2026-27 Federal Budget and Division 296: What it Means for Your SMSF
The big news for SMSF members this year, so far, is Division 296 — the new additional tax on superannuation balances above $3 million. If your total super balance is heading toward or above that threshold, this is worth a conversation sooner rather than later. There are also some changes that impact SMSF’s in the Budget, handed down on 12 May 2026.
Division 296 operates to apply additional tax on the superannuation earnings of members of superannuation funds (of all types) with balances over $3 million. Division 296 only applies to earnings you actually realise and only applies to those earnings that relate to the member balance over $3 million. There's an important and time-sensitive planning opportunity: you can elect to reset the cost base of your SMSF's assets to their market value as at 30 June 2026, which effectively quarantines historical gains from the Div 296 calculation going forward. This election is irrevocable, so it needs careful thought — but for funds holding long-held property or shares with large embedded gains, it could make a real difference.
On the upside, SMSFs come out of this Budget in a relatively strong position. The negative gearing restrictions and the new CGT minimum tax both exempt complying super funds — meaning the tax advantages of holding assets inside your SMSF have actually increased compared to holding them personally.
If you believe your superannuation is impacted by Division 296 or the budget changes, please contact a member of the team. IN any case, we will be reaching out to impacted clients to make sure the planning process gets underway efficiently.
2026-27 Federal Budget - Key Changes for Self Managed Superannuation Funds
| Area | Change / Detail | Who Is Affected | Start Date | Action Required | Key Exemptions / Notes |
|---|---|---|---|---|---|
| Division 296 — Additional Tax on High Superannuation Balances (now law — Royal Assent 13 March 2026) | |||||
| Div 296 — Overview | Applies to individuals whose total superannuation balance (TSB) exceeds $3 million. It is levied on superannuation earnings attributable to the balance above $3 million. This is in addition to the existing 15% tax rate inside super. Note: an earlier proposal to tax unrealised capital gains was dropped before the legislation was passed. The enacted law applies to realised earnings only. | Individuals with a TSB above $3 million | 2026–27 income year (now law) | Review current and projected super balances. Model whether balances are likely to exceed $3m threshold. Consider contribution strategy and benefit payment timing. | Applies to ALL super fund types including SMSFs, industry funds and retail funds. Tax is assessed on the individual member, not the fund. |
| Div 296 — Tax Rates | Tax rates on superannuation earnings by balance tier: Under $3m: existing rates — no change (15% or tax free if in pension). $3m to $10m: additional 15%. Above $10m: additional 10% = effective 25% higher rate. Thresholds indexed to CPI each year. | Individuals with TSB exceeding $3 million | 2026–27 income year | Model the effective tax rate on earnings above each threshold. High-balance SMSF members should review investment mix and income-producing assets held in super. | Under 0.1% of super members are expected to be exposed to the $10m tier. CPI indexation prevents future bracket creep. |
| Div 296 — Cost Base Reset Election | Eligible SMSFs can elect to treat the market value of their CGT assets as at 30 June 2026 as the new cost base for Division 296 purposes. This quarantines historical gains that accrued before 1 July 2026 from the Div 296 calculation. The election is made at fund level and must cover ALL CGT assets held directly by the fund on 30 June 2026 — it cannot be applied selectively. Once made, the election cannot be revoked. | SMSFs holding assets with significant unrealised gains accrued before 1 July 2026 (e.g. long-held property or shares) | Values at 30 June 2026 | IMPORTANT PLANNING OPPORTUNITY: Obtain market valuations for all fund assets as at 30 June 2026. Assess whether to make the cost base reset election before the deadline (lodgement of 2026 tax return). Obtain advice before making the election — it is irrevocable. | Election is irrevocable once made. Must cover all CGT assets held directly by the fund — cannot be applied selectively. |
| Div 296 — Payment of Tax | The ATO calculates the Div 296 tax and issues an assessment to the individual (not the fund). The individual can either: (1) Pay from personal funds, OR (2) Elect to release the tax amount from their superannuation fund. | Individuals with a TSB above $3 million | 2026–27 income year | Consider the impact on TSB thresholds and future Div 296 exposure when choosing payment method. | Election to release from super must be made within the required timeframe after assessment is issued by the ATO. |
| Div 296 — TSB Calculation | The TSB for Div 296 purposes includes all superannuation interests: accumulation accounts, pension accounts (including account-based pensions), defined benefit interests, and reversionary interests. SMSF assets must be valued at market value for TSB purposes each year. | All SMSF members, particularly those in pension phase or approaching the $3m threshold | Ongoing from 2026–27 | Ensure SMSF assets are valued at market value annually — particularly property and unlisted investments. Obtain independent valuations where required. Review pension account balances. | Market value is required — not cost base or book value. |
| Other Budget Measures Affecting SMSFs | |||||
| Negative Gearing — SMSFs Exempt | SMSFs are EXEMPT from the new negative gearing restrictions on established residential properties. SMSFs can continue to negatively gear established residential properties acquired after Budget night against all fund income. | SMSFs holding or considering residential investment property | 1 July 2027 (SMSFs exempt) | No action required — SMSFs retain full negative gearing entitlements on all residential property. | Exemption applies specifically to complying SMSFs. The new restrictions apply to individuals, companies, partnerships and most other trusts. |
| Capital Gains Tax — SMSFs Unaffected | The CGT changes (replacing 50% discount with indexation + 30% minimum tax) apply to individuals, trusts and partnerships — but NOT to complying superannuation funds. SMSFs retain existing CGT treatment: Accumulation phase: 10% effective CGT rate on assets held over 12 months (33.33% discount). Pension phase: 0% CGT on assets supporting pension liabilities. The gap between CGT inside super vs personally has now significantly widened. | All SMSFs — this retained advantage is now more valuable than before | No change to SMSFs | Review asset location strategy. The tax advantage of holding appreciating assets inside super (vs personally) is now substantially larger given the new 30% minimum CGT outside super. Consider whether asset mix between personal and super is optimal. | CGT concessions inside super are unchanged. The relative benefit of holding assets inside super has increased significantly under the new personal CGT rules. |
| Payday Super | Employers must pay superannuation guarantee contributions at the same time as salary and wages — no longer quarterly. Updated penalties apply for late or missed payments from 1 July 2026. | SMSFs with members who are employees receiving employer SG contributions | 1 July 2026 | Ensure SMSF bank account details are current with all employers. Monitor incoming contributions monthly to confirm SG is being received correctly and promptly. | New penalties apply for late or missed payments from 1 July 2026. |
| LISTO Increase | The Low Income Superannuation Tax Offset (LISTO) eligibility threshold increases from $37,000 to $45,000, and the maximum LISTO amount increases from $500 to $810. | Low-income SMSF members earning under $45,000 | From 2027–28 income year | Ensure the SMSF's bank account details are correctly registered with the ATO so LISTO payments are received into the fund. | Maximum LISTO payment increases from $500 to $810 per year. |
Disclaimer: This summary is prepared for general information purposes only and does not constitute financial or tax advice. SMSF trustees have specific legal obligations — please consult your adviser before making any investment or structural decisions.
