SMSF advisers and auditors should not rely on a limited reading of the Division 296 rules as they connect to a range of other laws and regulations that can shape the impact of the new tax on clients, a superannuation specialist has stated.
Westover Advisory principal Liz Westover said practitioners who are not familiar with the scope of the new impost may fail to see how other parts of tax law interact with it.
“My advice to you is to read it and what you will appreciate is that everything you need to know is not just contained in Division 296 of the Income Tax Assessment Act (ITAA) 1997,” Westover told delegates during a presentation at the ASF Audits Technical Summit 2026 in Adelaide last week.
“There are different sections, transitional acts and regulations, and you have got to be cognisant of these things.
“You need to really familiarise yourself with that legislation and all of the moving parts especially if you have a lot of clients that are going to be subject to Division 296.”
To illustrate this point Westover noted the new impost will require the calculation of an SMSF member’s total super balance (TSB) and the methodology to complete the task was found elsewhere in the ITAA but also interacted with specific Division 296 exclusions in in it.
“Your TSB is the total amount of benefits payable if you voluntarily ceased your interest,” she explained.
“We go into section 307 [of the ITAA] to look for the definition of a TSB, and that hasn’t changed.
“However, you then have to go back to the exclusion in Division 296 that states we are not going to include limited recourse borrowing arrangement amounts.
“So you don’t necessarily just go to the definition in section 307 for the TSB, you have to look at both of them in conjunction.”
“This is why it is critical you familiarise yourself with this legislation because if you were just looking in section 307 you wouldn’t find what you actually need for division 296 purposes.”
Westover added the attribution of earnings in an SMSF for trustees subject to the new tax also required looking past the rules in that section of the ITAA.
“The general rule is that attributing earnings to members must be on a fair and reasonable basis,” she indicated.
“Funds must also have a written policy that’s available not only to members but to the ATO as well, but there are specific requirements for an interest in a small fund, that’s the SMSF space, for defined benefit interests, and for modifications in relation to deceased members.
“So, we have to go off to the regulations to find out what that actually means.”
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