2026 Risk Watch for HNW Families: Compliance & Regulatory Pressures (Part 1)

This is a two part series to kick off 2026 with a strategic risk focus for the new year. Many of the families I work with conduct annual planning after the summer holidays and I recommend including these areas of focus in your agenda.

The first part of this series addresses compliance and regulatory pressures, either heightened focus from regulators on existing rules or new or proposed rules requiring consideration of current treatment.

The second part of the series addresses the strategic and governance pressures across families that can include technology, family dynamics, investment and the global landscape.

Key regulatory and compliance issues for 2026 will be:

1. Intensifying ATO Scrutiny on Trusts and Compliance

The Australian Taxation Office (ATO) has made discretionary (family) trusts a major focus area for compliance review in 2025–26. This includes:

Family Trust Elections (FTEs):

• The ATO is auditing historical elections and trust distributions, and applying Family Trust Distribution Tax (47%) where rules are breached, which can hit families unexpectedly for past years of income.

• Complex interpretations of distributions, loans and interposed entities are drawing more inquiries.

Trust distribution compliance & Section 100A risks:

• The ATO is closely examining whether distributions actually benefit beneficiaries, especially where distributions are used to fund costs or assets that benefit others — which can trigger punitive taxation.

Broader trust risks & historical liability bills:

• There are reports of significant retrospective tax assessments for trust distributions, signalling that previous trust administration may no longer be “low risk.”

Recommendation: HNW families with long-standing trust structures should prioritise trust governance, documentation and independent review before an audit starts. Professional validation of distributions, trustee minutes and FTE accuracy is now essential.

2. ATO Targeting Succession Planning and Wealth Transfers

Succession and intergenerational planning are flagged as high-risk compliance areas:

• The ATO has identified tax risks around business transfers and succession strategies, particularly where significant assets are moving from one generation to the next.

• Wealthy baby boomer households are specifically targeted in this review phase, owing to the large transfer of assets as they retire.

Key issues include:

• Incorrect use of small business CGT concessions around sales and succession events.

• Re-structuring ahead of retirement that may inadvertently trigger tax liabilities or fail ATO tests.

Recommendation: review and document succession strategies, CGT concession eligibility and inter-entity dealings well in advance of formal transitions.

3. Division 296 / $3m super tax - upcoming 1 July 2026

A proposed additional tax of 15% on earnings above $3 million in super funds has been confirmed for 1 July 2026, albeit with some changes in scope. The ATO is already monitoring behavioural responses to this policy.

New super tax rules may reduce value for beneficiaries receiving super death benefits, affecting estate planning outcomes. 

Recommendation: Super-based planning and estate strategy need updating to reflect the Division 296 environment, especially for families with larger balances.

4. Broader ATO Focus Areas Beyond Trusts

According to official ATO guidance, other priority risk areas for privately owned and wealthy groups include:

• Division 7A / company loans: Ensuring loans from companies to shareholders or family members comply with formal loan rules to avoid deemed dividends.

• Capital Gains Tax (CGT) concessions: Incorrect eligibility for discounts, rollovers, or small business concessions.

• Lifestyle assets & non-arm’s length transactions: Mischaracterisation of personal assets as business expenses and related party transactions without proper documentation are risk triggers.

5. The Self Managed Superannuation Fund (SMSF) Compensation Scheme of Last Resort (CSLR) - proposed

The CSLR was established to compensate retail clients who suffer losses due to misconduct by failed financial firms where no other compensation avenue exists. Currently the scheme is funded by levies on industry Super Funds, however SMSFs (as well as financial advisors) are being considered to also provide funding.

SMSFs have been excluded up until this point on the basis that:

• Trustees control their own investment decisions

• SMSFs are not product manufacturers

• SMSF trustees already bear fiduciary responsibility

Recommendation: There are a number of models being talked about in policy and industry circles with a direct levy on SMSFs the least popular but not impossible. Keep an eye on developments in this space and scenario plan super-based planning.

Conclusion: compliance and regulatory focus areas for 2026

The priorities for Regulatory and Compliance planning for HNW families in 2026 should be:

1. Immediate compliance review: Trusts, FTE status and distributions.
2. Stress-test succession / estate plans: Align legal and tax outcomes with ATO practice.
3. Update super strategies: Account for Division 296 and estate tax impacts.
4. Strengthen governance: Maintain documented decision-making across tax positions.
5. Engage proactive advisors: Tax, legal and wealth specialists to navigate ATO scrutiny and policy change.

Reach out if you need assistance. Kinexis helps navigate the complexities of significant family wealth.