Division 296 and SMSF valuations

What is Division 296 tax?

Division 296 is an extra tax on part of the earnings of members whose total super balance (TSB) is above the large super balance threshold. The ATO says it is law and applies from the 2026-27 financial year onwards.

Both thresholds may be indexed in future years. For 2026-27 the test is the TSB at the end of the income year, 30 June 2027. From 2027-28 it applies if the TSB just before the start of the year or at the end of the year is over a threshold.

The tax is assessed to the individual, not the fund, and can generally be paid from the individual's super fund or funds. The ATO says notices of assessment for 2026-27 will issue in the latter half of 2027-28.

Why does a valuation matter for Division 296?

Because the tax depends on a member's total super balance, and in an SMSF that balance rests on the values the fund reports for its assets. The ATO's valuation guide says the market value of the assets supporting members' accounts on 30 June each year is what allows each member's total super balance to be calculated. The ATO's total super balance page lists Division 296 tax among the rules the balance determines.

SMSFs report each member's annual balance in the SMSF annual return, and trustees give the ATO information on members whose balance is over the large super balance threshold, which the ATO calls in-scope members.

Most SMSFs hold assets with a price on every statement. Private company shares, units in an unlisted unit trust and trading business interests do not. For these the trustees' figure is an estimate, and for a member near a threshold that estimate can decide whether Division 296 applies at all.

What must auditors check under Division 296?

Auditors must check that the market value reported for each asset has evidence behind it. The ATO's Division 296 and SMSF audits notice, last updated 31 August 2026, says Division 296 does not change an auditor's obligations, and that accurate reporting and existing audit requirements remain important because they support Division 296 calculations. It tells auditors to check that:

• sufficient and appropriate audit evidence supports the market value reported for each fund asset, which regulation 8.02B of the Superannuation Industry (Supervision) Regulations 1994 requires trustees to use in the accounts
• trustees have allocated investment returns to members on a fair and reasonable basis (regulation 5.03)

Where evidence is insufficient, the ATO says to consider modifying the auditor's report and lodging an auditor contravention report where the reporting criteria are met.

A valuation prepared as audit evidence answers the first check for unlisted assets: what the asset was worth at 30 June and how the figure was reached. The second, the fair allocation of returns, is for the trustees and their accountant.

Why does a supportable value for a unit trust or private company matter near the thresholds?

Because the value is a judgement, and the margin in that judgement can be larger than the gap between a member's balance and a threshold. Three things make it worth getting right:

• No daily price. A private company or unit trust is not listed. Two reasonable people can reach different figures unless the method and the data are written down.
• An unchanged value is a flag. SMSF Adviser reported in March 2025 that the ATO had identified more than 16,000 SMSFs reporting assets such as property and unlisted trusts at the same value for three years running. See the ATO letter and unchanged values.
• Cost is not market value. The ATO says signed, audited company or trust statements that carry assets at cost are unlikely to be sufficient evidence on their own.

The ATO's guide lists the evidence that may support a value for unlisted shares and units: a valuation of the assets the entity holds, a property valuation where property is its only asset, and the price of the most recent sale between unrelated parties. A valuation that rests on objective and supportable data and states its method and assumptions gives the trustees and the auditor something to rely on, whichever side of a threshold the member lands. It does not change anyone's tax. It makes the value supportable.

What is the CGT adjustment election, and where does a market value fit?

The ATO says an SMSF can elect to adjust the cost base or reduced cost base of its CGT assets to their market value at the end of 30 June 2026, to recognise value built up before Division 296 began. The election applies only when working out the fund's Division 296 fund earnings. It applies to all CGT assets the fund held at the end of 30 June 2026, cannot be revoked and must be made by the due date of the 2026-27 annual return. Members do not need to be over the large super balance threshold.

The ATO says it is generally available only for assets the fund holds or owns directly, not those held indirectly, and the fund keeps a record of the election. Which holdings qualify is a question for the fund's accountant.

A valuation as at 30 June 2026 gives the fund a supportable market value for each unlisted asset. We can value as at that date even though it has passed, using information known or knowable then. Whether to elect is for the trustees with their accountant or adviser.

What do we do for Division 296, and what do we not do?

We value private company shares, units in private unit trusts and trading business interests held by SMSFs, as at the date you need, and write the report for the audit file. We do not calculate Division 296 tax, a member's total super balance or Division 296 fund earnings, and we do not advise whether a member should contribute, withdraw, roll over or start a pension.

The ATO's Division 296 page for SMSFs says an SMSF works out its Division 296 fund earnings, an adjusted amount of fund taxable income, and attributes a portion to each in-scope member's interests. Subject to some exceptions, an actuary will need to be engaged to work out the attributed amount. That work sits with the trustees, their accountant and an actuary.

Investment entity: $995 + GST. Trading business interest, turnover under $2 million: $1,495 + GST; $2 million to $10 million: $2,495 + GST; over $10 million: $3,495 + GST. We confirm the fee in writing before we start. No hourly billing.