SMSF, Superannuation, Tax

Don’t mistake Div 296 action date

Division 296 tax SMSF total super balance $3 million MLC Julie Steed

SMSFs should not confuse when they need to act to sidestep the impact of the proposed Division 296 tax, with the critical date occurring not in 2025, but in 2026.

SMSF members looking to sidestep the imposition of the proposed Division 296 tax should be aware they will still have time to reduce their total super balance (TSB) under $3 million after the start date of the impost in mid-2025.

MLC senior technical services manager Julie Steed said SMSF trustees, members and advisers should not act hastily in regards to compliance timeframes as the key date to consider occurs in 2026.

“The first thing is don’t panic. I know people are already asking questions and the feedback I have had from clients is not just around the taxing of unrealised capital gains, but also around the whole concept of another major change,” Steed said during a recent adviser briefing.

“It’s really important to remember that you are not caught by the Division 296 tax if you have a TSB of less than $3 million at 30 June 2026, not 2025.

“I’ve seen a lot of commentary that SMSF clients have only got until 1 July 2025 [when the proposed law commences] to get their account balances down if they don’t want to pay Division 296 tax.

“That is not true because if they want to act so that they are not covered by Division 296, they don’t actually have to have a TSB of less than $3 million until 29 June 2026, and then we won’t see the first assessments until well into the 2026/27 financial year.

“This is something that clients have been talking about with you for a year and we just need to keep those conversations going, but we also need to wait until the legislation is passed.

“The recommendation from the Senate Economics Legislation Committee was that the legislation be passed unaltered in its current form and even though they took an extra four weeks to report, they still came back with ‘tick, it’s good to go’, so that was disappointing.”

The Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023, which will introduce the Division 296 tax, is currently before the House of Representatives where it is awaiting a second reading, which would move it to the Senate for its approval.

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