Monthly technical briefing - October 2026

In this update, we’ll aim to answer key questions we’ve received from advisers. We’ll also help you get up to speed with technical developments for the period from 24 August 2026 to 28 September 2026, including the Government’s consultation regarding the proposal for discretionary trusts to be taxed at 30 per cent.

In this edition, the Adviser query of the month considers the possible time frame for the receipt of the notice of assessment from the ATO for Division 296 tax.

Adviser query of the month

Question

My client is likely to be subject to Division 296 tax for the 2026-27 year as their total superannuation balance is above $3 million.

When will they likely know about this tax liability?

Answer

As with many answers, it depends on your client’s circumstances and the super fund(s) that they’re a member of.

The ATO will make the Division 296 tax assessment based on the information they receive from the super fund(s) and it’s likely to be late in the 2027-28 year, and possibly into 2028-29, before the notice of assessment is issued.

Broadly, the sequence of events for gathering this information is as follows:

1. Total superannuation balance (TSB) reporting

The ATO require the 30 June 2027 TSB information to help determine who has a TSB of more than $3 million and therefore who is potentially in-scope for Division 296 tax.

The due date for the reporting of TSB depends on the type of fund, as follows
 

2. ATO requests Division 296 income from funds

Once the ATO determines the individuals who are in-scope for Division 296 tax, the ATO will write to each fund asking for the Division 296 earnings for that individual.

The ATO has indicated that they will start sending these requests to large funds from April 2028. However, the ATO has indicated that certain large funds that use a change in TSB to determine the Division 296 earnings (e.g. defined benefit funds) will start to receive the requests from November 2027.

3.  Providing the Division 296 earnings to the ATO

For the super fund to be able to provide this information to the ATO, the super fund will need to have completed its tax return for the 2026-27 year. An exception to this is funds whereby earnings are calculated on a change in TSB (e.g. defined benefit funds).

For large super funds, the due date will usually be 31 January 2028. However, as noted in 2 above, the ATO has indicated it expects to start sending the income requests from April 2028.

The tax return dates for SMSFs are the same as those outlined in the table in 1 above, that is:
 

The majority of SMSFs are existing funds that use a registered tax agent and therefore have a due date of 15 May 2028.

Large Super funds will generally be required to provide the information to the ATO within 28 business days after they receive the request. However, the ATO has indicated that certain large funds that use a change in TSB to determine the Division 296 earnings (e.g. defined benefit funds) will have 10 business days to respond.

4. Division 296 tax notice of assessment

Once the ATO has the required information, it will calculate the tax liability and issue a notice of assessment.

Payment is generally due within 84 days after the ATO gives the notice of assessment. The payment can be deferred for tax liabilities attributed to defined benefit accounts that are not in the retirement phase and from which no superannuation benefit has become payable.

In summary, the individuals who will be liable for Division 296 tax are likely to receive the 2026-27 notice of assessment in late 2027-28 or possibly in 2028-29. Factors affecting the timing include the type of super fund accounts they hold, the time the fund takes to lodge its tax return for 2026-27 and the speed at which the ATO calculates the tax and issues the notice once all information is available. 

Taxation of discretionary trusts – exposure draft legislation consultation – 2026-27 Federal Budget

On 3 September 2026 the Government released draft legislation regarding the reforms to the taxation of discretionary trusts as first announced in the 2026-27 Federal Budget. This consultation follows the original consultation covered in the August 2026 Technical Briefing. 

The intended commencement date for the primary changes is 1 July 2028. The Government aims to enhance the fairness and progressivity of the tax system by better aligning the tax rate on trust income with rates paid by workers, addressing concerns around ‘income splitting’.

The consultation closed on 18 September 2026.

The proposed changes below are not yet law.

1. Introduction

• Commencement: Applies to income years starting on or after 1 July 2028.
• Policy objective: Targets ‘income splitting’ practices to improve tax system progressivity.
• Trustee liability: The trustee will be primarily liable to pay a minimum 30 per cent tax on the trust's ‘minimum tax income’. If no beneficiary is made presently entitled, section 99A (top marginal rate plus Medicare levy) still applies.
• ‘Top-up’ mechanism: The tax operates as a minimum, ensuring that relevant trust net income is subject to at least 30 per cent tax.

2. Scope and key exclusions from the minimum tax

A ‘minimum tax trust’ is defined by what it is not. A trust is a minimum tax trust if it is not an excluded trust. Further, certain income of a minimum tax trust will be excluded from the minimum 30 per tax as outlined below.

Excluded trust types:

• Fixed trusts (under the new, expanded definition below). This includes bare trusts, managed investment trusts (MITs), and attribution managed investment trusts (AMITs).
• Deceased estates (while under administration).
• Special disability trusts.
• Complying superannuation entities (including self-managed superannuation funds).
• Charitable trusts (due to exempt status).
• Trusts of a kind determined by legislative instrument.

New definition of ‘fixed trust’

A new, expanded definition will be legislated. A trust will be considered a fixed trust if either:

• Its beneficiaries have fixed entitlements to all of the trust's income and capital, or
• There are no material discretionary elements affecting the entitlements or rights of the trust's beneficiaries.

