An experienced sector stakeholder has warned SMSFs involving blended families create an added layer of complexity to one particular Division 296 tax mitigation strategy.
Specifically, Smarter SMSF technical and education manager Tim Miller identified the withdrawal and recontribution strategy to equalise member balances preventing them from being in scope for the Division 296 impost as being more intricate when dealing with a fund servicing a blended family.
The reason being, Miller noted, was that there could be a good reason why one member may have a substantially larger total super balance compared to their spouse’s pool of entitlements.
“[If you’re asking] why is his balance so high and here so low, and this is where it gets interesting and this is where I have the conversation around blended funds, [you have to consider whether] his [total super balance] is higher because [he deliberately] wants to look after [the needs of his children from a previous marriage],” he told delegates at the SMSF Association Technical Summit 2026 recently held in Sydney.
“[This has to be taken into account] versus the rebalancing of super.
“If [the spouse] is the parent of [the children in question] then a recontribution strategy is a no-brainer to get both members under the $3 million threshold. But [if one member] is thinking about other family members and what that ultimately means from a distribution point of view, [it calls for a different approach].”
According to Miller, this is an instant where the introduction of the Division 296 tax has brought a new perspective to estate planning strategies.
“Division 296 has brought estate planning to the front of the superannuation conversation piece. It now becomes more important to understand what the consequences of death are from a tax and beneficiary point of view,” he said.
“[That’s] because we’ve got this additional tax, but that in itself isn’t such a big issue, yes it may be, but it’s actually more the point of [determining] what happens when we die and how do we avoid a recognisable] threat from a tax point of view.”
Darin Tyson-Chan
Editor
Darin is the founder and publisher of Benchmark Media, an independent publishing house whose mastheads include financialobserver, selfmanagedsuper and smstrusteenews. He has been covering the financial services space for over a decade and in this time he has worked for a variety of trade publications. Darin has also written for the Money section published in The Sydney Morning Herald and The Age.
Articles by Darin