Division 296 is an Australian tax law that imposes an additional 15% tax on superannuation earnings for individuals with a Total Super Balance (TSB) exceeding $3 million, effective from the 2025–26 income year.
Your SMSF audit Division 296 compliance is now one of the most pressing priorities for Australian trustees. With the introduction of Division 296 — the new tax on super balances above $3 million — and the upcoming Payday Super regime starting 1 July 2026, SMSF trustees face a sharper compliance lens than ever before.
At MintSuper, we specialise in providing top-tier SMSF auditing services for trustees, accountants, and financial advisors. In this article, we’ll walk you through what Division 296 means for your SMSF audit Division 296 obligations, the five critical areas your auditor will focus on, and the practical steps you should take before 30 June 2026 to stay compliant and minimise tax exposure.
Table of Contents
- What Is Division 296 and Why It Matters
- 5 Critical Areas Your SMSF Auditor Will Focus On
- Payday Super: What SMSF Trustees Need to Know
- Steps to Take Before 30 June 2026
- Frequently Asked Questions (FAQ)
Quick Summary
Division 296 introduces an additional 15% tax on earnings attributable to super balances above $3 million, effective from the 2025–26 income year, with the first TSB test at 30 June 2026. An additional 25% Division 296 tax (total effective rate of 40%) applies to earnings on balances above $10 million.
Division 296 tax is calculated based on the fund’s taxable income — adjusted by deducting assessable contributions and adding back net exempt current pension income (ECPI). The tax is assessed on the individual, not the fund — but can be paid from the member’s SMSF balance by election within 60 days of assessment.
SMSF trustees must ensure accurate market valuations, robust trustee documentation, and APES 110-compliant independent audits.
Payday Super starts 1 July 2026 — super must be received by the fund within 7 business days of payday.
Acting before 30 June 2026 can prevent contraventions and reduce tax exposure. A timely SMSF audit Division 296 review is your first line of defence.
What Is Division 296 and Why It Matters for Your SMSF Audit
Division 296 is the Australian Government’s new tax measure targeting individuals with a Total Super Balance (TSB) exceeding $3 million. The measure applies from the 2025–26 income year, with the first TSB test occurring at 30 June 2026. The tax applies in two tiers:
| TSB Threshold | Division 296 Tax Rate | Total Effective Tax Rate |
|---|---|---|
| Up to $3 million | 0% | 15% (standard fund tax) |
| $3 million – $10 million | +15% | Up to 30% |
| Above $10 million | +25% | Up to 40% |
Division 296 tax is calculated based on the fund’s taxable income for the year, adjusted as follows:
- Starting with the fund’s taxable income
- Less assessable contributions
- Add back net exempt current pension income (ECPI) excluded due to retirement phase pensions
- Plus any pooled superannuation trust components and non-arm’s length components (where applicable)
The tax is assessed on the individual member, not the SMSF itself. The ATO issues the assessment directly to the individual, who may elect to have it paid from their SMSF balance within 60 days of the assessment being issued.
For SMSF trustees, Division 296 isn’t only a tax issue — it’s an audit issue. The new tax calculations rely directly on:
- Accurate market valuations of all SMSF assets at 30 June.
- Correctly reported contributions and withdrawals.
- Proper documentation that trustees can defend under ATO scrutiny.
According to the ATO, SMSF trustees are responsible for ensuring their fund complies with superannuation laws. Engaging an independent, experienced auditor for your SMSF audit obligations has never been more important.
5 Critical Areas Your SMSF Auditor Will Focus On
1. Market Valuation of Complex Assets
The ATO has confirmed it is increasing scrutiny on market valuations in 2026, particularly for complex or illiquid assets. Under Division 296, obtaining accurate, independent, and defensible yearly market valuations at 30 June is strictly required to calculate earnings and manage tax exposure. Your auditor will require strong supporting evidence for the following:
| Asset Type | Auditor’s Focus |
|---|---|
| Direct property | Independent yearly valuation required with comparison sales |
| Unlisted shares / private companies | Recent financial statements, qualified valuer reports, |
| Cryptocurrency | Verifiable exchange data at 30 June, wallet ownership proof |
| Collectibles & artwork | Insurance, valuations, storage compliance, minutes |
If any single asset exceeds 10% of fund value or has materially changed in the past year, engage a qualified independent valuer before your audit begins.
2. Documentation of Trustee Decisions
Auditors will request minutes and resolutions for every significant fund decision, including investment strategy reviews, asset allocation changes, related-party transactions, and in-specie contributions or withdrawals. Keeping clear, dated records is essential for a smooth SMSF audit Division 296 process.
3. Contribution Caps & Reserves
With Division 296 incentivising trustees with high balances to consider withdrawing or restructuring, expect more activity around re-contribution strategies, pension commencement timings, and reserving strategies. Each of these creates additional audit evidence requirements.
For the 2025–26 financial year, the concessional contribution cap is $30,000 and the non-concessional cap is $120,000. Both caps increase from 1 July 2026. Speak to your accountant about contribution reserving strategies that may allow deductions across two financial years.
