What is Div 296 tax?
Division 296 (Div 296) is an additional tax that may apply to individuals with superannuation balance that exceeds the large and very large super balance threshold.
The tax is designed to apply on the proportion of an individual’s superannuation earnings, when their total superannuation balance exceeds a legislated threshold.
The calculation of Div 296 tax is performed by the ATO using information reported by the superannuation funds.
How will Class support Div 296 tax changes?
Phase 1 – Cost base adjustment support
In the first phase, Class will support recording and managing Div 296 cost base adjustments. This includes:
- A new report to assist trustees in analysing whether their fund should apply cost base adjustments
- Ability to record the decision to adjust the cost base in Class
- Carrying forward a second Div 296 cost base for eligible parcels in funds that opt to adjust the cost base
- A new minute/resolution to support trustee documentation
Next
In subsequent phases, Class intends to support additional functionality, including:
- Ability for funds that transition after 30 June 2026 to record Div 296 cost base adjustments in Class
- Ability to manually record a gain or loss for Div 296 purposes for a custom holding account
- Estimating Div 296 liabilities using the Class AI Agent
- Recording the Div 296 cost base adjustment decision in the prescribed ATO form (when available)
- New reports to track the unrealised and realised position of parcels against the Div 296 cost base
- Report showing the calculation of Div 296 fund earnings
- Supporting additional requirements from actuarial providers to apportion Div 296 earnings between members
- Reporting Div 296 earnings for members in the SMSF Annual Return
- Supporting changes to the definition of total superannuation balance (TSB) with the introduction of TSB value
- Supporting a new condition of release and release authority type for Div 296
- Supporting future indexation of the large superannuation balance threshold (set at $3 million for FY27) and very large superannuation balance threshold (set at $10 million for FY27)
Can any fund opt in for cost base adjustment?
Yes. The cost base adjustment functionality is not limited to funds with individuals who have large super balance.
The decision to apply Div 296 cost base adjustment can be recorded in Class for future reference. Once applied:
- The adjusted cost base is recorded specifically for Div 296 purposes
- The standard CGT cost base of parcels remains unchanged
- Each asset parcel will have two cost bases recorded in Class:
- the standard CGT cost base
- the Div 296 adjusted cost base
How will I record Div 296 cost base adjustment in Class?
Recording a Div 296 cost base adjustment in Class will involve the following steps
Step 1 – Record the cost base adjustment decision for a fund
After recording the decision, you can generate a minute or resolution for the trustee(s) to formally document the decision.
You will be able to generate a report with the prescribed ATO form for cost base election for a fund once that ATO has made this available.
Step 2 – Process the cost base adjustment
The cost base adjustment can only be processed after all processing and reconciliation to 30 June 2026 has been finalised. This includes tax statements, corporate actions and parcel matching.
Separating the decision and processing steps allows funds to complete the adjustment at a later date.
Can I record cost base adjustment for Custom Holding Accounts?
Yes, however this must be done manually. Class doesn't use the market value and cost base of the Custom Holding account to estimate the gain/loss position as the Custom Holding may not be entirely a CGT asset.
When a custom holding account is partially or fully disposed, you can manual record the Div 296 net capital gain or loss.
Should we deconstruct a one line wraps into individual investments?
There are pros and cons.
If the wrap is data‑fed, and the fund is likely to need to report Div 296 earnings in the future, it may be beneficial to deconstruct the wrap so Class can track the Div 296 cost base and subsequent gains or losses at a parcel level.
If the wrap is not data‑fed and requires significant manual processing each year, it may be more efficient to retain it as a one‑line wrap and manually track the Div 296 capital gain or loss.
Can I lodge a wind up fund return early on Class for FY2027
If a member is likely to have a total superannuation balance around $3 million, it is recommended not to lodge a wind‑up SMSF annual return early for the year ended 30 June 2027. Not until the ATO release the new SMSF annual return stationary for FY2027 to report Div 296 earnings. Otherwise, the SMSF may have to lodge an amendment to report the missing information about Div 296 earnings.
If all members are unlikely to be subject to Div 296, lodging the annual return early should not cause Div 296‑related issues.