July is an excellent time for SMSF trustees to turn over a new leaf and review, plan, and make improvements to the fund for the year ahead. Getting on top of key obligations in July, rather than leaving them to accumulate, can save significant time and stress down the track, while helping ensure the fund remains compliant and continues to maximise retirement outcomes for members. From investment strategy and asset valuations to contributions, pensions, and the latest legislative changes including Division 296, there’s a lot worth turning your mind to right now.
The superannuation law requires the fund’s investment strategy is reviewed regularly which means once each year or when a substantial event occurs in the fund such as a member’s retirement or death. Reviewing the fund’s investment strategy helps get the fund ready for the following year after considering the member’s circumstances and expected investment performance. Where asset allocations may have varied from the previous review, now is the time to adjust them to reflect the fund’s expected investing over the 2026-27 financial year.
Get valuations organised early If the SMSF holds assets that do not have publicly available market values. Examples would include real estate, private trusts and companies, collectables and precious metals. This is important if a fund member may be liable for Div 296 tax and the fund decides to exercise the right to a CGT cost base reset as at 30 June 2026.
If the fund owns real estate directly or via an LRBA an annual valuation of the property is required under the ATO’s asset valuation guidelines or where there is a material change in the property’s value. Funds that are unable to provide adequate valuation evidence may end up with a qualified audit or contravention report.
Clients should consider planning pension and lump sum withdrawals early in the financial year. If more than the minimum pension is intended to be withdrawn, consider taking any excess over the minimum amount as a lump sum. This may provide a tax benefit as lump sum withdrawals also have the effect of reducing the amount counted against the client’s Transfer Balance Cap. Documentation should be established at the beginning of the year or at the time the pension commences during the financial year.
The contribution and benefit caps have been indexed for the 2026-27 income year. The concessional contributions cap is $32,500 and the non-concessional contributions cap is $130,000. Also, the Total Superannuation Balance Cap and Transfer Balance cap have been indexed to $2.1 million.
For employees, the Superannuation Guarantee rate is 12%, however, from 1 July 2026 employers are required to pay contributions in line with the payment of the employee’s salary and wages under the Payday Super arrangements.
For anyone with a Total Super Balance of less than $500,000 as at 30 June 2026, carry forward rules for unused concessional contributions, may allow them to make contributions in excess of the standard concessional contributions cap of $32,500. Also, it is possible for anyone with a Total Super Balance of less than $1.97 million to use a bring forward rule for non-concessional contributions.
Other contributions could include the CGT small business concessions and the downsizer contribution. It is useful that prior to selling a business or a person’s main residence that some thought be given to the timing of all contributions made to the fund during the year to maximise the tax advantages provided by superannuation. So planning contribution strategies from the start of the financial year can reap benefits.
Fund members who wish to claim a tax deduction for personal superannuation contributions are required to provide a Notice of Intent to the fund just before their personal tax return is lodged with the ATO. However, it should be remembered that in some circumstances the Notice of Intent must be provided to the fund before the member commences a pension, rolls over their benefit to another fund or makes a contribution splitting notice to the member’s spouse. Any notice must be acknowledged by the trustee without delay. Failure to get the timing of the notice correct can mean the member will not receive a tax deduction for their contribution.
Division 296 of the tax legislation commences from 1 July 2026 and is an additional tax of 15% on realised income where the member has a TSB as at 30 June 2027 of greater than $3 million. A further tax of 10% applies where a member has a TSB of greater than $10 million.
Most of the administration with Division 296 is not required until after the end of the 2026-27 financial year. This will require a special calculation to determine the income of the fund that is attributable to the members on which the tax will be levied.
However, trustees and their professional advisers should be checking the market value of the fund’s investments as at 30 June 2026. The reason is that under the new law it is possible for a fund to make an election to reset the CGT cost base of all its assets to their 30 June 2026 market values. This is available solely for purposes of Division 296 and the election is required to be made by the fund prior to lodging its tax return for the 2026-27 financial year.
Resetting the asset value can have the advantage of reducing the amount of additional tax payable under Division 296. This does not affect ordinary CGT cost bases, so trustees must keep two sets of cost bases.
In summary, the election:
The election must be made before the following dates depending on whether the fund is new or is being lodged by a registered tax agent:
If no election is made the amount counted as Division 296 earnings will reflect all historical gains, which may significantly increase liabilities for long-held assets.
If you’re interested in learning more about Division 296, you can read a more in depth blog by Graeme here.
In this year’s Federal budget the Treasurer announced a number of changes to tax which related to negative gearing and CGT. These announcements were widely debated in the media and in parliament and led to the government making a number of concessions and changes to the original proposals.
One of the changes was to restrict limited recourse borrowing arrangements (LRBAs) to business real property. This means, in effect, that self-managed superannuation funds are prohibited from using LRBAs to acquire residential property. The prohibition is to commence 45 days after the legislation, Treasury Laws Amendment (Tax Reform No. 1) Bill 2026, receives Royal Assent which is expected in late June or early July. Contracts signed before the 45 day commencement period are expected to be protected.
It’s unclear what actions need to be taken before the end of the 45 day period to come within the current rules for LRBAs. Whether this requires the signing of the property contract, and possibly:
needs to be clarified.
Existing SMSF residential property LRBAs will continue in their current form. It should be ensured that the:
Where a breach of the LRBA rules has occurred the arrangement may require restructuring which could be treated as a new arrangement after the amended legislation takes effect.
The changes to LRBAs do not impact on funds that wish to invest in business real property such as commercial real estate. Nor do they impact SMSFs which wish to purchase residential property outright without using borrowing.
Any SMSFs which are in the process of purchasing a property by using an LRBA should ensure that the purchase is completed or well underway by the end of the 45 day period which will probably be sometime in August as timing is critical.
If you’d like to speak to one of the Cloudoffis experts, you can reach out here.
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