Factors indicating no material discretion include clearly defined/enforceable rights, powers that cannot significantly vary existing rights, and amendment powers requiring consent or not adversely affecting rights. The Minister can determine further matters via legislative instrument.

Excluded income types:

• Income from testamentary trusts established for genuine testamentary purposes.
  • Integrity rules apply for assets injected after 12 May 2026 (Budget night) and trusts established on or after 1 July 2028 will only be excluded where beneficiaries are limited to individuals and tax exempt entities.
• Distributions to foreign resident beneficiaries subject to non-resident withholding tax.
• Taxable primary production income.
• Income relating to vulnerable minors (meeting specific criteria, e.g. disabled, compensation).
• Distributions to registered charities and deductible gift recipients (DGRs). Conditions may be determined by legislative instrument.
• Distributions to other exempt entities (e.g. community organisations like sporting clubs), potentially with a reasonable cap.

3. Treatment of beneficiaries and tax offsets

Individual beneficiaries:

Assessed at marginal rates and receive a non-refundable tax offset of 30 per cent of their assessable amount attributable to minimum tax income.

The offset cannot reduce the Medicare levy and any excess is not refundable or carried forward.

Corporate beneficiaries:

Assessed on trust income but not eligible for the minimum tax offset.

Trustee beneficiaries (other trusts):

Can use the offset against their own tax liability, but cannot pass it down a chain if they are also a minimum tax trust.

Reduction of other rebates:

Existing deductions/refunds for beneficiaries are reduced to prevent an overall benefit exceeding 30 per cent on minimum tax income.

4. Expanded capital gains tax (CGT) rollover relief for restructuring

CGT roll-over relief will be available for a period of three years from 1 July 2027 to support small businesses and others that wish to restructure to limit the use of discretionary trusts that are within the scope of the minimum tax into another type of entity, such as a company or a fixed trust.

Key features of the roll-over relief include:

• Availability: For a three-year period, from 1 July 2027 to 30 June 2030.
• Purpose: Allows discretionary trusts to restructure into other entities (e.g. individual, companies or fixed trusts) without immediate capital gains tax (CGT) or other income tax consequences.
• Transferee requirements: The rollover requires transferring assets to a single entity; it cannot be used if assets are split among multiple entities. Must not be an exempt entity, complying super entity, or another minimum tax trust. The restructure must result in more fixed and transparent economic outcomes.
• Continuity: Specific requirements for family trusts (beneficiary and family group membership) and potentially other trusts via legislative instrument. For a family trust, the specified individual for the family trust election must be a member of the family group at the time of the transfer.
• Residency: Both transferor and transferee must meet Australian residency requirements.
• ‘All assets’ requirement: Generally, all trust assets must be transferred within the three year period. Exclusions include non-transferable assets, CGT assets used for primary production income, assets to discharge liabilities/winding-up costs, and assets with a cost of $1,000 or less.
• Election: Both the transferor and the transferee must voluntarily make a choice in the approved form to apply the rollover, notifying the Commissioner by the earlier of the day they lodge their income tax return for the income year in which the first asset transfer of the restructure occurs, and the due date for lodgement of that return. Additional elections are required where the restructure occurs over multiple years.
• Integrity (‘clawback’): Rollover is denied if material discretionary elements affecting the transferee entity's members are preserved or introduced during a four-year period after the last asset transfer.

5. Electable Regime: Excluded Election Trust (EET)

The EET regime was developed in response to stakeholder feedback on the proposed 30 per cent minimum tax, offering an alternative pathway for existing discretionary trusts to avoid the minimum tax without undertaking a full physical restructure. This option aims to limit the significant costs associated with restructuring, such as state and territory stamp duties, by allowing trustees to commit to making fixed distributions to pre-nominated beneficiaries.

Key features of the EET include:

• Eligibility: Discretionary trusts in existence on 1 July 2028 can elect into this new regime.
• Election timing: Only in the 2028-29 income year (or first substituted accounting period). Only one election per trust.
• EET nomination: Trustee specifies each nominated beneficiary (no limit), with a specific percentage share of both income and capital. The percentage share must be the same for both income and capital. The election must total must add to 100 per cent. Cannot nominate complying super entities, partnerships, or non-eligible companies. An "eligible company" has no material discretionary elements affecting its members.
• Variations: Limited circumstances for changes: death of a nominated beneficiary or relationship breakdown between two nominated beneficiaries.
• Revocation (Voluntary): Trustee can revoke the election at any time, but it cannot be reinstated.
• Revocation (Automatic): Triggered if distributions are inconsistent with the EET nomination or certain events occur (e.g. winding up of a nominated trust/company, nominated company ceasing to be eligible, or specific shareholder changes).
• Consequences of Automatic Revocation: For the income year of revocation, beneficiaries are treated as never having been presently entitled, and the trustee is assessed at the top marginal tax rate plus Medicare levy on all net income. The trust will then be subject to the minimum tax in future income years.

6. Franking credits

Minimum tax trusts must use franking credits to offset their income tax liabilities, including any minimum tax liability.

Any excess franking credits remaining will be refundable to the trustee.

Tax law will be amended to ensure franked distributions form part of the minimum tax income.

Further information can be found here: Treasury - Minimum tax on discretionary trusts – exposure draft legislation