher of your opening or closing balance. If your TSB exceeds $3 million at that date, Division 296 applies to the earnings on the proportion above the threshold.
The part most SMSF members underestimate is what counts toward that balance.
Every superannuation interest you hold is included:
SMSF accounts
Industry and retail fund accounts
Defined benefit interests (likely valued using the family law split method, though regulations remain in draft)
Old endowment policies you may have forgotten about
As discussed in our recent webinar "Division 296 explained, in 60 minutes", even a $1,000 endowment policy from the nineties could tip you over the line if you don't know about it.
Log into myGov and link to your ATO account or ask your tax agent to pull the figure from the ATO's records. Do this now, before 30 June 2026.
Confirming where you stand is the foundation. Every other step in this article depends on knowing whether you're in scope.
Not sure where you sit? Book a Division 296 Impact Assessment.
This applies to SMSF trustees only. It's irrevocable and it applies to every CGT asset in the fund simultaneously. There's no picking and choosing which assets to include.
The CGT cost base election resets the cost base of every CGT asset in your super fund to its market value at 30 June 2026 - for Division 296 purposes only. This doesn't affect your fund's ordinary tax position. The practical effect is that future gains above the reset value are used to calculate your Division 296 liability, rather than gains from the original purchase price.
A commercial property was purchased for $850,000. By 30 June 2026 it's worth $1.9 million. Two years later it sells for $2.3 million.
Without the election: the Division 296 gain is calculated on the full $1.45 million appreciation from original cost
With the election: only the $400,000 gain above the reset value is counted
Estimated tax saving from making the election: approximately $65,000
The election locks in the 30 June 2026 market value as the new cost base. If an asset falls in value prior to that date and you adjust the cost base lower, you may incur a larger Div 296 tax liability than if you had not made the election if the asset’s value recovers.
Another important consideration is that Div 296 capital losses can't be used to offset other fund income and can't be carried forward. For super funds with volatile assets, the election requires careful modelling across the whole portfolio before committing.
Lodgement deadline: the election must be made by the time you lodge your 2026 fund annual return. Miss that window and the opportunity is gone permanently.
This needs modelling across your whole portfolio. Book a Division 296 Impact Assessment to run the numbers with a Findex SMSF specialist.
Once the scope question is answered and the cost base election is modelled, the next question many trustees ask is: should I move assets out of super altogether?
The short answer is: probably not. But the reasoning matters.
Withdrawal as an exit strategy only works during the transitional year (1 July 2026 to 30 June 2027), and only if you've already met a condition of release. For members who haven't yet retired or reached preservation age, this option simply isn't available.
Even where withdrawal is legally possible, the costs compound quickly:
Capital gains tax on assets that need to be sold to fund the withdrawal
Stamp duty and brokerage on property and share transactions
Loss of the concessional 15% earnings rate that super provides
TSB tests and contribution caps that prevent most people from putting money back in to the superannuation environment once it's out
As discussions in our recent Div 296 webinar showed, super is still one of the most tax effective structure available in Australia.
Superannuation also provides asset protection that other structures don't. SMSF interests are generally protected from creditors in bankruptcy - a consideration that's particularly relevant for business owners and professionals with personal liability exposure.
The real risk isn't Division 296 itself. It's making a reactive decision before modelling the alternatives properly.
Model the alternatives before you act. Book a Division 296 Impact Assessment with Findex Wealth Solution Partners.
This is the part that surprises most people - and it's the one with the longest lead time to fix.
Super doesn't follow your will. It is dealt with by the fund trustees and follows your (valid) death benefit nomination. If your estate plan hasn't been reviewed alongside Division 296, the outcomes for your beneficiaries could be very different from what you intended.
An auto-reversionary pension transfers the deceased member's pension account to the surviving spouse on the date of death. Under the transfer balance cap rules, this worked well. Under Division 296, the math changes.
If a couple each holds $2 million in a shared SMSF and one partner passes away, the survivor's TSB can jump to $4 million overnight. From that point, 25% of the fund's earnings sit in Division 296 territory. The surviving spouse faces a tax liability they were never warned about and could have avoided with current planning.
Division 296 is a personal tax. That means it can become an estate liability even when the superannuation itself has already passed to a different beneficiary. An adult child who receives the super benefit isn't responsible for the Division 296 assessment. The estate is. If the estate doesn't have sufficient liquidity to meet that liability, the consequences can be significant.
Estate planning decisions are now also tax decisions. Death benefit nominations need to be reviewed alongside your trust deed, your estate plan, and your Division 296 position simultaneously.
Book a Division 296 Impact Assessment to walk all four in one conversation.
Division 296 assessments are personal. The ATO issues them to the individual, not the super fund. When the assessment arrives, you have two options: pay it from personal funds or elect to release the amount from your superannuation.
For most members, releasing from super is the simpler path. But it's not always available.
If your SMSF is dominated by illiquid assets - commercial property, units in unlisted trusts, or shares in private companies, the fund may not have enough cash to release the tax without triggering a forced sale. That sale comes with its own CGT consequences, brokerage costs, and potential timing issues.
This is why liquidity planning needs to happen now:
Review your fund's current cash and liquid asset position
Model what a Division 296 assessment might look like based on projected earnings
Identify whether the fund can meet that liability without disrupting the investment strategy
Update your fund's investment strategy to reflect the new Division 296 liquidity dimension
Members with defined benefit interests face an additional layer of complexity. If you haven't met a condition of release, you may not be able to release the Division 296 tax from super at all. In that case, the full assessment must be paid personally, regardless of whether the fund has the cash to support it.
Liquidity modelling needs to happen now, not after the first assessment arrives. Book a Division 296 Impact Assessment with Findex.
These five priorities don't stand alone. They form a chain, and the sequence isn't arbitrary.
Scope feeds the election. If you're not in scope, the CGT cost base election is irrelevant. Confirm scope first.
The election feeds the portfolio decisions. The cost base reset changes the economics of holding versus selling assets. You can't make a sound restructuring decision without knowing whether you've made the election.
The restructure decision feeds estate planning. The asset mix inside your fund affects liquidity on death, the reversionary pension question, and the size of any Division 296 liability the estate might face.
Estate planning feeds funding. How your death benefit nominations are structured determines who carries the Division 296 liability, and whether the fund has the liquidity to release it.
Get the order wrong and downstream decisions either cost more or become impossible to fix before 30 June 2026.
This is also why Division 296 advice can't sit in one discipline. Wealth, SMSF and tax all need to be in the same conversation. Advice that addresses only one of these five decisions without the others is incomplete by design.
Division 296 is an additional 15% tax on the proportion of superannuation earnings attributable to balances above $3 million, with an additional 10% tax attributable on the proportion of earnings above $10m. It is applied personally, not at fund level.
It applies from 1 July 2026, with the first valuation date at 30 June 2026.
No. It applies to all superannuation accounts. SMSFs have additional planning considerations, including the CGT cost base election.
In most cases, no. Withdrawal triggers tax and transaction costs and is constrained by contribution caps.
Yes, but only if the fund has sufficient liquidity. Otherwise, assets may need to be sold.
We’re offering a 60-minute Division 296 Impact Assessment, delivered alongside SMSF and tax specialists. For a fixed fee, you'll leave with a written summary of where you stand and what to do before 30 June 2026.
60 minutes
Delivered by Findex Wealth Solution Partners alongside SMSF and tax specialists
Written summary of where you stand and what to do before 30 June 2026
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24 April 2026
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