Contents Introduction What is Division 296? Pension Phase: The Core of a Smart Division 296 SMSF Strategy Still Working? Use a TTR Pension as a Transitional Strategy Real Case: High Net Worth Couple Protecting Their SMSF Risk Considerations for SMSFs Work with a Professional SMSF Strategist Final Thoughts FAQs Additional Resources How to Use Pension […]
Contents
- Introduction
- What is Division 296?
- Pension Phase: The Core of a Smart Division 296 SMSF Strategy
- Still Working? Use a TTR Pension as a Transitional Strategy
- Real Case: High Net Worth Couple Protecting Their SMSF
- Risk Considerations for SMSFs
- Work with a Professional SMSF Strategist
- Final Thoughts
- FAQs
- Additional Resources
How to Use Pension and TTR Strategies to Minimise Division 296 Tax in Your SMSF
With the Federal Government proposing new legislation under Division 296, SMSF members with large super balances are facing a new tax landscape. The proposal introduces a 15% tax on unrealised earnings for individuals with superannuation balances over $3 million, effective from 1 July 2025.
For SMSF trustees and members, MySMSF takes a look at a Division 296 SMSF strategy in this article. A proactive Division 296 SMSF strategy, such as transitioning up to $2 million into pension phase or using a Transition to Retirement (TTR) pension if still working can significantly reduce exposure to this tax and improve retirement outcomes.
⚖️ Legislative Disclaimer: The Division 296 tax is currently proposed and has not yet been enacted into law. All strategies discussed are based on current Treasury drafts and may change.
What is Division 296?
Division 296 is a new tax proposal that applies a 15% additional tax on the increase in a person’s Total Super Balance (TSB) above $3 million, including unrealised capital gains. The key date for the first calculation is 30 June 2026, using the balance at that time.
This change affects those with:
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High-value property, crypto, gold, or non-liquid SMSF assets
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Growth-focused long-term investment strategies
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Multiple super accounts or complex SMSF structures
Pension Phase: The Core of a Smart Division 296 SMSF Strategy
Once an SMSF member transitions into pension phase, all earnings and capital gains on assets supporting the pension become completely tax-free, up to their Transfer Balance Cap (TBC). From 1 July 2025, this cap increases to $2 million per member, creating a unique tax shelter opportunity.
| Account Type | Earnings Tax | Capital Gains Tax | Included in Division 296? |
|---|---|---|---|
| Accumulation | 15% | 10–15% (discounted) | Yes (if TSB > $3M) |
| Pension (≤ $2M) | 0% | 0% | No |
By placing high-growth assets (such as property or crypto) in the pension phase, members can legally exclude their growth from the Division 296 tax calculation.
Still Working? Use a TTR Pension as a Transitional Strategy
If you’re aged between 55 and 60 and haven’t retired, a Transition to Retirement (TTR) pension allows you to draw income from your super while continuing to work.
TTR pensions offer several benefits as part of a broader Division 296 SMSF strategy:
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Access up to 10% of your pension account each year
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Salary sacrifice to reduce personal tax
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Pension income is tax-free after age 60
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Prepares a portion of the fund to shift into full tax-free pension phase upon retirement
| Strategy Type | Work Status | Earnings Tax | Included in Div 296? |
|---|---|---|---|
| Accumulation | Yes | 15% | Yes |
| TTR Pension | Yes | 15% | Yes |
| Full Pension (post-retirement) | No | 0% | No |
Real Case: High Net Worth Couple Protecting Their SMSF
Consider a couple in their early 60s with an SMSF valued at $4.5M, including:
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A $2.2M property
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$800K in shares and crypto
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$1.5M in cash and other investments
Division 296 SMSF strategy applied:
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Each member starts a pension with $2M before 1 July 2025
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Property is allocated to the pension pool
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Remaining balance in accumulation is managed carefully
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At 30 June 2026, their taxable super balance is below $3M
Outcome: They avoid additional 15% tax on unrealised property growth and capital appreciation of crypto assets.
Risk Considerations for SMSFs
✅ Liquidity Risk – Assets in pension phase must support minimum pension withdrawals. Property and crypto can be difficult to liquidate quickly.
✅ Asset Valuations – SMSFs must obtain market valuations for 30 June 2026 and annually thereafter.
✅ Segregation – Ensuring clear accounting between accumulation and pension assets is essential.
✅ Timing – Delays in setting up pensions could push your balance over $3M, triggering unexpected tax liabilities.
Work with a Professional SMSF Strategist
Designing a Division 296 SMSF strategy requires careful planning, especially when:
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Your SMSF holds illiquid or volatile assets
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You’re approaching retirement
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You want to optimise estate planning and beneficiary outcomes
At My SMSF, we guide members through:
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Account-based and TTR pension commencements
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Rebalancing accumulation and pension allocations
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Staying compliant while maximising tax-free growth
Final Thoughts
The Division 296 proposal may reshape the tax treatment of high-balance super accounts but it also presents an opportunity for those who act early and strategically. Whether you’re still working or fully retired, structuring your SMSF to maximise the pension phase and stay under the $3M threshold could be the most effective way to preserve your wealth.
📞 Take Control Before 30 June 2026
Contact My SMSF to setup an SMSF or transfer an SMSF. We support this Division 296 SMSF strategy . We provide fixed-fee, online SMSF administration services with specialist experience in Property, Crypto and gold, based funds.
Additional Resouces:
- Div 296 Bill – Super Tax Bill
- MySMSF How to – Set up a Pension
FAQs
1. When does Division 296 apply?
From 1 July 2025, affecting balances over $3M, first calculated at 30 June 2026.
2. Should I move all assets into pension phase?
Not necessarily. You must keep enough liquidity to meet pension payments.
3. Does a TTR Pension remove assets from Division 296?
No. Only full pensions post-retirement are excluded from the Division 296 calculation.
General Advice Warning
This content is for general informational purposes only. It does not consider your specific objectives, financial situation, or needs. You should seek personalised advice from a licensed financial adviser before acting on this information.
