“And if you don't want to have a Division 296 liability, then it may be that you don't act immediately, but you act pre-30 June of the first assessment year which would be 2026.”

Aaron Dunn, chief executive of Smarter SMSF, said that with the debate around the legislation heating up again, it has highlighted a number of things that clients need to be looking at to minimise the impact of the regulations.

“The natural one is that this legislation is linked to total superannuation balance, and we are intending on seeing a legislative change around the definition of total super balance,” Dunn said.

“But you need to understand how TSB is different and distinct from a member's account balance and that is important in the context of these new Div 296 measures, although it’s important to note that this isn't law, and until it becomes law, we don't want to be acting on anything.”

Miller added that one of the positive measures that has come from the Div 296 tax is the redefining of TSB.

“[This was because] typically the element around the retirement phase value was quite clunky with reference back to the modified transfer balance account and having a starting point of debits and credits being removed, and then, effectively, looking at your account balance anyhow,” he said.

“It was an overly complex way of asking what the value of your pension is on 30 June. Without oversimplifying it, the total super balance is going to be, if it assumes no change to legislation, as simple as if you were to sell down everything on that day and you were to exit the system, what value you have in superannuation.”

He continued that although that definition is “very simplistic”, what it will entail, and what will be seen on a tax return from a member balance point of view might not necessarily take into consideration elements such as exit costs for certain investments.

“There's a range of practices where people will use tax-deferred accounting and others won't, because there's no reporting requirement to do so. Therefore, subject to the way that you do your reporting, some will be more reflective of the tax on capital gains and other things,” he said.

“You can consider some of these issues when defining what total super balance is, because we know that it's important when contemplating multiple contribution strategies. It's also going to be important when we're contemplating whether 296 liabilities apply.”

Dunn said the other things that should be considered in preparation for Div 296 are the structure of existing pensions.

“This becomes a broader estate planning consideration, where, in the event of the primary member dying, and that money reverts to that surviving spouse there is a legislative nuance in there between reversionary and non-reversionary pensions,” he said.

“In many instances, where clients have those reversionary pensions in place, they may actually want to consider making that change to avail themselves of effectively deferring that Div 296 liability for an extra year.”

Miller added that it is a catch-22 situation with retirement planning, as transition to retirement planning should also be considered.

“When you link matters such as insurance into the question, if you're looking at the natural occurrence of things, more people are likely to still hold insurance inside their super fund at the stage of a TRIS,” he said.

“If you consider that, then having reversionary pensions in place where the insurance won't form part of the transfer balance cap position means that reversionary is quite positive. However, where the total super balance is concerned as soon as the death occurs, from a total super balance point of view, it's going to be reflective immediately, or at least at the next 30 June, whereas from a transfer balance cap, it's a 12-month deferral.”

He added it’s important that people understand those nuances between transfer balance cap reporting, which is a separate issue, and TSB.

“One favours reversionary pensions and one doesn't, but then when you contemplate insurance, it's the reverse,” he said.