EOFY SMSF contribution strategies for Division 296

From 1 July 2026, the Division 296 rules will pare back the tax advantages for super fund members who have large balances, with the new tax laws applying to members with a total super balance above the $3 million threshold.

This has turned this year’s end-of-financial-year planning season into more than the usual exercise of topping up your retirement savings.

For some self-managed super fund (SMSF) members, the question is no longer, ‘How much can I get into super?’ but whether making further contributions will improve their long-term position in both the short and long term.

It also raises the need to compare the outcomes from moving assets into super by way of an SMSF asset purchase rather than as a super contribution.

This is especially relevant in the final weeks before 30 June, when traditionally we see a spike in discussions around in-specie super contributions to help boost retirement savings and, in some cases, reduce taxable income.

Personal contribution, asset purchase or both?

It’s not uncommon to see SMSF members making in-specie contributions into their SMSF in the lead up to 30 June.

Moving assets you personally own into the superannuation environment can provide long-term tax benefits because of the tax concessions available to super funds compared with owning those assets personally.

In most cases, these asset transfers are accounted for as a non-concessional (or after-tax) contribution. The market value of the asset being transferred into the SMSF is then used as the value of the contribution.

In other cases, SMSF members may want to treat the transaction as a personal concessional contribution to obtain any relevant tax deduction available.

SMSF members considering making contributions through an in-specie transfer of assets, such as listed shares or units in widely held unit trusts, could instead consider a combination of contributions and asset purchases.

Doing so allows the asset to be moved into the SMSF but has less effect on the member’s total super balance (TSB), as they are simply swapping some of the SMSF’s cash for part, or the whole of another asset.

This is particularly relevant for those with TSBs approaching the $3 million total super balance threshold for Division 296 tax.

If this is something that you’re considering, it’s important that the paperwork used is clear and concise and shows exactly what has occurred.

It would be worth having a written explanation from the SMSF member showing their intent and identifying the separate transactions. This paperwork can also be used to identify ‘separate transactions’ involving ‘separate assets’.

For instance, where an SMSF member wants to move ASX-listed shares they own personally into their fund by way of a combined asset sale and asset transfer, they could use:

• An off-market transfer form representing the quantity of shares being transferred into the fund as an in-specie contribution. Make sure that the quantity for the transaction includes only the number of shares being transferred by way of a contribution. As this is an in-specie contribution, the consideration would be nil.
• Separate paperwork (off-market transfer form) covering the separate asset sale transaction, again making sure that the quantity and in this case, the consideration for this separate share transaction represent the value of the asset sale to the SMSF at market value.

It would then be a good idea to have an SMSF trustee resolution identifying and accepting these as separate transactions.

Following this process removes any ambiguity around what has transpired.

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Considerations for direct property transfers

Where the asset being transferred into the SMSF is real property, the process becomes a little more complicated. It’s essential that SMSF trustees get this process right.

The main concern here is that the Australian Taxation Office (ATO) takes the position that the difference in the market value of an asset and the actual purchase price paid by the SMSF cannot be treated as an in-specie contribution.

The following is taken from an ATO Law Companion Ruling from 2021.

“In situations where the terms of a contract between the small complying superannuation fund and the seller of the asset make it clear that the asset is being purchased by the fund, the difference between the consideration paid (if any) by the fund and the market value of the asset purchased under the contract cannot represent the value of an in-specie contribution made by the other party.

This is because there is no other asset being transferred to the superannuation fund that can be regarded as being an in-specie contribution. The difference between the consideration (if any) paid by the fund and the market value is not an asset being transferred to the superannuation fund.”

For this to work, the sale contract must make it clear that the SMSF is only acquiring part of the asset in question under the contract so, in this case, the SMSF is acquiring part of the direct property. Then there would need to be separate documentation and legal paperwork that deals with the remaining interest in the property being transferred by way of in-specie contribution.

As per the ATO ruling:

“An in-specie contribution can be made in conjunction with a complying superannuation fund purchasing part of an asset where a contract makes it clear the fund is only acquiring part of the asset. In such situations, the fund:

• Purchases the interest in the asset specified under the contract, and
• Receives the in-specie contribution of the remaining interest in the asset.”

If this is something you are considering, it’s extremely important to discuss this with your legal adviser or conveyancer.

Other Division 296 considerations

For those SMSF members who already have a TSB approaching or exceeding the $3 million Division 296 threshold, you might question whether large super contributions should be made or are in your best interest.

It may be that non-super retirement savings vehicles need to be explored. This really does depend on your personal circumstances and would, in most cases, require some form of future modelling of your super balances.

The bottom line

As 30 June approaches, it’s important that SMSF members who are looking to transfer assets into their fund think about how best to structure the transfer to achieve the best outcome. Division 296 has not ended the appeal of super, but it has changed the way we need to look at certain contributions and strategies.

For SMSF members with higher balances, the final weeks of the financial year are now less about rushing to tip money and assets into their fund, and more about how contributions should be made and where future wealth is best held.