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Home / SMSFs / SMSF pensions and lump sums / Division 296 tax and reversionary pensions

Division 296 tax and reversionary pensions

Garth McNallyGarth McNally

Reversionary pensions have long been considered an effective estate-planning tool for couples in retirement, automatically passing a super income stream to a surviving spouse. They have been particularly popular with self-managed super fund (SMSF) members.

But with the introduction of Division 296 tax now reshaping the tax treatment of larger super balances from 1 July 2026, SMSF members should no longer treat reversionary nominations as an automatic default position.

Need to know

Division 296 tax imposes additional tax on investment earnings for super funds with balances above $3 million.

Read more about Division 296 tax and view our Division 296 tax webinar.

Background to reversionary pensions

When you start a pension or other type of retirement income stream in your super fund, you have the option to nominate someone who automatically becomes entitled to receive the ongoing income stream payments on your death. This is referred to as a reversionary beneficiary.

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About the author

Garth McNally
Garth McNally
Garth has worked in the Australian Superannuation industry for over 20 years with a specific focus on self-managed super funds. He provides ongoing support and training to individuals as well as to professionals working in the superannuation area, including advisers, accountants and lawyers. He is a regular contributor to industry publications and to the leading professional bodies including Chartered Accountants Australia & New Zealand (CA ANZ).
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