Draft Div 296 tax regulations

I’d say someone’s ears were burning in Treasury when Lyn and I were putting the finishing touches on our Division 296 Masterclass last weekend. We both commented what a shame it was that the regulations weren’t yet available and hoped our speculations as to how things would work would play out. 

Some did and some most certainly did not. 

Highlights from the regulations are as follows:  

Division of earnings between fund members in SMSFs

One of the most important features of the regulations for members of “small superannuation funds” (ie, SMSF & small APRA funds) is how the Division 296 fund earnings would be divided up between each member interest (ie, generally speaking, each member account).

While large APRA funds can decide how they do this, within some guidelines established in the regulations, SMSFs and SAFs must obtain an actuarial certificate that provides this calculation:

While the Actuaries Institute will obviously issue more specific guidance to its members on how these amounts are to be calculated, we can conclude already that: 

• The averages will reflect the timing of transactions but the fact that earnings themselves are often realised unevenly throughout the year will still result in some curious distortions at an individual level. 
• There are some extremely curious adjustments to ensure deceased members continue having earnings attributed to their balances (and subject to Division 296 tax) until the balance is dealt with. While it’s described as an integrity measure, it does seem to introduce a lot of complexity for not much revenue. 
• We can see some challenges for SMSFs with reserves and defined benefits – we will definitely return to this topic if nothing changes. 
• There are some sensible carve outs for funds that have (say) only one member or have multiple members but no-one is in scope for Division 296. These funds don’t need to get the requisite actuarial certificate. 

Defined benefits 

The regulations also set out how defined benefits should be valued (both in pension and accumulation phase). Like the previous version, they lean heavily on existing valuation methods and factors in the Family Law (Superannuation) Regulations 2025 but leave scope for large APRA funds (not SMSFs) to use fund specific approaches. 

For many people in receipt of defined benefits, the new approach will mean a substantial change to their total super balance vs amounts previously reported. 

One important transitional rule in these regulations is that the “new” calculation won’t apply until 30 June 2027 (so contribution limits and other thresholds will continue to be based on a total super balance using the “old” calculations for one last year in 2026/27). 

Fortunately, the regulations do have some special adjustments to make sure that a big increase in a member’s total super balance because of the change in methodology doesn’t fall into earnings for 2026/27. 

SMSFs providing defined benefit pensions have an incentive to think carefully about winding these up before 30 June 2026 for all the reasons set out here: Division 296 | Defined benefits | Heffron. And spoiler alert – the regulations do bring the mid year commutation risk we mentioned in that article as well as a couple of other challenges for good measure. 

There is more to say about these regulations but at this stage it’s important to remember they’re drafts – out for consultation until 7 April 2026. Like many others, Heffron will contribute to submissions and hopefully we will see some differences between what we have now and the final versions.  

If you want an in-depth session on all the details we have so far when it comes to Division 296, you can watch our two‑part masterclass (4 hours of CPD) here.   

But to stay up to date, make sure you subscribe to our Super Companion here. It is continuously updated as new details emerge and is the most comprehensive source of Division 296 information and insight available.