SMSF members and practitioners can provide the ATO with a lower super balance for the Division 296 tax purposes but accurate records and arm’s length arrangements will be critical to its acceptance, a technical specialist has pointed out.
Institute of Financial Professionals Australia (IFPA) head of technical services Natasha Panagis said the proposed tax does not exclude the use of a termination value for an SMSF and it would be a useful tool for those whose total super balances (TSB) are close to the $3 million threshold.
“The termination value is what a member would get from their super if they were to cash it out on any given day and it factors in any costs that might be incurred to be able to pay out a member benefit,” Panagis tlold delegates at The Super Playbook 2025 event, co-hosted by IFPA and The Auditors Institute, in Sydney last week.
“We’re talking about things like capital gains tax liabilities, realisation costs such as brokerage fees, property fees, and the wind up costs of an SMSF.
“Factoring all these expenses would mean if you’re selling off an asset, you can take that termination value and use it and report it to the ATO instead of the members closing balance through the SMSF annual return.
“If you wanted to use the termination values the ATO would use those amounts rather than the closing value for TSB purposes.
“It is an important planning lever for those clients that might be in Division 296 territory, and a legitimate planning tool if you can substantiate those expenses.”
On this last point Panagis pointed out it is possible to use a termination value for a property asset but supporting evidence would be critical if the new impost becomes law.
“You’ve got to document everything – your valuation, your methodology, and your costs that would be incurred.
“If you go to a real estate agent you want to look for a consistent arm’s length rate and make sure you’ve got that documented. Keep your evidence to show expenses are comparable in the market for whatever cost you’re looking at.
“You want to make sure you’ve got everything because the ATO will be scrutinising your market valuation and also your termination value and are going to ask how you got to the particular value.”
