Australia is about to see the largest shift of assets in its history. We are talking about $3.5trillion moving from baby boomers to gen x and millennials. While this is a major milestone for your family, the ATO sees it as a massive revenue opportunity. If you haven’t reviewed your estate planning recently, your legacy is sitting in a high-risk zone.
Key Takeaways
- ATO scrutiny is rising. The tax office is using advanced data matching to catch unreported wealth transfers and "sweetheart" deals between family members.
- New Division 296 rules start on 1 July 2026, if legislated. This adds tax on a percentage of earnings if a member’s super is over $3 million.
- Documentation is crucial. You must prove that asset transfers follow a "Pattern of Real Bargaining" to avoid the ATO resetting your valuations and issuing penalties.
Why is the ATO watching family wealth?
The ATO has intensified its focus on private wealth and succession planning, particularly for high-net-worth individuals. They’re specifically looking at how assets move between generations to catch improper valuations or tax avoidance. In short, they want to ensure every transfer happens at a fair market value.
The ATO is also watching "asset reorganisations" closely. This is where family companies shuffle shares or assets just before retirement or death to trigger CGT concessions. They call this "tax leakage." If your restructure looks like it was designed only to reduce tax, the ATO can deny those benefits.
We’re also seeing more scrutiny on "trust splitting." This is when you divide a large family trust into smaller ones for each child. While this helps family harmony, the ATO often views it as a taxable event. You need a clear commercial reason for the split to avoid a surprise tax bill.
Which 2026 tax traps will affect my inheritance?
The biggest immediate threat is Division 296, which is due to starts on 1 July 2026, if legislated. If your total super balance exceeds $3 million, a proportion of your realised earnings face an additional 15% tax, or an additional 25% tax if your total super balance exceeds $10 million.
Death triggers a second trap involving capital gains tax. Your heirs generally inherit your unrealised gains. If they sell a $2.5 million inherited property that originally cost $500,000, they could face a hefty capital gains tax bill if the asset is sold after your death.
The ATO uses data matching to cross-reference land titles, bank records, and super balances. They do this to catch any transfers that were not reported. These rules are not theoretical. They systematically erode unprepared estates by 20% to 47% before the wealth ever reaches the next generation.
Disclaimer: Super balance thresholds are subject to indexation and rules are subject to change at any time
Does my SMSF need a succession audit?
A self-managed super fund offers control but it requires constant maintenance. Many Boomers don’t regularly review their binding death benefit nominations as they are non-lapsing and easily forgotten about. If you forget to update your death benefit nomination, the fund's trustee or the ATO decides where your money goes. This often leads to family disputes that last for years.
When super is paid to an adult child who is not a financial dependent, the tax hit can be heavy. You are looking at a 17% to 32% tax on the taxable component. We can discuss with you strategies that may help minimise the impact by refreshing your nominations or cashing out certain components while you are still alive. We may also use "reversionary" pensions to keep the money in a tax-effective environment for a surviving spouse. This is a core part of a modern succession plan.
Can a Trust protect my children?
A simple Will is rarely enough for a complex estate. In collaboration with your solicitor, we may recommend using a testamentary discretionary trust. This is a trust created by your Will that only starts after you pass away. It acts like a vault for your assets.
One major benefit is that minors are taxed at adult rates. Usually, giving money to a grandchild under 18 through a normal trust triggers penalty tax rates. Inside a testamentary trust, they get the full $18,200 tax-free threshold. This allows you to fund school fees or university costs using pre-tax dollars from the estate's earnings.
These trusts also provide protection from "social risks." If a child goes through a divorce or a business bankruptcy, the assets in the trust are generally protected. Because the child does not own the assets personally, creditors and ex-spouses find it harder to claim them.
How can a Morgans advisor streamline the transfer?
Our 400+ advisors work with your tax and legal teams to build structures that survive the 2026 reforms. We focus on moving wealth across generations safely.
• Retirement and Estate Planning: We align your Will with your financial structures to ensure assets reach your heirs without unnecessary tax.
• Superannuation and SMSF: We stay on top of changing legislation and reforms, review and refresh binding nominations, and consider reversionary pensions if appropriate.
• Tax Planning: We work with your tax accountant to help resolve Division 7A loan issues and unpaid entitlements in family businesses using complying loan agreements.
• Portfolio Construction: We review your investment portfolio regularly to help you manage capital gains and losses.
• Succession Management Planning: We coordinate business leadership transitions and share transfers to prevent accidental tax events. We can also review your small business position so that sale proceeds can be used to build your retirement wealth.
Why is documentation the best defence?
The ATO expects you to prove your tax positions are correct. You cannot just rely on an old spreadsheet. You need formal trustee minutes and contemporary valuations.
If you are transferring a family business, you need a "Pattern of Real Bargaining." You must show the ATO that the deal was done like a normal business transaction. If the price is too low, the ATO will use their own valuers to reset the price and send you a bill for the difference plus penalties.
What should I do before July 1?
Baby boomers must know that the wealth inheritance transfer is already underway. If you hold a significant SMSF balance or a business, the cost of doing nothing could actually prove to be a costly mistake.
Start by listing every entity you control. Review your Will to see if it includes a testamentary trust option. Existing Morgans clients should contact their financial advisor to schedule an estate review. If you are new to the firm, contact us now to find a specialist who can secure your family’s future.
Frequently Asked Questions
What is the wealth transfer for baby boomers?
The wealth transfer is the massive $3.5 trillion shift of assets currently moving from baby boomers to their children and grandchildren. We see this as a critical window to review your tax structures so your legacy isn't eroded by new rules.
What is in a succession plan?
A succession plan is a roadmap for transferring leadership and ownership of your business or family assets to the next generation. You'll include formal documentation like share transfer agreements and tax-effective structures to prevent any disputes or surprise ATO bills.
What is estate planning in Australia?
Estate planning is the process of arranging how your assets are managed and distributed after you pass away. It involves more than just a Will because it covers your superannuation, family trusts, and powers of attorney to ensure your family's security.
Does my Will cover my superannuation?
Your Will does not automatically cover your superannuation because super is technically held in a trust by the fund's trustee. You need a valid binding death benefit nomination to ensure your super balance goes directly to your chosen beneficiaries rather than being decided by others.
