Date: 12 November 2026
Super and SMSF reforms: what Division 296 and the latest changes could mean for you
By Carol Halton and Ryan Pinkerton, Roberts + Morrow – SMSF Specialist Advisors
In our last article, we looked at the proposed changes to discretionary trusts and why they may prompt families and business owners to think more broadly about where their wealth is held. But trusts are only one part of the picture.
There has also been plenty happening in the superannuation space, from Division 296 to changes affecting limited recourse borrowing arrangements. Understandably, there have been plenty of headlines too.
SMSF trustees are being asked to consider what the reforms mean for their retirement savings and investment strategies.
But one of the biggest misconceptions we’ve seen is that the changes suddenly make super an unattractive place to hold wealth. That’s not necessarily the case.
With superannuation funds excluded from the proposed minimum discretionary trust tax, the changes may also cause some people to take another look at super and SMSFs as part of their broader investment structure. But that doesn’t automatically make super the right home for every asset.
As we discussed with Sophie on Leave It to the Accountants Podcast, the better question is becoming:
Where is the best place to hold my wealth?
What exactly is Division 296?
Division 296 applies an additional tax to earnings associated with larger superannuation balances.
Generally, super funds pay 15% tax on earnings. Under the rules discussed in the podcast, members with more than $3 million in super would face an additional 15% tax on the proportion of earnings attributable to the balance above $3 million.
And that’s an important distinction.
It doesn’t mean that the moment your super balance passes $3 million, everything is suddenly taxed at 30%.
If you had $4 million in super, for example, the additional tax would relate proportionally to the earnings attributable to the $1 million sitting above the $3 million threshold.
Should I take everything above $3 million out of super?
This is another misconception we wanted to address.
Having more than $3 million in super does not automatically mean you should withdraw the excess.
You need to compare the outcome within super against the alternatives.
As we discussed, super continues to offer concessional tax treatment. Assets held for more than 12 months can receive a one-third capital gains tax discount within super, resulting in an effective 10% tax rate on eligible capital gains under the circumstances discussed in the podcast.
Moving an asset outside super simply to avoid Division 296 could therefore result in a worse overall tax outcome.
Once again, it comes back to your individual circumstances.
What about SMSFs with farms and commercial property?
Liquidity is an important consideration for SMSFs holding large, relatively illiquid assets such as farmland or commercial property.
In recent years, we’ve seen property values increase significantly without rental yields necessarily keeping pace.
That can create an issue as SMSF members move into retirement and are required to draw pension payments based on their balance.
For example, if a farm is generating a rental yield of 2% or 3%, but the fund needs to pay pensions equivalent to 4% or 6% of its balance, plus ongoing fund operating expenses, eventually there can be pressure on the SMSF’s available cash.
Division 296 adds another consideration, but liquidity planning shouldn’t start because of one new tax. It should form part of the SMSF’s strategy throughout the life of the investment.
Why are valuations becoming so important?
For SMSFs with property and other significant assets, getting valuations right is increasingly important.
The reforms discussed in our podcast included a mechanism where members can opt to reset the cost base of its assets to their 30 June 2026 market value for the purpose of calculating Div296 tax earnings. That makes having a supportable valuation particularly important for affected funds.
SMSF trustees are responsible for ensuring the values they’re using can be substantiated.
For property, that might mean engaging a valuer and arranging an inspection where appropriate.
As we joked on the podcast, it’s a pretty good time to be a valuer.
But joking aside, the message is important: don’t leave the valuation piece until the last minute.
Can an SMSF still borrow to buy property?
Yes, but there are some important restrictions to understand.
Limited recourse borrowing arrangements, or LRBAs, continue to exist, with existing arrangements discussed as being grandfathered, including refinancing an existing LRBA with the same or a new lender.
However, the reforms covered in the podcast mean new borrowing arrangements cannot be established for residential property. Property acquired using a new LRBA needs to meet the relevant requirements around business real property.
What matters is how the property is used.
Farmland and commercial premises may be relatively straightforward examples. Mixed-use properties can become more complicated, such as a residential-style property being used as a doctor’s surgery or professional office.
The property’s business use also needs to continue throughout the life of the loan.
Importantly, this doesn’t mean an SMSF can’t own residential property. An SMSF with sufficient cash may still purchase residential property. The restriction discussed relates to borrowing to fund that purchase.
Is super still worthwhile?
In our view, the reforms represent part of a broader shift in the conversation around super.
Rather than asking “How much can I get into super?”, we’re increasingly asking “Where is the best place to hold my wealth?”
Super exists to provide retirement benefits. It shouldn’t be treated purely as another wealth accumulation vehicle or chosen simply because it provides a lower tax rate.
At the same time, super remains a very tax-effective structure and SMSFs continue to be popular. As Ryan discussed in the podcast, 52,000 new SMSFs were established in FY26, with younger Australians increasingly represented among those establishing funds.
The important thing is to take a step back and consider the complete picture. A trust, company and SMSF can each have a different role within the same family’s overall structure. The question isn’t simply which structure has the lowest tax rate, but which is appropriate for the particular asset and what you’re trying to achieve.
What are you investing in? How long will you hold it? Do you need access to the money? What are your retirement goals? And where does that investment sit alongside the rest of your wealth?
There is no universal answer. But with several significant reforms occurring at once, now is a good time to review your strategy and make sure your structures continue to support what you’re trying to achieve.
General information only. This information does not constitute personal financial, taxation or legal advice.
By Carol Halton and Ryan Pinkerton, Roberts + Morrow – SMSF Specialist Advisors. Learn more about these proposed changes on the latest Roberts + Morrow podcast, Leave it to the Accountants.
