What’s Shaping the Super and Tax Landscape in 2026

James Creevy and Mitchell Harding, current as of: 13 March 2026.

Division 296 and the Bendel case have been headline topics for advisers for a while now, but the next chapter is about to unfold in 2026. With the Division 296 legislation having now passed the Senate, and the High Court’s decision in Bendel still pending, staying across what comes next will be critical for those navigating the super and tax landscape.

Division 296

Division 296 first came to light in the 2023 Federal Budget and was introduced as the Treasury Laws Amendment (Better Targeted Superannuation Concessions) Bill 2023 on 30 November 2023. The purpose of Division 296 is to target tax concessions enjoyed by individuals with what the Australian Government deem to be ‘very large super balances’. Under the regime, people whose total superannuation balance (TSB) exceeds a threshold — currently set at $3 million — will pay an additional tax on the earnings from the portion of their balance above that threshold.

Importantly, the tax does not apply to the super fund itself, but to the individual member. That means the liability follows the account holder, whether their super is in industry fund/s or a self-managed super fund (SMSF), or a combination of both.

Following much needed consultation with the industry and political debate, the design of Division 296 has been adjusted. The key features now include:

Two-tier Threshold System

Earnings attributed to balances between $3 million and $10 million will be taxed at an effective rate of 30% (the usual 15% fund tax plus a 15% top-up under Division 296)
Earnings attributed to balances above $10 million will be taxed at an effective rate of 40% (15% fund tax + 25% top-up under Division 296).

Indexation of Thresholds

The $3 million and $10 million thresholds will be indexed, increasing in steps — $3 million threshold rises in increments of $150,000; the $10 million threshold in $500,000 increments.

Only Realised Earnings Will Be Taxed

The earlier plan had included “unrealised gains”, a controversial feature that drew much ire from the industry and public alike. One reason for the outcry was that ‘lumpy’ high value assets, such as farmland, could be forced to be sold if they pushed a members TSB over the threshold and that member could not afford to pay the annual tax with liquid funds. Under the revised design of the regime, only actual earnings such as dividends, interest, rent, and realised capital gains will be included.

CGT Transitional Adjustments

As part of the transition to the Division 296 tax regime, small superannuation funds—including SMSFs—can make a one-off election to adjust the cost base of their assets to market value as of 30 June 2026. This choice is designed to ensure that only capital growth occurring after the commencement of the new tax is captured in the earnings calculation.

To utilise this adjustment, trustees must elect to apply it to all eligible CGT assets held directly by the fund by the time they lodge their 2026-27 tax return. While the election is irrevocable and requires rigorous record-keeping for five years after an asset’s eventual sale, it notably does not trigger a CGT event or reset the 12-month eligibility period for the CGT discount.

The adjustment sets the first element of the cost base to the asset’s market value on 30 June 2026, resetting all previous cost base elements to nil. When an asset is eventually sold, the fund calculates a modified net capital gain specifically for Division 296 purposes. It is important to note that this adjustment does not allow for indexation, nor can any resulting capital losses be carried forward to offset Division 296 earnings in future years. Ultimately, this provision offers a vital “clean slate” for small funds to protect pre-existing capital gains from the new tax liabilities.

Start Date Deferred

The first iteration of Division 296 was proposed to commence on 1 July 2025 but the revised law is now set to commence on 1 July 2026, making the 2026–27 financial year the first year for which earnings will be taxed under Division 296.

Who Pays and How

The rule applies to all types of super — industry funds, retail funds, SMSFs, even defined-benefit schemes — so high-net-worth individuals, business owners with SMSFs, long-term high earners, and those with substantial inherited super might be exposed. Similar to the application of the existing Division 293, the tax will be levied at the individual level, but the person may elect either to pay the liability personally or have their superannuation fund pay it on their behalf from their super account.

What’s Next?

While the primary legislation provides the framework for the application of Division 296, many of the finer operational details are delegated to the regulations. Treasury typically releases regulations for consultation shortly after a bill passes or receives Royal Assent to ensure the industry has sufficient time to prepare for the July 1 commencement date. Given the complexity of the calculations and the transition rules, it is expected that draft regulations will be released for public consultation in the coming weeks.

