A Guide to the Division 296 Modelling Tool
For super fund members
The one thing to take away
This tool produces a single headline figure, but that figure is only ever as good as the assumptions behind it. The Sensitivity Analysis is the most valuable part of the tool, because it shows you how much the answer moves when an assumption changes. A small change to one input can reverse the result entirely. Treat the headline as a starting point, then spend your time changing assumptions and re-modelling.
What this tool is for
Division 296 is an additional tax on the earnings attributable to large superannuation balances. It is tempting to assume that reducing your super balance to avoid the tax must leave you better off. It often does not.
Moving money out of super has its own costs: tax inside the alternative structure, the tax and transaction costs of getting the money out in the first place, and the loss of super's concessional treatment. This tool weighs the Division 296 tax you would save against everything it would cost you, and works out whether — and by how much — you would actually come out ahead, or whether doing nothing is the stronger position.
It is a modelling tool, not advice. It does not tell you what to do; it shows you what the numbers do under the assumptions you give it.
The idea behind the model
Every scenario the tool runs comes down to one comparison:
- The benefit: the Division 296 tax you avoid by holding less inside super.
- The cost: the tax and ongoing costs of the alternative vehicle, the year-one cost of getting the money out (capital gains tax and transaction costs on assets that have to be sold), and the super concessions you give up.
If the benefit clearly beats the cost, an alternative structure may strengthen your position. If it does not, the model will show that taking no action is the stronger outcome — and it will say so plainly. The tool compares the two paths on a liquidation basis: not just what each side looks like on paper, but what you would actually walk away with if everything were cashed out, after all tax. That is the honest comparison, and it is the one the tool leads with.
Using the tool: four steps
Fill in the handful of inputs that matter
Most fields are pre-filled with sensible defaults. Only a few need your attention:
- Required Your name, age, pension account balance, and accumulation account balance. These have no default — they describe you.
- Check default The fund type, the CPI (inflation) rate, and — for an SMSF — the portfolio cost base and the cash held in the fund. These already have a value, but the value materially changes the answer, so it is worth confirming each one reflects your situation.
Everything else can be left as-is for a first pass. The fund type matters more than people expect: an SMSF, a pooled APRA fund (most industry funds), and a non-pooled APRA fund (super wraps) are treated differently, and the same balances can produce quite different answers. Select the type you hold.
Press Calculate and read the Key Findings
The tool tests every withdrawal amount across every alternative vehicle (an individually owned portfolio, a company, an insurance bond, and a discretionary trust, on their own or in combination) and reports the calculated optimum — the strategy that produces the highest total wealth on your assumptions.
Directly below the Key Findings is an analysis breakdown showing, over the full projection:
- Division 296 tax saved — the benefit.
- Alternative-vehicle tax & costs incurred — everything that offsets it.
- Net change in combined wealth — the bottom line, shown in today's dollars as well as future dollars.
If no action is the stronger position, the heading will read Sub-Optimal Scenario and the wording will make clear that the figures shown are for context only. That is the model doing its job — it is just as useful to learn that doing nothing wins as it is to find a strategy that helps.
Look at the chart and the year-by-year detail
The chart shows four lines. Two are the running balances of the no-action baseline and the strategy — what each looks like on paper. The other two, the grey lines, are what you would actually keep if you liquidated everything at each year, after all tax. The grey lines are the ones that matter, because they are the true like-for-like comparison.
Use the zoom button to switch between the full term and a focused view around the year the strategy overtakes the baseline — often the most informative window. The Year-by-Year Detail table directly underneath is simply those same lines as numbers, year by year.
Study the Sensitivity Analysis — then change things and model again
This is the part that matters most. It is explained in full in the next section.
Why the Sensitivity Analysis is the most important part
The headline figure is a single point. Real life is a range. The Sensitivity Analysis exists to show you how wide that range is — how much the answer moves when one assumption changes while everything else stays the same.
Each row in the analysis changes one input only and re-runs the entire calculation from scratch. It then shows how much the result changes and, where relevant, the year the strategy recovers its starting costs. The sections cover:
| What it tests | Why it can swing the answer |
|---|---|
| Individual tax rate | Whether earnings outside super are taxed at a flat top rate or at marginal rates makes a large difference, especially for modest amounts. |
| Available fund cash | If assets must be sold to fund a withdrawal, the year-one capital gains tax and transaction costs can wipe out the benefit. Holding cash changes everything. |
| Cost base | A lower cost base means larger embedded gains and a bigger tax bill on the way out. |
| Insurance bond fee | A difference of a tenth of a percent in the bond's internal cost can change which structure wins. |
| Investment strategy | The income-versus-growth split and turnover of your portfolio drive how much is taxed each year. The tool models every available portfolio profile. |
| CPI / inflation | Inflation feeds the thresholds, the tax brackets, and the cost-base indexation all at once, often in offsetting directions. The net effect is rarely obvious. |
If the answer barely moves across every sensitivity row, you can have reasonable confidence in it. If it swings wildly — or flips between "act" and "do nothing" — then the headline figure is not something to rely on by itself, and the assumptions driving the swing are the ones worth getting right (or getting professional input on).
Change an assumption and model it again
The single most useful thing you can do with this tool is not to read one result — it is to run many. Every input can be changed and the model re-run instantly, as many times as you like, at no cost. Treat it as a workbench, not a calculator.
Worthwhile things to vary and re-model:
- Fund type. Run SMSF, pooled APRA, and non-pooled APRA. The same balances can produce opposite conclusions, mainly because of how the money has to come out.
- Tax method. Switch between the fixed rate and marginal rates. If you use marginal rates, also vary the external income, because that sets the bracket everything else stacks on top of.
- Portfolio profile. A growth-heavy portfolio and an income-heavy portfolio are taxed very differently under Division 296. Try the ones that resemble how you actually invest.
- CPI. The default is a long-run average. Model a higher and a lower figure and see how much it matters.
- Cash held and cost base (for an SMSF). These drive the year-one cost of acting and are often the difference between a strategy working and not.
After each change, press Calculate again and compare. You will quickly develop a feel for which assumptions your situation is sensitive to and which it is not. That understanding is far more valuable than any single number the tool can produce.
Reading a result honestly
- The calculated optimum is the best outcome the mathematics found on the assumptions you entered. It is not a forecast, and it is not a course of action you are being pointed towards — it is the result of an exercise.
- A small advantage (the tool flags anything modest in today's-dollar terms) should be treated as "no meaningful difference", because it can be erased by minor variation in real life.
- Future dollars look larger than they are. Always read the today's-dollars figure alongside the headline.
- A "no action" result is a genuine, useful finding — not a failure of the model.
Important
This tool is provided by SMSF Alliance for illustrative and educational purposes only. It is a modelling exercise based entirely on the assumptions you enter. It does not constitute personal financial advice, taxation advice, or legal advice, and it is not a recommendation to adopt any particular course of action.
Actual outcomes will differ — often materially — from those modelled, because investment returns, tax rates, inflation, legislation, and personal circumstances all vary from the assumptions. Independent professional advice should be sought before acting on any withdrawal strategy.