The $3M Super Tax Bill Has Just Passed Parliament — What Does This Mean for SMSF Audits?
The Federal Government’s proposed tax changes for large superannuation balances, also known as the Division 296 tax bill, has officially passed through Parliament as of last night.
From 1 July 2026, individuals with total super balances above $3 million will pay an additional tax on the portion of their super balance above that threshold. While the reform is primarily a tax policy change, it has flow-on implications for self-managed super funds and the way they are administered, valued and audited.
With additional scrutiny from the ATO on these funds, here’s what SMSF trustees and advisers need to know.
A Quick Overview of the Changes
The Division 296 tax bill will come into effect from the 2026–27 financial year. Individuals with a total super balance above $3 million will pay up to 30% tax on earnings relating to the portion of their balance above the threshold. For balances above $10 million, the tax rate on earnings may increase by an additional 10%. The $3 million and $10 million thresholds will be indexed annually to inflation.
It’s important to note, the tax is calculated at the individual level, not at the fund level. This means a person’s total super balance across all super funds will be considered.
What Does This Mean for SMSF Audits?
Although the tax itself is administered by the ATO, the changes increase the importance of several areas that our team of SMSF auditors will be reviewing.
Accurate Market Valuations Will Be Even More Important
Because the new tax is based on earnings and total super balance, accurate asset valuations will become increasingly important.
For SMSFs holding assets such as:
direct property
unlisted investments
private company shares
collectibles or alternative assets
auditors will need to continue ensuring that market valuations are reasonable and appropriately supported.
Greater Focus on Year-End Reporting
The calculation of an individual’s total super balance relies on accurate financial reporting at year end.
This means our team will be paying increased attention to:
member balances
allocation of earnings
timing of contributions and pensions
year-end asset valuations
Clear documentation and comprehensive reporting processes will become even more important for SMSFs with higher balances.
Increased Complexity for Larger SMSFs
SMSFs with large balances, particularly those with multiple members or complex investment structures, may experience greater administrative complexity.
In these instances, it’s likely our audit team will require more valuation evidence, additional documentation relating to investment performance and earnings calculations, and accuracy around member balances.
To avoid non compliance and audit delays, all provided documentation and records must accurately reflect the fund’s financial position.
More Strategic Attention From Trustees
In response to these changes, we understand Trustees with balances approaching or exceeding the $3 million threshold may begin to review asset allocations and investment structures, or look into pension withdrawals.
Although these decisions sit outside the scope of an audit, we’re anticipating more frequent changes to fund structures or investment strategies, which will require careful documentation and compliance review.
What Trustees Should Do Now
While the rules will not apply until 1 July 2026, SMSF trustees should begin ensuring their fund records are in good order by:
maintaining accurate and supportable asset valuations
keeping clear documentation of investment decisions
ensuring member balances are recorded correctly
The Division 296 is primarily a tax change, but it reinforces something that has always been critical for SMSFs: accurate reporting and reliable valuations.
As SMSF auditors, our role is to help ensure trustees and advisers are prepared for the increased scrutiny that may come with these changes. By planning ahead and maintaining clear, well-supported documentation, we can work together to keep the audit process smooth and efficient.
For more information, or if you have any questions about how these changes might affect your clients, feel free to reach out to our team.