The treatment of a superannuant’s death in the revised Division 296 tax legislation will have significant estate planning implications and may change arrangements with individuals who have taken on the role of executor to a will, a senior industry executive has said.
The Treasury Laws Amendment (Building a Stronger and Fairer Super System) Bill 2026, introduced into parliament last week and which will enshrine the new tax into law, stipulates any superannuation member who dies after 30 June 2027 and is categorised as an ‘in-scope’ person will have to pay any liability incurred under the measure in the income year of their passing.
“[This will be the case] even if their super has been fully distributed before the Div 296 assessment has been issued,” Institute of Financial Professionals Australia (IFPA) head of technical services Natasha Panagis told attendees of a recent IFPA webinar.
“[For example, if] a [superannuation] death benefit has been paid fairly quickly, let’s say within a six-month period, and then by the time the fund [is wound up] or [submits] its tax return, and the ATO realises there was an in-scope member for Div 296, the estate will technically be up for Div 296.
“And that could be at a time where the death benefits [from the estate] have already been paid to beneficiaries and there are no further funds for the executor or the LPR (legal person representative) to pay any Div 296 tax. So what happens there?”
Panagis acknowledged a scenario like this could potentially lead to a change in estate planning practices in the future to provide financial protection for executors.
“The liability is going to rest with executors because [they] will be forced to come up with [the money for] that tax liability and in most cases executors have limited visibility of the deceased member’s super so they’re not going to know if the deceased person was up for Div 296,” she pointed out.
“So there might need to be a provision made within the estate to [account for any taxes needing to be paid], including Division 296.”
