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Division 296 – Important review of SMSF investment portfolios before 1 July 2026

  • 9 June 2026
  • by Hanh On
  • 6-minute read

The Federal Government has now legislated Division 296 through the:

  • Treasury Laws Amendment (Building a Stronger and Fairer Super System) Act 2026; and
  • Superannuation (Building a Stronger and Fairer Super System) Imposition Act 2026.

The legislation received Royal Assent on 13 March 2026 and will commence from 1 July 2026 .The first Division 296 assessments are expected to occur following the end of the 2026–27 financial year.

Division 296 imposes an additional tax on superannuation earnings attributable to individuals with Total Superannuation Balances exceeding $3 million.

While much of the public attention has focused on the additional tax itself, one of the most important strategic issues for SMSF trustees is the optional CGT cost base reset available before commencement.

Optional SMSF cost base reset

Under the enacted Division 296 rules, SMSFs may elect to reset the cost base of eligible CGT assets to market value as at 30 June 2026 for Division 296 purposes.

Broadly, the purpose of the reset is to ensure that unrealised capital growth accrued before 1 July 2026 is not included in future Division 296 calculations.

Importantly:

  • the election is optional,
  • the election is irrevocable once made, and
  • the reset applies for Division 296 purposes only.

What this means:

The ordinary income tax cost base of the asset remains unchanged for normal CGT purposes. This means trustees may effectively need to maintain separate CGT records for ordinary tax purposes and Division 296 purposes.

The reset applies to the entire portfolio

A critical issue many trustees overlook is that the reset election is effectively an “all or nothing” election. Trustees cannot selectively choose individual assets to reset. If the election is made, it applies across all eligible CGT assets held by the SMSF at 30 June 2026.

What this means:

This means trustees cannot simply:

  • reset high-growth assets with large unrealised gains, while
  • retaining original cost bases for underperforming or loss-making assets.

As a result, while the reset may significantly reduce future Division 296 exposure for some assets, it may create adverse outcomes for others. For example:

  • assets currently in unrealised loss positions may lose future tax effectiveness,
  • future capital loss utilisation may be impacted, and
  • different assets within the portfolio may produce competing tax outcomes.

Importance of reviewing the investment portfolio

Given the complexity of the new rules, clients should consult with their advisers before making any cost base reset election.

A detailed review of the SMSF investment portfolio should be undertaken, including consideration of:

  • unrealised capital gains and losses,
  • future disposal intentions,
  • carried forward capital losses,
  • pension and accumulation balances,
  • liquidity requirements,
  • estate planning implications, and
  • long-term investment objectives.

What this means:

For some funds, the reset election may produce substantial long-term tax savings under Division 296. For others, the election may create unintended consequences and reduce future tax flexibility.

The correct strategy will depend on the specific composition of the fund’s investment portfolio and the member’s broader financial objectives.

Early planning is critical

Although Division 296 does not commence until 1 July 2026, early planning is essential. Clients with superannuation balances approaching or exceeding $3 million should seek professional advice well before 30 June 2026 to determine:

  • whether the Division 296 cost base reset is appropriate,
  • whether investment restructuring should be considered, and
  • whether the current SMSF investment strategy remains suitable under the new regime.

Contact us

We recommend you speak with your financial adviser to review your superannuation and investment strategy prior to 1 July 2026. Alternatively, if you would like to discuss how Division 296 may impact your superannuation fund, including whether a cost base reset or investment restructuring strategy may be appropriate, please contact BG Private.

About the author

Hanh On

Hanh On

Partner | SMSF Management
Hanh On is a Partner at BG Private with over 25 years of experience across accounting, financial planning and self-managed superannuation. He founded BG Private's dedicated SMSF Management division in 2004 and was appointed Partner in 2017, working with professionals, families and pre-retirees to build the strategies and structures that support their long-term financial goals.
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