Division 296 Tax March 14: Senate Pass Triggers SMSF Workarounds, LISTO Lift

Division 296 tax strategies matter now that the Senate passed the reforms on 14 March. From 1 July, tax on super earnings above $3 million rises to 30 percent, and 40 percent above $10 million. Fewer than 0.5 percent of balances are hit, yet planning shifts for many families. We explain what changed, why SMSF moves are building, and how the low-income super offset lift supports workers. Use these steps to reassess asset location, timing of gains, and cash flow.

What the new rules change from 1 July

Tax on earnings above $3 million in super rises to 30 percent, and to 40 percent above $10 million, starting 1 July. Treasury says fewer than 0.5 percent of balances are affected, but the dollar impact can be large for very high accounts. We see division 296 tax strategies becoming central for SMSF trustees and advisers as they weigh the trade off between security in super and flexibility outside.

The annual assessment hits earnings tied to the portion above the $3 million and $10 million levels. Timing of realised gains matters now. Investors may spread disposals across years to smooth tax. Plans must also cover cash flow, since bills can arrive after year end. Clear division 296 tax strategies should map when gains occur and how to fund any assessment from inside or outside super.

SMSF tactics high-balance members are using

Many trustees are rebalancing across members to reduce exposure above $3 million. Shifting future contributions to a lower-balance spouse can slow growth over the cap. Pacing non concessional and concessional flows also helps manage cash. For division 296 tax strategies, we see advisers model spouse splits, pension and accumulation mix, and the order of withdrawals to keep earnings subject to lower rates where possible.

Some high-balance SMSFs are earmarking growth assets for family trusts or companies. This can improve control over the timing of gains and the use of franking credits. It also diversifies rule risk. AFR reporting shows wealthy members are already testing such moves as division 296 tax strategies. See the coverage here source.

Implications for portfolio design in 2026

With higher rates above $3 million and $10 million, asset location choices change. These superannuation changes 2026 reset where returns are best held. We place lower growth or income assets in super above the cap, and higher growth assets outside where personal rules may suit. Liquidity to pay any bill is key. Effective division 296 tax strategies weigh franking credits, deductions, and family tax positions across entities.

Property-heavy funds should check valuations, rent coverage, and loan terms ahead of 1 July. Illiquid assets can make cash flow tight when tax lands. Consider a sales pipeline and buffers. For division 296 tax strategies, we map expected gains by year and build a funding plan, including reserves, pension payments timing, and the use of distributions from related entities.

Support for low-income savers and LISTO changes

The government is lifting the low-income super offset settings from 1 July to boost outcomes for workers on modest wages. The aim is equity, alongside higher rates for very large balances. Treasury notes the reform targets a small share, yet it changes planning for many. See the explainer from SBS here source.

Low paid workers should check their fund has their tax file number, confirm employer contributions are on time, and consolidate small accounts to cut fees. If eligible for the low-income super offset, keep contributing at least at the Super Guarantee level. These actions compound gains from the lift and sit well beside household budgeting and emergency savings plans.

Final Thoughts

Division 296 is now live for planning. From 1 July, earnings above $3 million face 30 percent, and 40 percent above $10 million. While fewer than 0.5 percent of balances are hit, the ripple effects are broad for SMSFs and advisers. Our playbook is simple. First, set clear division 296 tax strategies that map gains, cash needs, and where assets sit. Second, model spouse splits, pension and accumulation mix, and the use of trusts or companies. Third, schedule disposals to smooth tax across years and keep enough liquidity to pay any bill on time. Finally, if you earn a low income, make sure you capture the low-income super offset lift. Keep records, run projections, and review with a licensed adviser before large moves so execution matches policy settings. Revisit insurances and estate documents as balances shift. Document trustee decisions and minutes for audit. Phase changes, measure results, and adjust after the first assessment notice.

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The content shared by Meyka AI PTY LTD is solely for research and informational purposes.  Meyka is not a financial advisory service, and the information provided should not be considered investment or trading advice.