The landscape for high-balance SMSFs shifted significantly on 13 March 2026, when the Treasury Laws Amendment (Building a Stronger and Fairer Super System) Act 2026 received Royal Assent. While the broad headlines focus on the 15% tax on balances over $3 million, the “devil in the detail” lies within the recently released exposure draft regulations—specifically, how earnings are attributed to members within an SMSF.
For those of us in the SMSF space, the methodology for “small superannuation funds” (six members or fewer) is markedly different from the “fair and reasonable” approach permitted for large APRA funds.
Why the “Prescribed Formula” Matters
Large funds often have the luxury of unit pricing and diverse investment pools to determine member earnings. SMSFs do not. To prevent “selective allocation”—where trustees might try to cycle assets to members under the $3 million threshold to dodge the tax—the Government has mandated a prescribed formula method under section 296-65.03 of the draft regulations.
This removes trustee discretion entirely. Your share of the fund’s earnings is now a mathematical certainty, based on your “average” slice of the pie.
The Core Formula: Proportionality is King
The fundamental principle is that a member’s share of Division 296 earnings is proportional to their average Total Superannuation Balance (TSB) value during the year.
The formula looks like this:
Key Definitions to Remember:
- Division 296 Fund Earnings: Broadly the fund’s taxable income, adjusted for contributions and ECPI.
- Average TSB Value: The average of a member’s TSB over the income year. For standard accumulation accounts, this is generally the account balance.
The Actuary’s New Role
One of the most significant practical shifts is the requirement for an actuary’s certificate to determine these attributed amounts. Gone are the days when this was purely an accounting software calculation.
You will always need an actuary’s certificate unless:
- The fund had only one member for the entire year.
- The fund’s Division 296 earnings are nil.
- The fund has no members in-scope for Division 296 tax (since they will not be required to report an amount, there is no need to obtain an actuary’s certificate).
Complexity at Death: The “Roll-Back” Rule
Perhaps the most complex area involves the death of a member. The draft regulations (section 296-70.04) ensure that earnings generated after death—but before the benefit is paid out—don’t escape the net.
If a member dies, their final Division 296 assessment for that year will include earnings from the start of the year to the date of death, plus all earnings attributed to that interest until the benefits are fully paid out or a reversionary pension begins.
Critically, if the distribution takes place in the following income year, those future earnings “roll back” into the deceased’s final-year assessment.
Reversionary Pensions: A Clean Break
For a reversionary account-based pension (ABP), the rules are slightly cleaner. The TSB value of the deceased is taken to be nil from the date of reversion. From that exact moment, the interest and subsequent earnings are attributed to the beneficiary.
Practical Steps for Trustees and Advisers
With the 2026-27 income year approaching, the window to prepare is narrowing.
- Review Estate Planning: The multi-year attribution rules reinforce the need for timely death benefit distributions. Illiquid assets that take time to sell could see significant earnings attributed back to a deceased member’s estate.
- Identify “In-Scope” Clients: Start modelling the potential exposure for clients with balances near or above $3 million.
- Check Pension Documents: Ensure reversionary nominations are current, as the tax consequences of who “owns” the earnings at the date of death are now material.
The “prescribed” nature of these rules removes ambiguity, but it also removes flexibility. Understanding the math now is the only way to avoid surprises when the first Division 296 tax bills arrive.
