Are SMSFs back in vogue? Reflections on the 2026 Budget from an SMSF perspective

Given the significant reform occurring in the superannuation space in recent years (e.g. Division 296, Payday Super), we anticipated a quiet night for SMSFs as the Treasurer handed down the 2026 Budget on 12 May 2026.

While that proved to be the case, the Budget announcements contained a number of significant tax reform measures which, if legislated, suggests that superannuation will continue to provide significant tax structuring advantages over other vehicles, even with the introduction of Division 296.

Superannuation CGT discount to continue

A key Budget announcement was the removal of the 50% CGT discount for all assets to be held by individuals, trusts and partnerships for more than 12 months, to be replaced with indexation, from 1 July 2027.

This long-standing 50% CGT discount is often a key factor in structuring decisions, particularly when the structure is to hold assets which will experience significant capital growth. If this Budget measure is legislated, long-standing principles of asset structuring will need to be reviewed and potentially revised.

In welcome news for SMSFs, the CGT discount for complying superannuation funds was specifically carved out in the Budget papers. This means that the current one third CGT discount that applies for complying super funds will continue. As the discounted gain is then included in the super fund’s assessable income and taxed at the concessional rate of 15% (even less if the fund is in pension phase), this results in an effective tax rate of approximately 10%, or as low as 0% if the fund is fully in pension phase.

Although, if the member is caught by Div 296, an additional 15% - 25% tax can apply.

Minimum tax rate for discretionary trusts will not directly impact SMSFs

Another key budget announcement is that from 1 July 2028, trustees of discretionary trusts will pay a minimum tax of 30% on the taxable income of the trust. The Budget papers noted that fixed trusts are not caught by this measure. As there are multiple definitions of ‘fixed trust’ under different areas of the tax laws, it remains to be seen which definition of ‘fixed trust’ will apply here.

From an SMSF perspective, the definition of a ‘fixed trust’ is often considered in the context of the non-arm’s length income (NALI) provisions of the Income Tax Assessment Act 1997 (ITAA 97). Section 295-550(4) ITAA 97 provides that where a super fund derives income as a beneficiary of a trust other than holding a fixed entitlement to the income of that trust, the income it derives is NALI.

It is due to this provision that SMSFs do not receive distributions from discretionary trusts. On that basis, the new 30% minimum tax on trustees for discretionary trusts will not directly impact SMSFs as beneficiaries.

It is also due to this provision that SMSFs are typically careful to ensure that any unit trusts they invest in are trusts in which they hold a fixed entitlement to the income. In the ATO view, for NALI purposes, a fixed entitlement is one where such entitlements to the income and capital of the trust are fixed and cannot be taken away from the unitholders. When looking at the unit trust deed, this would include, for example, clauses providing that all unitholders are entitled to the income and capital of the trust in proportion to their unitholding, and the trustee of the unit trust has no discretion in that regard.

So, will this be the definition of ‘fixed trust’ that applies for the abovementioned budget measure? If so, ‘fixed’ unit trusts in which SMSFs typically invest won’t be impacted, and unit trusts will remain a useful structuring option for SMSFs.

SMSFs remain concessionally taxed

Even with the introduction of Division 296 tax, which commences on 1 July 2026, SMSFs continue to enjoy significant tax concessions, which were untouched by the Budget announcements. This includes the one third CGT discount, the exempt current pension income provisions, and the fact that benefit payments to members over 60 are tax free.

Phil Broderick
Principal
T +61 3 9611 0163 l M +61 419 512 801  
Epbroderick@sladen.com.au

Philippa Briglia
Special Counsel
T +61 3 9611 0174 | M +61 449 404 801
E:pbriglia@sladen.com.au