6 hours ago
1
Grace Bacon
March 18, 2026 — 5:01am
From July 1 this year, the newly legislated Division 296 superannuation tax laws will come into effect, reshaping how countless Australians approach their retirement and succession planning.
The new rules will impact anyone with a total super balance exceeding $3 million and applies to every type of super fund – self-managed super funds (SMSF), retail, industry, pension or other.
Balances between $3 million and $10 million will now be subject to a 30 per cent tax on super fund earnings, and balances exceeding $10 million will face a 40 per cent tax rate.
While this is a significant change in how the super of millions of Australians will be taxed, for SMSF users in particular there is still some upside to be found.
Reset now, save later
Under the legislation, SMSF users are being offered a one-off opportunity to avoid unexpected tax bills in the future.
This ‘Capital Gains Tax reset’ is a chance to reset the cost of assets to market value before the legislation comes into effect, updating the value of all assets to be reflective of their worth at the time of the new laws being introduced. In essence, this works to create a clean break between ‘old growth’ and ‘new growth’ of assets.
Super was never designed as an inheritance vehicle, but low taxes made it attractive for long-term family wealth.
The catch? The reset is an all-or-nothing decision. If a fund chooses to reset, every asset in the fund must follow suit, even those that have fallen in value. Once the decision to reset is made, it cannot be reversed, and if the deadline (June 30, 2026) is missed, the opportunity is gone.
For SMSF users, this could be the single most important decision in preparing for the new tax rules, and one that will shape their tax outcomes for years.
In short, the reset doesn’t reduce tax today but it can prevent tomorrow’s tax bill from being much bigger than expected – especially when it comes to succession planning. With this in mind, here are a few considerations I’d encourage in the coming months before Division 296 comes into effect.
Rethinking your succession planning
Australia’s new tax on large superannuation balances will force families to reconsider how super is used in succession planning.
For decades, superannuation has been a cornerstone of succession planning. Low tax rates meant wealth could stay in super for life, grow steadily and then pass to a spouse or dependants.
With the introduction of Division 296, holding large balances in super until death is no longer the best option by default – families now need to consider when super should be drawn down, not just who will eventually receive it.
Another consideration under the new legislation is the distribution of wealth between spouses, as the tax weighs up the assets of an individual, rather than assessing a couple or family as one unit. This means one spouse with $5 million in super may face higher ongoing tax than two spouses with $2.5 million each.
Perhaps the biggest shift under the new legislation is the changed role of death within super planning. Previously, death simplified super planning, but under the new rules it can do the opposite.
If not prepared for appropriately, the automatic transfer of a super balance upon the death of one spouse could push the bereaved partner over the $3 million threshold, triggering lifelong higher taxes, forced payout of super funds, or the forced sale of illiquid assets to align with death benefits payout and/or tax requirements.
To avoid being caught out when a partner passes away, I would encourage anyone undertaking estate planning to prioritise balancing super between partners from the very beginning and avoid structures that unintentionally concentrate wealth in one name.
Super was never designed as an inheritance vehicle, but low taxes made it attractive for long-term family wealth. Division 296 reinforces the principle that super is primarily to provide a retirement income, not for accumulating wealth in a tax-effective environment.
As a result, more families are expected to move surplus wealth out of super earlier, consider living inheritances or gifts to children during their lifetime or use trusts, companies or other personal structures for intergenerational wealth transfer planning.
If not appropriately prepared for, your beneficiaries may inherit not just assets, but complex tax exposure. Clear documentation, trustee succession planning and forward-looking strategy are now non-negotiable.
Think of it like this – Division 296 doesn’t eliminate the benefits of super; it just changes how families should use it. Where succession planning once focused on who gets the money, Australians now need to ask where the money sits, how long it stays there and who owns the assets.
For many families, the biggest impact of the new super tax won’t be the headline rate – it will be how it reshapes long-term planning across generations.
The best asset you can pass to your loved ones is a seamless succession strategy that promises a painless and well-planned transfer of wealth.
Grace Bacon is the Partner of RSM Financial Services Australia (AFSL 238 282), advising clients on wealth management, retirement planning and succession planning.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their personal circumstances before making any financial decisions.
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