SMSF members who have assets that will push their fund balance past the $3 million threshold that will trigger the proposed Division 296 tax can defer the realisation of those assets to reduce or avoid the impact of the proposed impost, an SMSF lawyer has suggested.
Sladen Legal principal Phil Broderick said the revised approach to capital gains in the Division 296 legislation before parliament meant fund members could plan out when gains would be realised and the impact they would have on the member’s balance in regards to the tax.
“One of the good things about the new Division 296 is we only pay on realised gains, so if we don’t sell an asset, we’re not paying any tax,” Broderick said today at the SMSF Association National Conference 2026 in Adelaide.
“That might be just kicking the can down the road and, of course, you shouldn’t have tax being the tail that wags the dog, but if there’s no reason you don’t want to sell the asset, we can defer Division 296 until such time as we do decide to sell.”
He added this allowed a fund member to be strategic about when to sell an asset if they were in the process of reducing their balance and were planning on reducing it below $3 million.
“If in the year after we drop below $3 million we sell the asset, then we have got assessable income and that does flow to the member, but if they are below $3 million at the start of the year and below $3 million at the end of the year, there is no Division 296,” he said.
“If it’s possible, we can defer the sale until such time as we are below $3 million and won’t pay any Division 296 on those gains.”
He noted this would also work where an SMSF owned a regulation 13.22C company or an unrelated company.
“The good thing about companies, from a Division 296 point of view, is when does the super fund derive income from a company? [That happens] when it pays a dividend and you get to choose when you pay,” he said.
“So you can defer Division 296 until such time as you decide to pay that dividend and it might be deferred until you are below $3 million.
“You might do it on the basis that you would make a big gain, but can frank out those dividends over a number of years, which reduces Division 296, rather than getting it all in one go, which is in contrast to a unit trust.
“If we’ve got a unit trust and make a big capital gain that flows down all at once, we pay Division 296 in that year, whereas with these companies we will be able to defer over a number of years if we want to.”
