Beyond Super: Generational Wealth Strategies After Division 296

From 1 July 2026, shifts in superannuation tax could have a big impact on high-balance investors. Division 296 is changing the rules for balances above $3 million.

A controversial piece of legislation from the outset, its main drawback was initially the proposed tax on unrealised gains – assets that went up in value but weren’t sold.

However, with multiple changes to address concerns, the finer details of Division 296 are now confirmed. This means the real-world impacts on generational wealth, tax and superannuation strategies can now be considered.

This episode was released prior to the amendments to Division 296.

Why It Matters

This new legislation has real-world impact for lots of Australians. This isn’t just about tax. How your wealth is structured today will directly impact how effectively it’s passed on in the future.

We may ask ourselves, what is the good in building wealth, if not effectively passed on? Division 296 reveals that the structures supporting accumulation, don’t always optimise its transfer.

The Facts: What is Division 296?

Division 296 applies to individuals with a Total Superannuation Balance (TSB) from FY26-27 over $3 million as of 30 June 2027.

It has a tiered structure:

Balances between $3 million and $10 million: an additional 15% tax on earnings attributed to that portion.
Balances above $10 million: a further 10% tax on earnings above that tier.

What this means in practice:

Higher super balances may face higher tax rates, particularly if large amounts remain within the super system.

In this changing landscape, structuring your assets correctly is ciritical to achieving the best long-term outcomes.

For more information, refer to our previous article on Division 296.

So, what should you consider for your generational wealth strategy?

Through structuring a will that is tax-conscious, locating the most tax-effective recipient of your super, and proactively managing assets, you are working to get the most out of your assets and safeguard against adversities.

A well-structured approach helps to best align your financial decisions with your long-term goals. Read below to explore different strategies and what they may offer.

Strategy 1: Passing Wealth via a Will

Division 296 doesn’t just affect tax – it affects how wealth is passed on. And this makes your will more important than ever.

A will is a legal document outlining how your assets are to be distributed after your death, covering property, investments, and personal belongings.

What are the Pros?

Control over distribution: A will helps to allocate assets to your intentions.

Ability to use trusts: Rather than giving assets directly to beneficiaries, the use of a testamentary trust may:

• Provide tax advantages for beneficiaries: Income can be distributed in a tax- effective way. For example, minor beneficiaries may be taxed at adult marginal rates, as opposed to the usual higher penalty rates.
• Asset protection: Assets are better protected against changing life circumstances, such as a relationship breakdown or bankruptcy.
• Greater flexibility in managing distributions over time: A trust allows for staggered distributions, allocation based on needs, and overall flexibility as situations change.

Covers non-super assets: Whereas super falls under super fund rules, a will accounts for all other non-super assets and distributes them according to your wishes.

What are the Cons?

Can be slow through the estate: Assets within a will must go through probate, a court process validating the will which can delay access.

Potential disputes: A will can lead to disputes between beneficiaries who believe assets are unfairly allocated.

Strategy 2: Superannuation Death Benefits

A higher tax on super doesn’t just affect you. It can impact what your beneficiaries receive. Reviewing your super death benefit nominations is a must.

A superannuation death benefit is the money in your super fund paid to your binding or non-binding nominated beneficiaries when you pass away.

What are the Pros?

Direct and efficient transfer: Super can be paid directly to beneficiaries under super fund rules, avoiding delays common when through the estate.

Potential tax advantages: Payments to tax dependants (e.g. spouse or minor children) are typically tax-free, providing a highly effective transfer mechanism.

Flexibility in structuring: You may choose for assets to go directly to individuals or be funnelled into your estate for further control via your will.

What are the Cons?

Limited control: Once paid, you may have less control over how the funds are used, unlike if they were structured through an estate imposing conditions.

Tax for non-dependants: Adult children and other non-dependants may pay tax on the taxable component of super death benefits.

Administrative complexity: Binding nominations must meet strict requirements. It can get complicated, with different funds requiring different things. If a nomination is deemed invalid, the allocation of benefits may fall to the super fund trustee.

Strategy 3: Gifting During Lifetime

If Division 296 is increasing tax on large super balances, could gifting assets during your lifetime help to negate some tax and preserve wealth?

Gifting involves transferring assets to others whilst you’re still alive as opposed to passing them through your estate. This can include cash, property or financial support to family members.

What are the Pros?

Reduces asset exposure: By transferring assets earlier, you may reduce the size of your super balance or estate, in turn potentially reducing tax.

Immediate benefit to recipients: Allows you to support family members when they need it most, such as helping with a home deposit or education costs.

Greater visibility and control: You can see the impact of your support and adjust distributions as required.

What are the Cons?

Loss of control: Like super benefits, an asset you gift is no longer your own. You won’t have control over how it’s used.

Centrelink implications: Under deprivation rules, Centrelink limits how much you can gift:
• Up to $10,000 per year, and
• $30,000 over 5 years
Any excess amount is counted as your own asset for 5 years, potentially affecting your pension.

Tax consequences: There may be tax burdens based on asset distribution. For example, profits made on the sale of an asset may incur Capital Gains Tax (CGT). How does this tie into a will?

The Key Takeaway

Essentially, there is no single ‘best’ strategy for managing assets – the strongest outcomes come from combining the approaches that work for you.

In short, these changes reinforce the importance of diversifying your strategy. Basically, don’t put your eggs all in one basket. To truly harness the benefits of super in this everchanging landscape, careful planning must be undertaken.

It’s important to ask yourself:

Where are your assets held?
How will they be transferred?
What tax outcomes will apply?

Answering these questions can help build a robust strategy that remans responsive to the future.

Don’t navigate it alone. At Aintree Group, we’re here to help you understand what this means for you and help you plan accordingly. Speak to our team today to review your tax strategy and optimise your position.

This article contains general advice only and has not been prepared with your situation and needs in mind. For individual and personalised advice, we highly recommend that you seek out proper professional advice.