A senior chartered accounting firm director has warned against making strategic decisions for an SMSF based on tax considerations alone as changing circumstances may lead to choosing a suboptimal outcome under this criterion.
RSM Australia partner superannuation and SMSF Kate Timms indicated this tenet is particularly relevant with the introduction of the Division 296 measure.
“Quite often tax issues are the first driver. Someone says ‘I don’t want to pay any tax’ and so we think about what’s the best tax situation. The reality is tax actually probably makes us make the wrong decisions, decisions that don’t suit us for 20 years down the track,” Timms told delegates at the Class Ignite 2026 conference in Sydney last week.
“It’s something that was a great decision now, not great later,” she added.
Timms noted there is no better example to highlight this point than the situation an adviser found themselves in recently with regard to implementing a client solution to Division 296.
“When the Division 296 tax came out last year we were at a SMSF Association roadshow and they were talking about [the measure] and people were asking ‘what are your colleagues doing’,” she shared.
“One adviser put up their hand and said ‘none of my clients have a Division 296 problems now’ and everyone asked ‘why?’.
“She said ‘because I pulled every [total super] balance out that is over $3 million and put [them] in a discretionary trust’,”.
Timms pointed out the announcement on budget night that discretionary trusts would now attract a minimum 30 per cent tax completely changed the effectiveness of this strategy and suggested it provides a cautionary situation.
“The reality is that was a tax-driven response which has created a bigger problem,” she explained.
“There are things that need to be considered such as asset protection [when formulating Division 296 responses],” she said.
“Sometimes what we need to think about, particularly for those people with [a total super balance] over $10 million, is actually less about the tax in super and more about whether or not [the SMSF] is the best vehicle for asset protection,” she concluded.
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