Author: Ross Turner, General Manager, Australian Valuation
As the proposed Division 296 tax edges closer to implementation, trustees of self-managed superannuation funds (SMSFs) with significant property holdings are facing a new layer of complexity, and opportunities for strategic planning.
With a fixed $3 million threshold and a tax on unrealised gains, accurate property valuations and rental assessments are no longer just compliance tools: they’re essential levers for managing future tax exposure. Misjudging market inputs could result in avoidable and significant tax liabilities.
Here’s what you need to know, and what you can do now to stay ahead.
Where the Legislation Stands
As of June 2025, the Treasury Laws Amendment (Better Targeted Superannuation Concessions) Bill 2023 has passed the House of Representatives and is under review in the Senate. Key developments include:
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House Approval: Passed on 9 October 2024
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Senate Review: Ongoing, with debate centred on taxing unrealised gains and the non-indexed $3 million threshold
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Proposed Start Date: 1 July 2025, with assessments based on balances as of 30 June 2026
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Potential Amendments: Indexation of the threshold is being discussed, but no changes have been confirmed
Understanding Division 296: Key Provisions
Division 296 introduces a significant shift in how high-balance superannuation accounts are taxed:
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Additional 15% Tax: Applies to earnings on balances above $3 million, bringing the total effective tax rate to 30%
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Tax on Unrealised Gains: Increases in property value will be taxed—even if the asset hasn’t been sold
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Fixed Threshold: The $3 million cap is not indexed, meaning more individuals could be affected over time
Why Property Valuations Matter More Than Ever
For SMSFs holding unlisted property, particularly those with related-party leases, valuation accuracy is critical. Here’s why:
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Market Inputs Drive Tax Outcomes
The ATO requires market-based valuations. If property values are overstated (often due to inflated rental income) your fund’s balance could exceed the $3 million threshold, triggering unnecessary tax.
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Related-Party Leases Are Under the Microscope
If your SMSF leases property to a related party (like a trustee’s business), rent must reflect market rates. Non-market rents can artificially inflate property values, increasing your super balance and potential tax exposure.
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Liquidity is a Real Concern
Properties are illiquid assets, and taxing unrealised gains could create cash flow challenges. Funds may need to hold more liquid assets to meet tax obligations without being forced to sell property.
What SMSF Trustees Should Do Now
To stay compliant and protect your fund’s position, consider these proactive steps:
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Engage Independent Valuers
Work with qualified, ATO-compliant valuers to assess property values annually, starting from 30 June 2025.
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Review Related-Party Leases
Ensure lease terms and rental rates align with current market conditions. Independent assessments can help reduce ATO scrutiny.
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Plan for Liquidity
Assess your fund’s cash position to fund future tax requirements.
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Stay Informed
Keep a close eye on legislative updates. Any changes to the threshold or timeline could impact your strategy.
Division 296 represents a fundamental change in how high-balance superannuation accounts, particularly those with property assets, are taxed.
For SMSF trustees, the path forward is clear: act early, value accurately, and plan strategically.
Ross Turner
General Manager, Australian Valuation
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