With the proposed $3 million Division 296 legislation entering Parliament in February 2026, and a scheduled commencement date of 1 July 2026, now is an ideal time for individuals with high superannuation balances to review their position and consider succession planning strategies.
For members aged over 65 who are retired and hold large super balances, one option may be to withdraw funds from superannuation and redirect wealth to the next generation via non‑concessional contributions. While there are several ways this can be achieved — including providing assistance with housing — this article focuses specifically on superannuation contribution strategies.
Where adult children are to contribute into the same Self‑Managed Superannuation Fund (SMSF) as their parents, they must first be admitted as members and trustees (or directors of the corporate trustee). This brings with it a range of governance and compliance considerations, which we explored in our previous article, Adding family members to a Self-Managed Superannuation Fund.
As part of the admission process, each new trustee or director is required to sign an ATO Trustee Declaration, acknowledging that they understand their duties, obligations and responsibilities in managing an SMSF.
Example
Daniel and Joan are both 67 years old and retired. Each has a superannuation balance of approximately $3.35 million, all held as a taxable component within their SMSF. They have two adult sons, Simon and Peter, who are in their 30s and have relatively modest superannuation balances of $50,000 each.
With the non‑concessional contribution cap currently set at $120,000 per year — or up to $360,000 under the three‑year bring‑forward rule — Daniel and Joan decide to withdraw $360,000 each from their superannuation accounts. These funds are then contributed to superannuation for Simon and Peter ($360,000 each), after the sons are admitted as members and trustees of the SMSF.
Potential Benefits of This Strategy
Reducing exposure to Division 296
By withdrawing funds from superannuation, Daniel and Joan reduce their individual balances below $3 million, potentially avoiding the additional complexity and tax implications associated with the new Division 296 regime.
Minimising future death benefits tax
This strategy may also reduce the amount of superannuation death benefits tax payable by non‑dependent beneficiaries. In this example, Daniel and Joan could save up to $122,400 in tax ($720,000 × 17%) that may otherwise arise if the last surviving member passed away with these funds still held in superannuation. For further detail, see our article Are you aware of Superannuation Death Benefits Tax?
Accelerating wealth transfer to the next generation
Simon and Peter receive a significant boost to their superannuation balances, allowing those funds to benefit from long‑term compounding investment returns over the next 30–40 years.
Additional planning opportunities for adult children
As a further consideration, Simon and Peter may choose to treat part of the $360,000 contribution as a concessional contribution, subject to their available concessional caps of $30,000. This may create a personal tax deduction and potentially result in a tax refund, depending on their taxable income and marginal tax rates.
The introduction of the $3 million Division 296 regime presents a timely opportunity for high‑balance superannuation members to revisit their retirement and succession planning strategies. By proactively managing super balances and involving the next generation in a structured and compliant way, families may be able to improve long‑term outcomes, manage tax exposure and achieve more effective intergenerational wealth transfer.
If you would like to discuss how these strategies may apply to your circumstances, or if you have any questions regarding superannuation more broadly, please contact one of our superannuation specialists.
