Treasury has underestimated the impact of Div 296, benchmark report indicates

On Wednesday (24 September), cloud-based accounting and SMSF administration software provider Class released its 2025 Annual Benchmark Report, detailing key trends and statistics in the SMSF sector.

Based on member balances and statistics, the report estimated that the proposed Div 296 tax on superannuation would have more far-reaching tax implications than first expected.

“It's a material impact on the sector in terms of potential tax implications, and it'll be far more profound than I think was even originally forecast by Treasury and government,” Tim Steele, CEO of Class, told Accounting Times.

In 2023, when the policy was first announced, Treasury predicted that the Div 296 super tax would generate approximately $2 billion in its first full year of operation.

The report by Class found that if the Div 296 tax had been enacted for the 2024 financial year, Class members would have received a collective tax bill of $940.9 million. Approximately 18,198 Class SMSF members would be affected, with an average tax liability of $51,702.

Extrapolating these findings to the broader SMSF sector, Class estimated that SMSFs alone would see a tax burden of $2.7 billion, Steele said.

“About 35 per cent of the assets in the SMSF sector are administered on Class. And so the simple calculation is that self managed super funds alone, on that basis, assuming all the things are equal, would see a $2.7 billion tax burden. That doesn't include APRA fund members,” he said.

The report also estimated that approximately 6.7 per cent of affected Class SMSF would have insufficient liquid assets to pay the Div 296 tax, equalling roughly 1,219 members.

“That's a real challenge, and so they're either forced to sell assets they don't want to hold, or sell them at a discount to meet this tax burden,” Steele said.

The benchmark report also noted that the ATO was cracking down on property valuations.

“The regulatory environment suggests increased vigilance regarding asset valuations will be necessary. In its April 2025 guidance, the ATO emphasised that real property investments require heightened attention during end-of-year reporting,” the report read.

Steele said that the ATO had bolstered its focus on property valuations, as it had found that many taxpayers were not relying on accurate or timely valuations.

“Last year the ATO identified property valuations in SMSFs as a key compliance issue, revealing over 16,500 properties that hadn't been revalued in more than three years, signalling a growing expectation that valuations needs to be current and reflect market conditions,” he told the 2025 Class Ignite conference on Wednesday

In its benchmark report, Class urged SMSF trustees to ensure that valuations were supported by objective and verifiable evidence reflecting market value.

The report found that direct property remained a popular asset for Class SMSFs, with total holdings at $74 billion. Almost a third (29.8 per cent) had direct property holdings.

However, the share of Class SMSFs holding property decreased by 0.9 percentage points in the 2025 financial year and asset allocation was down 1.1 percentage points. The report suggested that trustees may be reducing allocations ahead of potential Div 296 changes.

Steele also noted that accurate valuations would become even more critical within the SMSF sector if the Div 296 super tax were to be legislated.

“If legislated, Div 296 will place even greater importance on the accurate and timely substantiation of valuations,” he told the conference.