SMSF Reforms – What Trustees Need to Know

There are important changes on the horizon for Self-Managed Superannuation Funds (SMSFs), including the new Division 296 super tax from 1 July 2026 and a broader package of reforms designed to strengthen consumer protections in the SMSF sector.

Division 296 – New Tax on Larger Super Balances

One of the most significant changes is the introduction of Division 296, which applies from 1 July 2026.

The new rules impose additional tax on certain superannuation earnings for individuals with a Total Superannuation Balance (TSB) above $3 million. A higher rate applies where balances exceed $10 million, with both thresholds to be indexed.

Importantly, Division 296 is a personal tax liability of the individual member, rather than a tax imposed on the SMSF itself.

For SMSF members who may be affected, 30 June 2026 valuations and records will be particularly important, including consideration of the available cost-base reset election.  The one-off voluntary election allows eligible SMSF members affected by Division 296 to reset the cost base of certain superannuation assets to their market value at 30 June 2026, so only future gains are captured under the new tax rules.

Further SMSF Reforms Announced

The Government has also announced a package of consumer-protection reforms following significant losses associated with the collapse of the Shield and First Guardian Master Funds and other investment failures.

The proposed SMSF measures include:

• Greater ATO powers over rollovers – allowing the ATO to prevent potentially risky rollovers into newly established SMSFs where fraud, financial abuse or misconduct is suspected.

• Mandatory trustee education – new SMSF trustees will be required to complete education before their SMSF can be registered.

• Identifiable SMSF bank accounts – SMSFs will be required to maintain uniquely identifiable bank accounts to help protect fund money from fraud and misuse.

• Stronger investment strategies – greater emphasis will be placed on meaningful, written investment strategies that properly reflect members' circumstances and the fund's investments.

• Greater adviser transparency – the ATO will collect additional information about advisers involved in establishing SMSFs and ongoing advice fee arrangements.

• Higher SMSF supervisory levy – the annual levy will increase from $259 to $295.

• Better investment return information – trustees will receive greater information to help compare SMSF returns with APRA-regulated super funds, with particular attention on lower-balance SMSFs.

  
  

SMSFs and the Compensation Scheme of Last Resort

The Government has also proposed that SMSFs contribute to the Compensation Scheme of Last Resort (CSLR) in future years where a special levy is required.

This follows concerns about significant compensation costs arising from financial advice and investment failures involving SMSFs.

What Does This Mean for SMSF Trustees?

Many of the consumer-protection reforms are aimed primarily at new SMSFs, so existing trustees may see limited immediate change.

However, Division 296 is already relevant from 1 July 2026, and the broader reforms signal increased regulatory attention on SMSF establishment, investment strategies, separation of fund assets, adviser arrangements and whether an SMSF remains appropriate for its members.

Many details of the consumer-protection measures are still subject to consultation and legislation.

Sullivan Dewing will continue to monitor these changes and keep our SMSF clients informed as further details and commencement dates become available.