If you work with SMSFs, you already know that 1 July 2026 is circled in red on the calendar. The Division 296 tax — the Federal Government’s measure to apply an additional 15% tax on super earnings for members with total super balances (TSB) above $3 million — is coming, whether we like it or not.
The question isn’t whether it will affect your clients. It’s whether you’ll be ready when it does.
This checklist is designed specifically for SMSF professionals, accountants, financial advisers, and administrators who need a clear, step-by-step action plan — not more theory. Let’s get into it.
What Exactly is the Div 296 Tax (And Why Should You Care)?
Before we get to the checklist, a quick recap for those still getting across the details.
The Div 296 tax imposes an extra 15% tax on the notional earnings attributable to the portion of a member’s TSB that exceeds $3 million. Critically, this applies to unrealised gains too — meaning a member could face a tax liability even if no assets were sold during the year.
For SMSFs holding illiquid assets like property, business real property, or unlisted shares, this creates a real compliance and cash-flow headache.
The Division 296 tax update still has some unresolved questions — particularly around how defined benefit interests will be treated — but the core framework is legislated. Here’s what you need to do right now.
The Division 296 SMSF Compliance Checklist
Step 1: Identify Affected Members Immediately
Not every SMSF member will be caught by the Div 296 tax — but you need to know which ones will be before 30 June 2026, not after.
Action items:
- Pull TSB figures for all members as at the most recent 30 June
- Model projected balances to 30 June 2026, accounting for contributions, earnings, and drawdowns
- Flag any member approaching or exceeding the $3 million threshold
- Don’t forget to include defined benefit interests in the TSB calculation
Expert tip: Don’t rely solely on last year’s numbers. Members with high-growth assets — particularly SMSFs holding property in capital-growth markets — may cross the threshold sooner than expected. Run projections quarterly if balances are close to the line.
Step 2: Audit Asset Liquidity and Fund Structure
The SMSF Division 296 tax is unique in that it taxes unrealised gains. That means a fund can have a tax liability with no cash to pay it — unless you’ve planned.
Action items:
- Review the fund’s asset composition: what proportion is illiquid (property, unlisted investments)?
- Calculate whether the fund has sufficient liquid assets to meet a potential Div 296 tax liability
- Consider whether asset restructuring or a partial liquidation strategy is appropriate
- Document the trustee’s decision-making process — this is important for audit purposes
If the fund has a significant property holding and a member’s TSB is above $3 million, this is your biggest risk area. The ATO has indicated that tax assessed under the Division 296 tax framework will be payable within a defined window, and illiquid funds can be caught short.
Step 3: Review and Update the Fund's Investment Strategy
The Division 296 regime is a good trigger to revisit whether the fund’s investment strategy remains appropriate — particularly for affected members.
Action items:
- Review the investment strategy document and ensure it accounts for the div 296 tax implications
- Consider whether the strategy addresses liquidity risk for members with high balances
- Update the strategy if needed — and document trustee resolutions formally
- Ensure the strategy is signed and dated before 30 June 2026
Step 4: Communicate With Members and Trustees — Now
Many trustees are still unaware of exactly how the SMSF Division 296 tax will affect them personally. This is your opportunity to demonstrate value and prevent nasty surprises.
Action items:
- Send a written communication to all potentially affected members outlining the Div 296 tax and what it means for their fund
- Explain the concept of notional earnings and unrealised gains in plain language
- Outline what options they have: drawing down super, restructuring assets, personal tax planning
- Document that communication was made and acknowledge responses from trustees
Expert tip: Frame this conversation carefully. The Division 296 tax update has generated a lot of media heat, and some trustees will come in with misconceptions. Having a fact sheet ready (not just a verbal explanation) reduces confusion and demonstrates professionalism.
Step 5: Check Contribution and Drawdown Strategy
For members near the $3 million threshold, the contributions strategy takes on new significance. Every dollar added to an already high balance could increase the Div 296 tax exposure.
Action items:
- Review concessional and non-concessional contribution plans for affected members
- Consider whether it makes sense to redirect future contributions to a different structure
- Review pension payment strategies — are minimum pension payments being made correctly?
- For members already in the retirement phase, consider whether increasing drawdowns could reduce TSB below the threshold
Step 6: Prepare for Amended Reporting Obligations
The ATO will use existing TSB data reported through the Transfer Balance Account Report (TBAR) and annual return to administer the Div 296 tax. But accuracy matters more than ever.
Action items:
- Confirm all TBAR events have been reported accurately and on time
- Review prior-year annual returns for any discrepancies in member balances
- Ensure the fund’s financial statements are prepared to a standard that supports accurate TSB reporting
- Engage your auditor early — don’t leave the annual audit to the last minute
Step 7: Engage Specialist Advice Where Required
Not every compliance issue is a DIY job. For complex fund structures — multiple members, mixed-phase funds, significant illiquid assets — specialist advice isn’t optional.
Action items:
- Identify funds in your portfolio that have complex structures or unusual asset classes
- Engage a specialist SMSF lawyer or tax counsel where needed
- Consider whether any restructuring (e.g., removal of a member, asset spin-out) might be appropriate
- Document all advice received and trustee decisions made in response
What Happens if You Miss the Mark?
The ATO has been clear that the Division 296 tax will be administered firmly. Errors in TSB reporting, missed liquidity planning, or failure to communicate with trustees won’t just be an inconvenience — they could result in penalties, reputational damage, and client loss.
This isn’t a regime you can backfill after the fact.
Download the Full Checklist
We’ve put together a downloadable, print-ready version of this checklist — formatted so you can work through it with each affected client file. Use it in your review meetings, include it in client communications, or keep it as a compliance reference.