4. Independence & APES 110 Compliance
Your auditor must be fully independent of your accountant. The ATO has increased referrals to ASIC for breaches of APES 110 in 2025–26. Choosing an independent SMSF audit Division 296 specialist like MintSuper ensures full compliance and peace of mind.
5. Investment Strategy Review
Your investment strategy must be reviewed annually and reflect your fund’s current circumstances — particularly important if your TSB is approaching the $3 million threshold. Auditors will check for evidence of genuine review, not just a signed copy of last year’s document.
Payday Super: What SMSF Trustees Need to Know
From 1 July 2026, employer super contributions must be paid on payday rather than quarterly. According to the ATO, contributions must be received by the super fund within 7 business days of payday.
For SMSF members who are also employers paying super to themselves or staff, this means:
- Contributions due within 7 business days of each payday.
- New SuperStream compliance touchpoints and real-time payment requirements.
- More frequent audit trails — every payday contribution becomes auditable evidence.
- Late payments attract the new Super Guarantee Charge (SGC), which compounds daily and is assessed directly by the ATO.
Now is the time to update your payroll systems and confirm your SMSF is ready to receive contributions on the new schedule.
New to SMSFs? Learn more about how to setup your SMSF.
Steps to Take Before 30 June 2026
To prepare your SMSF for the new compliance landscape, we recommend the following actions:
- Obtain yearly market valuations for all major assets — especially property, unlisted shares, and crypto. Under Division 296, independent yearly valuations are required for all assets at 30 June.
- Review your Total Super Balance — are you near or above the $3 million threshold? Remember, the first TSB test is at 30 June 2026.
- Consider the CGT Cost Base Reset election — SMSFs can elect to reset the cost base of CGT assets held at 30 June 2026 to their market value at that date. Note this election applies to all CGT assets in the fund — you cannot cherry-pick individual assets. Speak to your accountant now.
- Discuss withdrawal or re-contribution strategies with your licensed financial adviser — particularly if your TSB is above $3 million.
- Update your trust deed if it predates 2020, ensuring it accommodates current rules.
- Book your SMSF audit Division 296 review early to avoid the EOFY backlog and address issues with time to spare.
A comprehensive SMSF audit Division 296 review before 30 June 2026 is the best way to avoid penalties and stay compliant.
Frequently Asked Questions (FAQ)
Q. Does Division 296 apply to my SMSF if my balance is under $3 million?
A: No — Division 296 only applies to individuals with a Total Super Balance above $3 million at 30 June. The first TSB test is at 30 June 2026. However, strong investment returns and contributions mean more trustees may be captured in future years. All SMSF trustees should still ensure accurate valuations and audit-ready records.
Q. When does Division 296 start?
A: Division 296 applies from the 2025–26 income year, with the first TSB test at 30 June 2026. As a transitional rule, for 2026–27 only, your TSB is measured at 30 June 2027. From 2027–28 onwards, the higher of your opening or closing TSB is used.
Q. How is Division 296 tax calculated?
A: Division 296 earnings are based on the fund’s taxable income, adjusted by deducting assessable contributions and adding back net ECPI. The tax rate is 15% on earnings attributable to balances between $3 million and $10 million, and 25% on earnings attributable to balances above $10 million (total effective rate of 40%).
Q. Do I need a property valuation every year for my SMSF?
A: Yes — particularly for funds subject to Division 296. All SMSF assets, including direct property, require an independent yearly valuation at 30 June. This is required to accurately calculate Division 296 earnings and ensure your fund’s financial statements are ATO-compliant. Engage a qualified independent valuer annually to ensure your property valuation is defensible under ATO scrutiny.
Q. Will my SMSF audit fees increase because of Division 296?
A: Possibly — particularly if your fund holds complex assets requiring deeper valuation review. MintSuper offers transparent, fixed-fee pricing tailored to fund complexity. Book a free 30-minute discovery call to find out where your SMSF audit obligations sit.
Q. Can my accountant audit my SMSF?
A: No. Under the APES 110 Code of Ethics, your SMSF auditor must be fully independent of the firm preparing your fund’s financial statements. Engaging an independent specialist like MintSuper ensures full compliance.
Q. What happens if my SMSF valuation is challenged by the ATO?
A: If your valuation cannot be substantiated with appropriate evidence, the ATO may reassess the fund’s reported balance, leading to additional Division 296 tax, contraventions, or penalties. This is why obtaining qualified independent yearly valuations and engaging an experienced auditor is essential.
Q. What happens to Division 296 tax if a member dies?
A: If a member dies on or before 30 June 2027, there is no Division 296 tax liability. If a member dies after 30 June 2027 and their TSB exceeded $3 million at the start of that income year, a Division 296 liability may still arise. Speak to your adviser about estate planning implications.
Ready to get started? Book your SMSF audit with MintSuper today — Book a Free Discovery Call
Disclaimer: This article is general information only and does not constitute financial or tax advice. Speak to a licensed adviser regarding your specific circumstances.
Sources: ATO.gov.au | SMSF Adviser | Treasury.gov.au | APES 110 Code of Ethics | ATO — Division 296 is now law
