Division 296 is now law. It commenced 1 July 2026 and imposes an additional 15% tax on realised earnings, including capital gains, for superannuation balances above $3 million.
The timing is pointed. Australian property has delivered five years of strong capital growth. Many SMSFs are carrying significant accumulated gains, unrealised, for now. Division 296 captures movements in total superannuation balances, meaning changes in asset values, realised or unrealised, can influence the tax outcome.
It’s a lot to navigate, when to sell, what to hold and what the fund balance looks like, and the timing is worth understanding carefully.
Where the Property Market Sits
Growth across industrial, logistics and many parts of the residential property market has been strong over the past five years.
More recently, that momentum has shifted, we’re seeing:
- A moderation in growth
- Pockets of softening in certain markets
- Greater variability in performance across asset classes
For SMSF trustees, that combination creates a specific and time-limited dynamic.
Many funds are sitting on material gains built up through the last growth cycle, just as Division 296 is introduced and the starting position is set. These two factors are arriving together, and that matters.
What Division 296 Does to that Position
The commencement date effectively sets a new baseline by:
- Establishing a starting balance at a point in the market cycle, and
- Framing how future changes in value are measured
The valuation at commencement helps establish that starting position and influences how future movements are assessed.
Where markets have stabilised or softened slightly, there may be an opportunity to establish values at or near current market levels, shaping how future gains are measured within the new regime. Future growth is then assessed from that base. The market has already done the heavy lifting. Division 296 determines how that position is carried forward and assessed over time.
The Valuation Overlay
From a valuation perspective, this reinforces the importance of timing and evidence. You’re not just assessing value in isolation, you’re effectively:
- Capturing the outcome of a full market cycle
- Translating that into a starting point for future tax calculations
The valuation at commencement will reflect a materially different market position than just a few years ago. A well-supported valuation sets the line clearly. An unsupported one creates exposure, and that’s a risk worth avoiding.
The Catch: It’s a Portfolio-Wide Position
This is where it gets interesting, and where early advice from your professional SMSF advisor really earns its keep.
The reset isn’t applied selectively across assets. It operates at the fund level.
In simple terms: You don’t get to reset only the winners.
Where It Gets Uneven
For high-performing assets:
- The reset is clearly advantageous
- Embedded gains are effectively quarantined
- Future growth is measured from a higher base
For underperforming assets:
- The position flips
- Any historical “buffer” is lost
- Future recovery becomes fully exposed as new growth
Which means:
The same mechanism that protects gains on strong assets can increase exposure on weaker ones.
Understanding that across the whole portfolio, is what good planning looks like here.
The Practical Takeaway
This isn't just a structural tax change happening in isolation. It coincides with a very specific moment in the property cycle.
Strong historic growth, combined with a more balanced current market, makes the reset point particularly consequential for SMSF property holdings. For trustees already above $3 million, the valuation doesn’t change whether Division 296 applies, it defines the line between old and new growth, and ultimately how much of that new growth is taxed in the future.
Coming off the back of a strong five year growth cycle across Australian property, the timing of Division 296 means many SMSFs will be establishing values at or near peak or recently stabilised market levels, forming the basis for future tax calculations.
Trustees and advisers working with SMSFs holding property should be having this conversation now, not at the filing deadline.
There's still time to get the position right, but that window won't stay open indefinitely.