Highlights

  • Division 296 applies from the 2026–27 financial year, with a $3 million large super balance threshold and a $10 million very large balance threshold.
  • Accurate SMSF asset valuations remain important because total Superannuation balances help determine whether, and to what extent, Division 296 applies.
  • The new tax does not change existing SMSF audit obligations, but it increases the consequences of unsupported valuations and weak evidence.
  • Direct property, unlisted investments and other hard-to-value Assets Warrant particular attention from trustees and auditors.

The Division 296 tax on large superannuation balances has now commenced, and the Australian Taxation Office has highlighted the importance of accurate asset valuations and appropriate audit evidence for self-managed super funds.

The measure, formally part of the better targeted superannuation concessions reforms, applies from the 2026–27 financial year. The legislation establishes a $3 million large superannuation balance threshold and a $10 million very large superannuation balance threshold for 2026–27, with indexation applying in later years.

How Division 296 works

Division 296 imposes an additional 15% tax on taxable superannuation Earnings attributable under the statutory calculation once an individual's superannuation balance exceeds the large superannuation balance threshold.

For individuals with a very large superannuation balance, an additional 10% applies to the very large balance earnings component. In effect, Division 296 can impose an additional 25% on the relevant earnings component associated with balances above the $10 million threshold, subject to the detailed statutory calculation.

For 2026–27, the large balance threshold is $3 million and the very large balance threshold is $10 million. Both thresholds are subject to indexation from later financial years.

The Liability is imposed on the individual rather than directly on the SMSF.

Importantly, the final 2026 legislation should not be confused with earlier versions of the Division 296 proposal. The enacted regime was revised before commencement, including the introduction of the two-tier threshold structure and a start date of 1 July 2026.

The audit connection

Division 296 does not create a new set of SMSF audit obligations, but it raises the importance of getting existing reporting obligations right.

Trustees are already required to prepare their SMSF accounts using appropriate market values for fund assets, while auditors must obtain sufficient appropriate evidence to support the figures reported.

Those valuations can affect members' total superannuation balances, which in turn influence whether Division 296 applies and the proportion of earnings that may fall within the regime.

That makes valuation evidence more consequential, particularly for funds whose members are close to one of the new thresholds.

Who may be affected

Members with total superannuation balances approaching or exceeding $3 million are the most directly exposed.

Those above the $10 million very large balance threshold face the additional tax layer applying to the relevant very large balance earnings component.

However, the practical implications extend to trustees and auditors more broadly because unsupported or inaccurate asset values can affect the balance information used in administering the measure.

Assets that are difficult to value — including direct property, unlisted shares, private investments and collectables — therefore warrant particular care.

What to consider next

Trustees should obtain objective and documented evidence supporting market values each year, rather than waiting until a member approaches a Division 296 threshold.

Evidence might include independent valuations, recent comparable transactions, financial statements for unlisted investments and other information appropriate to the asset involved.

Where an auditor cannot obtain sufficient appropriate evidence, the issue can affect the audit opinion and may also trigger further reporting obligations.

Members potentially affected by Division 296 should also monitor ATO correspondence once reporting for the relevant financial year has been completed.

The key point is that valuation discipline now has an additional tax dimension. Getting values right, and being able to substantiate them, supports both the SMSF audit and the accuracy of members' superannuation balance information.

First assessments and what members will see

Because Division 296 applies from the 2026–27 income year, liabilities arise by reference to that year under the new rules. Transitional provisions specifically apply the Division 296 liability rules from 2026–27.

The ATO has previously indicated that the first assessments are expected to begin issuing from the 2027–28 financial year after the necessary superannuation reporting has been received and processed.

The tax is assessed to the individual, rather than the SMSF itself.

For SMSFs, the practical connection remains the accuracy of the fund information that contributes to each member's total superannuation balance and the relevant Division 296 calculations.

An overstated or poorly supported asset value could inflate a member's reported balance, while later valuation adjustments could create complications when reconciling information across reporting periods.

What trustees and auditors should do now

Trustees with members near the $3 million or $10 million thresholds should pay particular attention to year-end valuations and the quality of evidence supporting them.

Independent appraisals for property, recent comparable sales and supportable financial information for unlisted investments can strengthen the audit trail.

Auditors should similarly treat valuation evidence as a priority where asset values have a material effect on member balances.

The measure does not fundamentally rewrite SMSF auditing standards, but it increases the financial consequences of weak valuation practices.

For trustees, that means the safest approach remains consistent market-value reporting backed by evidence that can withstand audit scrutiny.