It’s also vital to start considering those clients that are members of SMSFs that have a balance nearing the thresholds as the valuation of the Fund’s assets and individual member balances by 30 June 2026 becomes extremely important. This will be the “anchor” date for the one-off CGT cost base reset for SMSFs to ensure pre-commencement gains aren’t unfairly taxed later.

Commissioner of Taxation v Bendel

Background

The widely followed, and what will inevitably be seminal, ‘Bendel case’ centres on whether unpaid present entitlements (UPEs) – which are amounts a trust owes to a corporate beneficiary when the trust resolves to distribute income but does not actually pay it out — qualify as a “loan” under the private-company loan rules in Division 7A of the Income Tax Assessment Act 1936 (ITAA 1936).

Mr Bendel was in control of a trust that had corporate beneficiaries and he argued that UPEs made to corporate beneficiaries should not be considered loans and therefore should not be caught under Division 7A.

Since 2009, the Australian Taxation Office (ATO) treated UPEs as loans under its rulings, including most recently in TD 2022/11. That interpretation meant that UPEs triggered Division 7A’s “deemed dividend” rules unless properly documented as compliant loans.

On 19 February 2025, the Full Federal Court of Australia delivered its judgment (in Commissioner of Taxation v Bendel [2025] FCAFC 15), unanimously dismissing the ATO’s appeal from the earlier decision of the Administrative Appeals Tribunal (AAT). The Court held that an unpaid present entitlement is not a loan for Division 7A purposes.

The Court’s reasoning emphasised that s 109D(3) of Division 7A requires an enforceable obligation to repay a specific principal sum (i.e. a genuine loan), not just an entitlement to be paid out at some undefined point. The Court held that the mere fact a beneficiary was presently entitled to trust income, but did not call for payment, did not create a “loan” as defined by section 109D(3).

In practical terms, the Full Federal Court ruling challenges a 16-year old ATO interpretation that deemed UPEs to be loans (and hence taxable dividends) for corporate beneficiaries.

The High Court

12 June 2025 marked the day that the Commissioner of Taxation for the ATO was granted special leave to appeal to the High Court of Australia, and, on 31 July, the ATO filed its Appellant’s submission. The Respondents, being Mr Bendel and Gleewin Investments Pty Ltd, filed their Respondents’ submissions in response. These submissions were then presented in a hearing in the High Court on 14 October.

The core issues, as framed in those submissions, remain:

Whether the UPEs (unpaid present entitlements) from the trust to the corporate beneficiary constitute “loans” under s 109D(3) of the ITAA 1936 (for the purposes of Division 7A); and
If they do, whether the amounts must then be treated as deemed dividends, or whether alternative provisions (e.g. s 6-25 of Income Tax Assessment Act 1997) prevent their reinclusion in the trust’s income.

Because both parties have now filed written submissions and participated in oral arguments before the High Court, the case is fully before the Court for final decision.

What The Submissions Say

The ATO argues that by allowing the trust to retain and use the funds to which the company was “presently entitled,” the corporate beneficiary effectively provided “financial accommodation” — equivalent to a loan under s 109D(3).
The Respondents (Bendel / Gleewin) argue that no “loan” was made and that instead, the UPE was merely an entitlement that remained unpaid and unpaid entitlements do not amount to a loan as defined in s 109D(3).
As an alternative if the Court finds a loan arises, the Respondents argue that reincluding amounts via deeming provisions should be prevented under s 6-25 of the ITAA 1997 because the trust income and the unpaid entitlement are the same amount and would therefore result in double taxation.

These arguments largely reflect the same core issues that were made before the Full Federal Court but the High Court now has the final say.

What Happens Next

Once delivered, the High Court’s decision will be final and non-appealable, and it is hoped that clarity is delivered in the first half of 2026. Until that decision, the ATO has publicly stated it will continue administering the law as per its prior view (that UPEs are loans) under TD 2022/11.

Even if the Court sides with the Respondents, affected taxpayers may still face scrutiny under other anti-avoidance provisions (e.g. s 100A, Subdivision EA), depending on their facts.

Given the significance and the number of entities potentially affected, namely private companies receiving trust distributions, it is widely expected that the decision will result in legislative or regulatory clarifications to provide certainty.

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