Fund trustees and members who are likely to pay Division 296 liabilities under the proposed new tax should examine what parts of their superannuation have high taxable components and use these to meet the new impost, according to an SMSF legal specialist.
DBA Lawyers special counsel Bryce Figot said while there were a number of options regarding where someone draws funds from to pay a Division 296 tax liability, this decision should be approached strategically when considering superannuation monies.
“You can choose which superannuation interest [you want] to pay from,” Figot said during an online briefing last week.
“However, consider Sally, she is 83, who receives a notice from the ATO of a $46,000 Division 296 tax liability.
“She has a pension interest in her SMSF of $1.8 million, an accumulation interest with a 100 per cent tax-free component in her SMSF of $2 million and an accumulation interest with a 100 per cent taxable component in an APRA (Australian Prudential Regulation Authority)-regulated fund with $3 million, and she’s got some money outside of the super system.
“From where must Sally pay the Division 296 tax liability? The answer to that is anywhere, that is, from any of those various sources of money she can direct to pay the $46,000, but strategically, where should she pay the tax liability from?
“The APRA fund because that fund is comprised of the taxable component and Sally is over 60, and at age 83 succession planning is probably a real issue and you want to minimise the taxable component.
“You certainly wouldn’t want to minimise the tax-free component and wouldn’t want to minimise a pension interest. You want to minimise the taxable component, effectively maximising everything else.
“This is not a pre-1 July 2026 strategy. This is very much a post-1 July 2026 strategy.”
