Michael Hallinan, special counsel for SUPERCentral, said the impact on finance professionals can be broken into two periods – before 30 June 2027 and after 30 June 2027.
Hallinan said even before then, in the period before 30 June 2026, an SMSF adviser will need to determine in respect of each current CGT asset before 30 June 2026 whether it is beneficial to uplift the cost base of CGT assets.
“They then need to decide whether they will need to identify any CGT assets which should be cashed out before 30 June 2026, so that the CGT uplift election can be made,” he said.
“Advisers and accountants will need to consider whether an SMSF should take advantage of the CGT cost base uplift for Div 296 purposes for those assets held on 30 June 2026 – this decision must be made by due date for lodgement of the fund’s annual report for 2027 income year, which are 31 October 2027 for some self prepares, 28 February 2028 (for first year return for via tax agent); and existing funds via tax agent – generally 15 May 2028.”
Following 30 June 2026, advisers and accountants then need to identify which clients the Div 296 tax will negatively impact.
“For adversely affected clients who have or will satisfy an unrestricted release condition (or otherwise have unrestricted amounts in super) it is important to determine whether to cash out super in excess of $3 million or $10 million thresholds or retain excess super balances and bear Div 296 tax,” he said.
“If there is a cash out they have to decide where to invest noting that generally this money cannot be returned into the super system given the attained age of the taxpayer and or no or limited contribution cap space. They must also consider the tax implications of this.”
Additionally, professionals should be considering if a spouse or children of a member can use the cashed out amount to make non-concessional contributions for themselves, again keeping in mind age and cap space issues.
“While there will be reduced after tax earnings on large and very large balances, think about what would be the after-tax earnings of investments outside super and whether a member can cash out the excess balance and make early estate distributions,” Hallinan said.
After the first year of operation, from 30 June 2027, Hallinan said advisers and accountants should be looking at whether clients nearing retirement or attaining age 65 and who are likely in the near future, be adversely affected by Div 296.
“If so, then the same considerations as above will apply but there is a longer time frame in which to consider the relevant issues,” he said.
“For clients with low balances and recently commenced super and given the current dollar values of the concessional and non-concessional contributions caps, it is likely that they will not be affected by Div 296 tax assuming the indexation arrangements for the $3 million and $10 million thresholds are not subsequently changed unless CGT non-contributions are made.”
He continued that advisers and accountants also then need to identify LRBAs that are cashflow positive, and which will add to superannuation earnings, from those that are cashflow negative, which will not add to superannuation earnings.
“Consider whether cashflow negative LRBAs are more attractive in a post Div 296 world. Also identify clients who are in receipt of death benefit pensions, superannuation interests supporting death benefit pensions as Div 296 fund earnings will be allocated to the pension recipient,” Hallinan said.
