Div 296 regs taxing beyond the grave

Mike Taylor

Managing Editor and Publisher

10 April 2026

The Federal Government has been warned that the proposed regulations underpinning its Division 296 tax regime risk extending tax liabilities beyond death.

The issue has been driven home by the SMSF Association in a meeting with Treasury officials this week with the organisation seeking urgent changes to the draft regulations which it claims risk creating unworkable outcomes for self-managed super fund members and their estates.

SMSF Association chief executive, Peter Burgess said the proposed regulatory setting represent a material expansion of the Division 296 regime which has not been subject to appropriate scrutiny.

His comments follow on from the SMSF Association’s submission to Treasury responding to the draft regulations in which it states that they “introduce an approach under which superannuation earnings derived in subsequent income years following the death of an in-scope member are included in the calculation of that member’s total superannuation earnings in the year of death”.

“We note this policy position was not articulated in our previous discussions with Treasury, the primary legislation, nor the previously released ‘Additional guidance on proposed regulations’ paper, which was intended to provide insights into the proposed scope and operation of these Regulations,” the submission said.

“This represents a material expansion of the regime that has not been subject to appropriate scrutiny.”

Commenting following his organisation’s discussions with Treasury, Burgess said that “by extending tax liabilities beyond death you create a scenario where liabilities can arise years later, after an estate has been finalised, leaving executors and beneficiaries exposed without access to the underlying superannuation assets”.

“Members could be taxed on earnings they have never received – and may never receive,” Mr Burgess said.

“That includes situations where earnings are attributed from reserves or from periods where an individual was no longer even a member of the fund.

“These are not marginal cases – they are real, foreseeable scenarios that undermine the integrity of the regime as a personal tax.”

Burgess said the current design also fails to reflect how a genuine personal tax should operate.

“As a personal tax, Division 296 earnings should reflect an individual’s net position across all their superannuation interests,” he said.

“However, by effectively setting negative earnings to zero, the rules prevent losses from offsetting gains, resulting in overstated Division 296 earnings.”

Burgess said this week’s discussion with Treasury was constructive, with a shared focus on ensuring the rules are workable in practice.

“It is critical the design of this tax is practical, fair and aligned with how the superannuation system operates in the real world,”

“We will continue to work with Treasury and to push for workable and practical solutions,” he said.