Division 296: The Estate Planning Conversation Advisers Need to Have Now

Division 296 is no longer just a superannuation tax issue. It is now an estate planning issue.

The new Division 296 tax is now law and is scheduled to apply from 1 July 2026 to individuals with total superannuation balances above $3 million. The ATO has confirmed that the measure will reduce superannuation tax concessions for individuals above that threshold. There is a further threshold of $10 million where an additional tax will apply to earnings above that threshold.

For accountants and financial planners, the technical tax calculation is only part of the story.  The larger issue is this: what happens when a client dies with a high superannuation balance, an expected Division 296 liability, and a death benefit strategy that has not been properly integrated with their Will?

Why Division 296 changes the estate planning discussion

High-balance superannuation clients often have estate plans that assume superannuation will pass cleanly outside the estate — usually by binding death benefit nomination to a spouse, children, or the legal personal representative. However, Division 296 adds another layer.

Advisers now need to consider:

• whether the client’s superannuation balance is likely to exceed $3 million;

• whether benefits should remain in superannuation or be withdrawn before death;

• whether death benefits should be paid to a spouse, adult children or the estate;

• whether the estate may need liquidity to meet tax liabilities;

• whether equalisation clauses are needed where one beneficiary receives superannuation and another receives estate assets;

• whether the Will contains appropriate indemnity and adjustment clauses; and

• whether the executor has enough power to deal with superannuation-related tax assessments after death.

For blended families, second relationships and clients with adult children from prior relationships, these issues can quickly become contentious.

The hidden risk: fairness between beneficiaries

A surviving spouse may receive superannuation death benefits tax-free. Adult children may not.  One child may receive non-super estate assets. Another may receive a taxable superannuation death benefit. A spouse may receive the superannuation, while the estate bears costs or tax liabilities connected with the deceased’s broader planning.

Without proper drafting, this can produce unequal outcomes — and litigation risk.

Division 296 therefore requires advisers to move beyond the question: “Who gets the super?”

The better question is: “Who bears the tax, and was that intended?”

What advisers should be reviewing

For clients with high superannuation balances, accountants and financial planners should now be reviewing:

1. the client’s total superannuation balance trajectory;

2. the terms of any binding death benefit nomination;

3. whether the nomination aligns with the Will;

4. whether the Will contains a superannuation proceeds trust;

5. whether tax-adjustment clauses are required;

6. whether the executor is indemnified for post-death tax liabilities;

7. whether liquidity is available outside superannuation; and

8. whether the estate plan remains fair after tax.

This is not simply a compliance exercise. It is a client strategy conversation.

The opportunity for advisers

Division 296 gives accountants and financial planners a timely reason to revisit estate planning with high-net-worth clients.  For many clients, their existing Will and superannuation nomination may have been prepared before Division 296 was contemplated. Those documents may not deal adequately with tax equalisation, executor protection, liquidity or the interaction between superannuation and the estate.

At Inherit Australia, our platform helps advisers identify these risks and connect technical estate-planning issues with practical document solutions.

The aim is not just to prepare a Will.  The aim is to ensure the client’s superannuation, tax position, family structure and estate planning documents all work together.

Division 296 may be a superannuation tax measure, but its consequences will often be felt in the estate plan. For advisers, the message is clear: high-balance super clients need more than a Will and a binding death benefit nomination.

They need an integrated estate planning strategy.