An SMSF specialist has noted the revised Division 296 legislation, released in draft form on 19 December, has significantly changed the role an individual’s total super balance (TSB) will play in determining whether they will be caught by the new impost.
“There were new items in the revised bill that weren’t announced back on 13 October. One of those is it is no longer simply your total super balance at 30 June that determines whether you’re an ‘in scope’ person. It’s now going to be the higher of your TSB at the start of the income year or at the end of the income year,” Accurium head of SMSF education told smstrusteenews.
As such he acknowledged this new detail will make strategies previously being considered to manage or avoid a tax liability under the proposed measure obsolete.
“It means one of those strategies that has been talked about for the last couple of years, after the original bill came out, that if you were able to withdraw benefits out of super and took out enough to get your TSB below $3 million, the original single threshold, by 30 June then you wouldn’t have any Division 296 tax liability for that year is no longer effective,” he explained.
According to Ellem Treasury has included this “integrity design measure” with the specific purpose of preventing this type of action.
“So now if your TSB is above $3 million at the beginning of the year you will be a candidate for the Division 296 tax even if your TSB at the end of the year drops below that threshold,” he explained.
While any withdrawal strategies to reduce a member’s TSB to below $3 million after 1 July 2027 will no longer be an effective way to avoid the tax, he recognised superannuants could still take steps between now and 1 July 2026 to avoid being classified an ‘in scope person’ for the purposes of the impost.