SMSF members looking to take proactive steps to avoid the impact of the proposed Division 296 tax should bear in mind they are still subject to the rules relating to the withdrawal of benefits from superannuation, according to a specialist lawyer.
McCullough Robertson partner Hayley Mitchell said government plans to reintroduce a bill for the tax into parliament had led to some SMSF members planning to reduce their balance to lessen the impact of the impost, but consideration had to be given to when and how they could do that.
“Critically, if you are considering reducing your member balance, you have to have met a condition of release,” Mitchell said, adding a decision to reduce an SMSF balance would be an individual decision that should only be made after considering personal circumstances.
“Seek accounting and financial advice, and where possible some modelling around the outcomes depending on where your superannuation balance is sitting in the 2025/26 year and compare this with the tax outcomes if assets/funds are removed from the superannuation system and taxed elsewhere.
“If you do decide to reduce your superannuation balance, how will this be achieved and what are the other things you need to think about, [such as] other tax and duty consequences and your estate planning.”
She noted accurate valuations for assets and supporting evidence would be required for SMSFs that may be impacted by the new tax and the likelihood of a short timeframe from the time the bill is passed and the first assessment date of 30 June 2026 left members in a difficult position.
“I’m seeing a lot of clients that are concerned about the impact of Division 296 and the changing landscape of superannuation generally,” she said.
“It is important that people remember that the advice available at the moment has a degree of speculation. As the legislation has not yet been reintroduced, we are only able to advise based on the previous draft legislation and speculate that it may commence 1 July 2025.
“For now, it will be important for our clients to satisfy themselves that they have considered their own personal circumstances, the potential impact by Division 296 tax on their member balance versus the other considerations if they remove assets or funds from the superannuation system.”
