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financial advice, Financial Planning, Strategy, Tax

Some clients require Div 296 urgency

While the Division 296 tax is yet to be passed into law advisers may need to have some clients act now to manage the liability of the impost.

A legal specialist has reminded advisers of their obligation to discuss the implications of the proposed Division 296 tax and to form strategies to manage their liability under the new impost to mitigate any business risk, even though the measure is yet to be passed in to law.

“I think at a minimum you have to raise it with your clients. It’s not law but we do have the legislation, and it’s all client specific,” consultant lawyer Peter Bobbin told attendees at the Super Playbook 2025 co-hosted by the Institute of Financial Professionals Australia and the Auditors Institute last week in Sydney.

“I’ve got one chap with $75 million in his SMSF and I have to say my original thinking was, and I was saying to people, you don’t have to look at it until April 2026 but for him [that was not the case],” he said.

“[For him] I emphasised that he’s got to make the decision, but mechanically this is how it will work, and you can leave the whole $75 million in there.

“So in terms of providing advice I put it onto him, told him mechanically how it works, and said when you’ve got $75 million [in the SMSF] the majority of his balance is going to be taxed at the higher rate and the tax on unrealised capital gains would be an issue.”

As such Bobbin pointed out the haste with which SMSF trustees may need to act will most likely be linked to the size of their fund’s asset balance and the approach should be treated no differently to any other tax planning strategies.

“So if [you’re dealing with] a super, super large fund like the one I’m taking about which may have a [significant balance], he told me he had a $20 million latent capital gain inside that particular fund, there are even some pure tax planning strategies that you need to map out [now],” he suggested.

“To make it work the best [it could mean] taking the money out sooner and not making decisions in April,” he concluded.

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