SMSF members who leave a fund will still be required to pay the Division 296 tax if the $3 million threshold is passed in the income year in which they have exited, a superannuation lawyer has pointed out.
Sladen Legal principal Phil Broderick stated the methodology to attribute earnings to members when charging the new tax will capture those who have left an SMSF, but could be avoided in some circumstances.
“For multi-member funds we have to attribute [income] between the members and the draft regulations have released a formula, which is effectively similar to your exempt current pension income calculation, and it is a time and average balance-based formula,” Broderick said during a presentation at the recent Institute of Financial Professionals Australia 2026 Annual Conference in Melbourne.
“An easy example is where mom and dad have got 50/50 of the benefits during the whole year so they will get 50 per cent each of the Division 296 earnings.
“It is going to be more complicated when members come in and out and where some are making contributions and some are making withdrawals.
“Let’s use a classic example. A husband and wife split and under family law, the wife rolls out of the fund in December and the husband sells a big asset in January, and that will be assessable income for that year.
“The wife, even though the sale happened after she rolled out, will still be attributed with it for the five months that she was in the fund. She won’t get it all, but is still getting Division 296 tax liabilities on things that happened after she left, and that could be a disadvantage.
“In a family law split you might get an indemnity or something like that from the other side to say they won’t realise assets in that year, but otherwise you are, unfortunately, just stuck with that.”
He added a marriage split did not require the sale of assets and it was possible to avoid generating a taxable situation.
“In that example where we have a marriage break-up and we don’t want to trigger Division 296 unnecessarily, we can instead of selling the assets, roll the assets out,” he said.
“The wife rolls out, takes some assets with her and because there is capital gains tax (CGT) rollover relief in that scenario, because it’s from a marital split, no CGT is triggered, and so no Division 296 is triggered, so that’s an advantage for people in those situations.”
