Now legislation has passed, what’s next?

The Division 296 bill may have passed through Parliament but there are still a lot of unknowns as to the operational elements.

Peter Burgess, CEO of the SMSF Association, said the sector remains concerned about the unintended consequences, complexity, and long-term effectiveness of the tax.

“Significant industry effort and costs will now be required to implement and explain a tax that may ultimately have only a limited and diminishing revenue base,” Burgess said.

“The legislation introduces what can only be described as an ‘ugly tax’, layering significant complexity across the superannuation system while raising questions about whether the long-term revenue generated will justify the substantial cost of implementation.”

Burgess continued that ultimately the cost of this tax will be borne by all superannuation fund members, not just those directly affected.

“Over time, the pool of wealthier super members affected by this tax will shrink as benefits are compulsorily paid out. Under the existing contribution rules those amounts cannot simply return to the superannuation system, meaning the number of individuals captured by this tax will naturally decline over time,” he added.

“In the meantime, the superannuation industry is expected to prepare for implementation even though the regulations that will determine how the regime will actually operate still have not been released.

“These compressed timelines will inevitably increase implementation costs and may leave many affected individuals with little time to understand the changes, increasing the risk of misinformation, non-compliance and unexpected tax outcomes”.

Meg Heffron, director of Heffron Consulting, said the sector is still looking forward to seeing the regulations, which will contain some important details.

“Fortunately, most SMSF members don’t need to take any urgent action – anyone wanting to withdraw money and not pay Div 296 tax has until 30 June 2027,” Heffron said.

“Urgent action for now would be looking at the SMSF’s investment portfolio and thinking about whether you’ll opt in for the CGT relief at 30 June 2026. While you don’t have to formalise the decision and ‘opt in’ until the due date of the 2027 return – two years away – anyone who does opt in will be locking in 30 June 2026 asset valuations.”

Heffron continued there are two things that SMSF trustees and their advisers should be considering now.

“[Firstly], someone who has tricky-to-value SMSF assets should think about this now and make sure they’re ready to get really solid, robust valuations at that time so they can defend them if ever asked to by the ATO,” she said.

“Additionally, someone who has assets in a loss position that they were half inclined to sell anyway, should take a good look at these and make a decision before 30 June. If they decide to sell, better to do this before 30 June rather than shortly after.

“That’s because the ‘opt in’ is an all or nothing decision. A fund that opts in and has assets in a loss position will be locking in a lower cost base on those assets – potentially resulting in more Div 296 tax down the track.”

David Busoli, principal of SMSF Alliance, said he is expecting some move on capital gains tax legislation as a reward for Greens’ support in passing the bill.

“Sign off by the Governor-General is a formality so Div 296 will commence on 1 July 2026. Unusually, the regulations surrounding the detail of its implementation have not yet been released,” he said.

“However, we know enough to be able to say that firstly, members with over $3 million, but less than $10 million will not find super as attractive as it once was for that part of their balance over the threshold, but it’ll still be a better alternative than just about every other tax structure.”

He continued that members with over $10 million will need to consider the difference in greater detail as they could be better served moving the excess over $10 million into another environment, though this is not automatically the case.

“Any withdrawals do not need to be made until the next financial year as, in the first year of operation, only the balance on 30 June 2027 is measured for Div 296 purposes,” he said.

“For those who will be affected, any legacy pension commutations should be considered in this financial year as they can produce a poor Div 296 tax outcome. This is an unintended consequence which may be dealt with by subsequent regulations, but we can’t rely on that.”

Nicholas Ali, head of technical services for Neo Super, said that now the bill has been waived through the Senate by the Greens, it is crucial the regulations are released, as much of the intricacies have yet to be provided and this is a very complex change to the way member superannuation benefits are treated.  

“With a start date of 1 July 2026, just over three months away, trustees and members need to do a number of things,” he said.

“They should ensure they understand what the actual tax impost will be and look at various scenarios, such as withdrawing funds from super to get under the relevant cap. They should also examine alternative strategies, such as re-contributions for a spouse with a lower super balance, or investing outside the superannuation system and finally consider implementing those strategies in the next financial year.”

Ali continued that analysis undertaken by industry luminaries shows superannuation, especially under the $10 million cap, is often still a lower tax entity compared with other structures.

“However, lump sum death benefits tax is often substantial, so one key deliberation becomes whether it is worthwhile withdrawing money from the super system and potentially paying more tax on the way through, but avoiding not just the Div 296 tax but more importantly the 15 per cent tax on lump sum death benefits,” he added.

“Often funds with large balances also have lumpy or illiquid assets, such as property or units in a unit trust, so another discussion is the cost to sell or transfer assets out in-specie, bearing in mind the myriad of state based taxes such as stamp duty and the fact such funds are often largely in accumulation mode, which could lead to large CGT imposts on assets held for a long period of time.

“Even if members decide to do nothing, administering this tax will be difficult, and accurate record keeping will be more important than ever before.”

Naz Randeria, director of Reliance Auditing Services, said she was disappointed at the passage of the legislation, and the concerns she has raised for more than two years about the longer-term impact to the broader superannuation system remain.

“The fundamental structure of Div 296 is punitive and acts as a disincentive for Australians to save and be self-sufficient in retirement, and despite the federal government continuing to argue that only a small group of people will be impacted, an increasing number of hard-working Australians will find themselves breaching the threshold in the future,” Randeria said.

 “I also remain concerned that the policy will fail to increase revenue to the level that has been forecast, and with the precedent now set, where will the government make changes next? Our superannuation system has long been the envy of other nations, yet this policy moves us in the wrong direction and sends the message that if you work too hard or save too much, you will be penalised.”

Peter Johnson, director of Advisers Digest, said the decision to make now is whether the extra tax is not such an impost that it is not worth withdrawing the excess over $3 million from super and simply accept the extra tax.  

“It is also probably worth noting that it is still way less tax than they would have paid on a similar super balance (even adjusting for inflation) before the very generous changes in 2007,” he said.

“This decision should only be made after a detailed consultation to determine the most tax effective structure to hold those funds. You will also need to take into consideration any death taxes that may be payable if the money stays in super.  This will be an intergenerational tax planning strategy.”

Johnson continued there are other structures such as companies where you can limit tax to 30 per cent and in some circumstances even 25 per cent.  

“If, however, you decide to withdraw funds now you then need to determine the best date to do that. Getting this date wrong by even a day can have serious taxation consequences because we need to ensure you obtain the greatest benefit from any superannuation pension accounts going forward that are income tax and capital gains tax exempt,” he warned. 

“It is vitally important that advisers communicate with clients and meet with them to model out the best long term strategy. And remember accountants are allowed to provide financial product recommendations provided they are only considering the tax consequences and they are accompanied by a written statement that complies with Corporations Sub-Regulation 7.1.29(4).”

Keeli Cambourne

March 12 2026

smsfadviser.com