Practitioners should highlight the sunk costs of investing inside a fund that cannot be recouped when members consider ways to sidestep the impact of the Division 296 tax, Accurium head of SMSF education Mark Ellem has pointed out.
Ellem said SMSF members who have balances over the $3 million and $10 million thresholds that will apply under the new impost need to consider a range of variables that will come into play if they choose to withdraw funds to get below those levels.
“What is the cost of the withdrawal because there is going to be a cost?” he asked delegates at the SMSF Professionals Day 2026 hosted by selfmanagedsuper and Accurium in Sydney today.
“Two big costs are brokerage commissions, depending on the type of assets in the fund, and capital gains tax.
“Those are sunk costs. They are gone and you don’t get them back, and you need to consider what is the lost opportunity for investment earnings on those costs that have been incurred just because we want to withdraw money out and not be subject to Division 296 tax.
“We have also got costs to get into new investments in a new structure, whatever that is, which is a sunk cost that is also gone.”
“How long does it take to recover that? How long will it take until we are back to our original lump sum of money and then get out in front?”
He added investments outside of super will also incur tax, often at the member’s marginal tax rate, on top of the sunk costs and collectively this highlighted there were a number of variables to be considered with clients who did not want to pay the additional tax.
“You have got to take away the Division 296 interest and focus on these other aspects that could affect their capital and building and retaining that capital going forward,” he stated.
“There is selling costs, management costs, taxes, alternative strategies and alternative structures as well, as if it takes a long time to get in front, what is the likelihood of things changing over that time?
“This is an opportunity to sit down with clients and provide bespoke, tailored advice on their particular situation so they have all the information to be able to make a fully informed decision.”
Jason Spits
SENIOR JOURNALIST
Jason is a senior journalist with Benchmark Media and writes for the selfmanagedsuper website and magazine and smstrusteenews website. He has covered financial services since 1999 and has written about life insurance, superannuation, investment management and financial advice, in both a freelance and in-house capacity, and also did a brief stint as a media manager for an industry association. He has been the editor of trade titles Money Management and Financial Standard, and was most recently senior journalist with life insurance title Riskinfo.
Articles by Jason