The Div 296 bill was introduced to parliament on 11 February 2026. So what were the changes from Treasury’s draft legislation? For a summary of the draft legislation see our articles – part 1, part 2, part 3 and part 4.
Application in the year of death
While submissions were made that Div 296 tax should not apply in the year of death (see part 2), that change was not made.
Rather, the Div 296 calculations were changed such that, in the year of death, only the opening total superannuation balance will be used. Treasury justified this change as removing the requirement to calculate the member’s total superannuation balance at the date of death.
This change means that:
Div 296 will apply to applicable members in the year of their death
Whether they are caught by Div 296 will depend on whether they are over the $3 million at 1 July in the year of their death
The proportionate formula will rely on the opening balance only
Industry has highlighted the difficulties and unfairness that will result from applying Div 296 tax to members in the year of their death, including:
The executor receiving a Div 296 tax assessment after the estate has been distributed
The estate receiving a Div 296 tax liability (to the detriment of the estate beneficiaries) when the death benefit was paid directly to other beneficiaries
The additional administrative burden this could apply to executors/administrators of estates
That executors/administrators may have no visibility of the deceased’s super and no ability to foresee whether a liability may arise or not
That as a result of death, most or all of the assets of the super fund could be realised to cash out the death benefit, resulting in an outsized Div 296 tax liability
Death transitional rule extended to 30 June 2027
In a welcome but minor change, death benefits will be counted if the member dies on (or before) 30 June 2027. The previous draft only applied if you died before 30 June 2027.
Net ECPI add back includes all deductions
The draft legislation provided that when super funds added back except current pension income (ECPI), that ECPI could only be reduced by section 8-1 deductions. The legislation now provides that the added back ECPI will be reduced by all applicable deductions (eg depreciation deductions).
Transfer balance notional gains not taxed
The legislation excludes from Div 296 tax any notional gains that were deferred under the transfer balance cap transitional rules from 2017. Those gains (where applicable) were deferred until the relevant asset was disposed of.
Changes not made
Despite submissions by industry, most of the requested changes to the draft legislation were not made including:
As noted above, not taxing members in the year of their death
Applying the total super balance test only on the closing year balance (rather than the higher of the closing or opening balance)
Applying the cost base adjustment on the higher of the asset’s cost base or market value
The portability of the cost base adjustment
The ability to reduce benefits if the member has not met a condition of release
Phil Broderick
Principal
T +61 3 9611 0163 l M +61 419 512 801
E pbroderick@sladen.com.au
Philippa Briglia
Special Counsel
T +61 3 9611 0174 | M +61 449 404 801
E: pbriglia@sladen.com.au
Jan Harnischmacher
Associate
T +61 3 9611 0158
E joh@sladen.com.au
Andrea Lin
Lawyer
T +61 3 9611 0189
E alin@sladen.com.au
This article was originally published on the Sladen Legal website: Div 296 legislation introduced to Parliament – what are the key changes
