Division 296 is now law: why valuations matter more than ever
- 17 hours ago
- 4 min read
From 1 July 2026, Division 296 introduces a significant change to the way superannuation earnings are taxed for individuals with larger superannuation balances.
If your Total Super Balance (TSB) is above, or even approaching, $3 million, now is the time to understand how the new rules may affect you and begin planning accordingly.
What's changing?
Division 296 introduces an additional tax on earnings attributable to higher superannuation balances.
Total Super Balance between $3 million and $10 million
An additional 15% tax applies to earnings attributable to the portion of a member's balance above $3 million, resulting in an effective tax rate of up to 30% on those earnings.
Total Super Balance above $10 million
An additional 25% tax applies to earnings attributable to the portion of a member's balance above $10 million, resulting in an effective tax rate of up to 40% on those earnings.
The legislation provides for both thresholds to be indexed over time.
Why accurate valuations are critical (even if you're not affected today)
One of the most important aspects of Division 296 is that it is driven by your Total Super Balance, which relies heavily on the valuation of assets held within your superannuation fund.
For many self-managed superannuation funds (SMSFs), this may include property, unlisted investments, private company shares and other assets that do not have readily available market values.
Even if your balance is currently below $3 million, accurate valuations remain important because:
Your superannuation balance may grow into the Division 296 regime over time.
Future tax outcomes will depend on the values established today.
Historical valuations may become increasingly important in supporting future tax calculations and planning decisions.
Incorrect, unsupported or outdated valuations may lead to:
Paying more tax than necessary.
Difficulties supporting positions adopted in future years.
Increased scrutiny from regulators.
In short, accurate and supportable valuations are no longer just a compliance requirement, they have become an important part of long-term superannuation planning.
The one-off CGT reset opportunity
The introduction of Division 296 also creates a potentially valuable planning opportunity for affected members.
A one-off election will allow eligible funds to reset the cost base of assets to their market value as at 30 June 2026. The election itself is expected to be made through the fund's 2027 SMSF annual return.
The practical benefit is that unrealised gains accrued up to 30 June 2026 can effectively be excluded from future Division 296 calculations, meaning only future growth may be subject to the new rules.
However, there is an important consideration.
The election applies across all eligible assets within the fund. Trustees will not be able to selectively apply the reset to individual assets.
As a result, careful planning may be required before 30 June 2026. Potential strategies could include:
Reviewing assets with unrealised losses and considering whether disposal before 30 June 2026 is appropriate.
Retaining assets with significant unrealised gains that may benefit from the reset.
Assessing how future investment plans interact with the new tax regime.
The suitability of these strategies will depend on individual circumstances and should be considered as part of a broader superannuation and tax planning review.
Key dates to be aware of:
30 June 2026
This is expected to be the critical cut-off date for implementing any pre-election strategy.
Before this date, trustees should consider:
Finalising market valuations for all fund assets.
Reviewing unrealised gains and losses.
Assessing whether any asset sales should occur before the reset date.
Determining whether the CGT reset election may be beneficial.
30 June 2027
This is expected to be the first test date for Division 296.
Your Total Super Balance at this date will determine whether the new rules apply in the first year of operation.
What should you be doing now?
If you have an SMSF or a growing superannuation balance, now is an ideal time to review your position.
Key actions to consider include:
Reviewing your current Total Super Balance.
Obtaining accurate and supportable market valuations for all fund assets.
Assessing unrealised gains and losses across investments.
Evaluating whether the CGT reset election may provide a benefit.
Seeking advice on how Division 296 may affect your long-term retirement and tax planning strategies.
How we can help
Division 296 adds a new layer of complexity for SMSF trustees and individuals with substantial superannuation balances.
Our team can assist with tax planning, SMSF compliance and helping you make informed decisions before the key 30 June 2026 deadline.
General advice warning: The advice provided is general advice only. In preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.
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