Entity Setup
Entity Setup and Structuring in Light of Australia’s Division 296: What Businesses Should Consider
Choosing how you hold high-value assets matters: structuring through SMSFs, public funds or private entities can influence exposure to large-balance super taxation under new laws.
By NomadicTax Research Team • 5-8 min read • May 1, 2026
## Why Entity Structure Matters with Division 296
Under Division 296, individuals with super balances over certain thresholds are taxed on earnings associated with high balances. Depending on how those balances are held (SMSFs, public funds, or private entities), the exposure and ability to respond will differ. Structuring assets and choosing entities wisely can make a significant difference.
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## Structures to Evaluate
- **Self-Managed Super Funds (SMSFs)**
With SMSFs, trustees will have greater control over asset value measurements, cost bases, and potential opt-in decisions (e.g. for cost base resets). However, they also face direct scrutiny and reporting obligations. ([fordhamgroup.com.au](https://www.fordhamgroup.com.au/industry-expertise/division-296-super-tax/?utm_source=openai))
- **APRA-regulated public and industry super funds**
These may provide more administrative streamlining and risk pooling. But earnings allocation to individuals, especially above thresholds, depends on fund-level allocation methods approved by regulations.
- **Private investment entities or non-super structures**
Some individuals may consider holding excess assets outside of super for flexibility, though they lose concessional tax treatment. Must compare tax and investment returns carefully.
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## Strategic Considerations When Structuring
1. **Assess liquidity and valuation**: Unrealised gains are excluded, but once assets are sold, those realised gains contribute to earnings subject to Division 296. Structure with liquidity in mind.
2. **Cost-base management**: SMSFs can opt to reset cost bases across all CGT assets by 30 June 2026, locking in market values to exclude past unrealised gains. Public funds will have alternative rules. ([fordhamgroup.com.au](https://www.fordhamgroup.com.au/industry-expertise/division-296-super-tax/?utm_source=openai))
3. **Timing issues**: Structure contributions, withdrawals, fund changes around financial year ends carefully. Avoid traps for exceeding caps due to transition timing (Payday Super, etc.).
4. **Consider tax burdens outside super**: Holding assets outside super means losing concessional rates; also consider capital gains tax, dividend tax, investment income patterns.
5. **Review estate and succession plans**: Super balances in pension phase still count, and after death there are further rules. Balancing wealth transfer with Division 296 exposure is essential.
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## Practical Scenarios
- **High-net-worth retiree**: Jane has $11 million in super across funds; majority in public fund, some property in SMSF. She opt-ins SMSF cost base reset; for public fund, seeks clarification on earnings allocation. She may draw some funds outside super, invest through trusts or private companies when tax rates plus compliance costs are favorable.
- **Executive nearing threshold**: Robert has $2.9 million in super; with expected growth he may cross $3 million. He considers slowing contributions or shifting asset mix to less volatile (lower growth) assets to avoid unintended threshold breaches.
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## Checklist for Structuring & Setup
- List all super accounts, values, assets held, unrealised vs realised gains.
- Engage adviser to model Division 296 exposure with and without structuring changes.
- Ensure cost bases and valuation documentation are in place by 30 June 2026.
- If using SMSF, prepare for more robust governance and timely reporting.
- Monitor regulatory guidance on how public funds will attribute earnings.
Settings your holdings up in the right structures now could save significant taxes later under the new regime.