Figot gave an example of John, who has a total super balance of $2 million on 1 July 2025.

“You wouldn't think that Div 296 tax is going to affect him, but the SMSF invests in equity in a certain start-up, and it goes gangbusters.”

“You prepare really good interim accounts on 1 June 2026 and it appears his TSB on 30 June 2026 is going to be $4 million. What do you advise him?”

At the start of the year, John has made no withdrawals. The start-up could be very illiquid, and John may not have the cash from his fund to invest.

“Indeed, the start-up could collapse in the next year, and if John did invest, he is not going to get a refund. He'll get a carried forward loss on his investment, but that's not necessarily particularly valuable,” Figot said.

He said there are three grounds on which Div 296 tax is criticised, the obvious ones of unrealised capital gains and the lack of indexation.

“The third reason is that if something shoots up in value, it crystallises tax liability. However, when it drops, or if it drops down again, John is not going to get a refund. It could cause him a real tax problem,” he said.

Figot said there is a lot of complexity involved in what would be the best advice, and is something that advisers need to consider, taking into account many factors for each client.

“It could be that John’s fund has plenty of cash, and he's confident that this thing is going to list, it's going to become liquid, and it's going to go up in value even more.”

“So fine, leave that in the fund in that case. However, if it's still very risky, maybe what he wants to do is get it out of the fund before 30 June. If it's still a bit of an unknown commodity, maybe what John wants is to withdraw $1 million out of his fund and hold some of that start-up outside of super.”

However, Figot said this also depends on the client’s age.

“In this scenario, John is 61 and he's still working, so he might not have enough unrestricted, non-preserved benefits, and the start-up entity is still illiquid. He may not be able to move it too readily.”

“I'm not saying these are impossible issues to deal with, but remember the rule of thumb – volatile, really speculative assets, especially for people in the vicinity of $3 million, maybe SMSFs aren't the greatest vehicle for those ones.”