A senior SMSF stakeholder has suggested individuals should apply a three-stage process in preparation for the introduction of the Division 296 tax scheduled for 1 July 2027 and management of the impost after this date.
To this end, Smarter SMSF technical and education manager Tim Miller identified the period before 30 June 2026 as the first stage where members should be reviewing the value of fund assets and their actions such as contribution strategies.
Miller pointed out the second stage will comprise of what members decide to do during the transitional year spanning 1 July 2026 to 30 June 2027.
“This is where we have to look at our CGT (capital gains tax) election [as to whether to adjust the cost base of fund assets] and get them done. We appreciate the [Division 296 tax] assessment is at the end of the [income] year so [clients should consider] is that the time to sell down [assets or] is that the time to withdraw money from the fund,” he told attendees of a SuperGuardian webinar held today.
“That is effective the one year when [these strategies can be effective] because once we move past 1 July 2027 we’re locked in [to the] opening versus closing [total super balance regime to determine the applicability of the Division 296 tax], we’re locked in to the irrelevancy of withdrawal strategies and the irrelevancy of asset values with regard to the ability to do anything about [whether or not we are in scope for the impost].”
Following on from this recognition, the third stage he highlighted was for the time after 1 July 2027.
During this period he indicated SMSF members had to consider some of the specific details included in the measure, such as the inability for drawdowns to have immediate effect in avoiding being caught by the Division 296 tax one particular financial year, the significant implications of investment return spikes and the policy’s lack of accommodation for financial losses such as those arising from the Shield and First Guardian master fund collapses.
