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A senior superannuation stakeholder has suggested the use of tax-effect accounting is now more compelling given the significance of an individual’s total super balance (TSB) with regard to the Division 296 tax.
Colonial First State head of technical services Craig Day recognised TSB value is defined as the total amount of benefits that would be payable if the member voluntarily caused their super interest to cease at 30 June in a year, which takes into account taxes and costs incurred to pay out benefits.
Day noted up until now taking advantage of this definition was not necessarily a constant priority and likely used only by individuals who were close to a TSB threshold that determined whether they could use a particular action, such as making non-concessional contributions.
“Now going forward it is going to be important every single year,” he indicated to delegates at the SMSF Association Technical Summit 2026 held in Sydney last week.
“So [from this point] do we want our clients who are paying Division 296 tax to automatically be turning on tax-effect accounting [features in the administration software they are using]?
“If you’re not turning on tax-effect accounting, you’re not taking into account realisation costs, unrealised CGT (capital gains tax), [so] their TSB will be larger and they will pay more tax.
“If [that’s what it would] mean, I would pretty much want you to be turning on [the] tax-effect accounting [feature included in the software package].”
According to Day, the argument some advisers prosecute that the adoption of tax-effect accounting will not make a significant enough difference in a Division 296 context and so should be ignored is not valid.
“If it makes more than one dollar of difference, [it is worth considering]. I want to pay less tax and I don’t want you deciding for me that it doesn’t make much difference,” he said.
He pointed out cost is unlikely to be a deciding factor given the level of automation fund administration service providers now employ.
“If it costs more, I’ll take that into account, but what I’m told is a lot of these admin packages, [such as] Class, BGL [and] SuperMate, [just require you to tick a box to apply tax-effect accounting] so I’m not sure it actually does cost you any more,” he stated.
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