“I am quite sure that the clients who are concerned about Division 296 tax are those with illiquid assets, particularly property, and they are likely to be more concerned about CGT and stamp duty,” he said.

However, Figot said there may be a way to minimize these costs, not by withdrawing the property in kind, but by taking money out of the fund.

“There will be clients who will want to withdraw as much money as possible in cash (to avoid Section 296 taxes),” he said.

He gave an example of April, who has a total super balance of $3.5 million on July 1, 2025, with assets including real estate. By June 30, 2026, her real estate had increased in value by $800,000 and her TSB reached $4.3 million.

“If she does nothing and the value goes up by $800,000, she will have a tax bill of just over $36,000,” Figot said.

But he continued: If she can withdraw money, her tax bill might go down.

“If she takes out property, that may trigger income tax and stamp duty, but if she takes out cash, it will save her money from a Section 296 perspective.”

Figot explained that if April had $1.2 million cash in her SMSF that she wanted to withdraw, and she used the new calculations to determine her Section 296 tax liability, that portion of her tax would be reduced to less than $4,000.

He said if an SMSF does not have cash reserves, there is a strategy that can strengthen this part of the fund.

“What is the maximum number of members of an SMSF these days? Six. (In this scenario) could April’s children roll into the fund?” he asked.

However, Figot cautioned that this strategy presents a number of complexities that must be taken into account, and that documentation, particularly a thorough, tightly written deed, is necessary.

“If an SMSF takes on additional members to potentially reduce Division 296 tax, make sure you have the correct documentation in place and know which funds you are going to put those additional members into,” he said.

“But when you use this kind of strategy you also have to think about other, more obscure things, like if the adult child, who is maybe in their 30s, 40s or 50s, for example, and really needs and values ​​insurance, if you roll them out and they had insurance in the SMSF, have you just cost them their insurance? They may not be able to get equivalent insurance in the new fund.”