TITLE: Division 296 CGT Cost-Base Adjustment Election: What Australian SMSF Trustees Need to Know
Separate form gives trustees more flexibility
Australian SMSF trustees now have greater clarity on how to make the one-off Division 296 CGT cost-base adjustment election. It will use a dedicated form, separate from the SMSF annual return. The form is not yet available, so your priority is to prepare the records and evidence needed to make an informed decision when it is released.
Speaking at The Tax Institute National Superannuation Conference in Melbourne on 22 October 2026, Jemma Sanderson of Cooper Partners confirmed that the election will be made through a standalone ATO form, not through the SMSF annual return. She described this as “a really good outcome”, particularly for trustees who lodge their annual return late.
As reported by SMS Magazine, the election can be made independently of the fund’s 2026/27 return. That gives trustees a separate opportunity to complete the election by the relevant lodgment due date, even if the annual return is not ready.
The ATO has not yet released the dedicated form. Once available, the election can be made up to the lodgment due date for the 2026/27 income year. The form is to be retained in the fund’s records, rather than sent to the ATO. Expect the SMSF auditor to request a copy.
Understand what the election changes
The one-off election allows an SMSF to reset the cost base, or reduced cost base, of its CGT assets to market value at 30 June 2026 for calculating future Division 296 fund earnings.
The election applies to all relevant CGT assets held by the fund at that date. You cannot select only the assets that appear favourable. Once made, it is irrevocable.
That makes this a whole-of-fund decision, not a formality. Resetting values may reduce the effect of gains that accrued before 1 July 2026, but the result depends on the fund’s asset mix, unrealised gains and losses, members’ circumstances, and likely future transactions. Obtain appropriate advice before deciding; an all-assets adjustment may not produce a favourable outcome for every SMSF.
A fund may make the election even if no member currently exceeds the $3 million threshold. That could matter if a member’s total superannuation balance may rise above the threshold in a future year.
Check who may be affected
Division 296 tax applies to individuals, not directly to the SMSF. However, trustees may still need to calculate the fund’s Division 296 earnings, attribute them to members in scope, and report relevant information to the ATO if requested.
For 2026/27, the relevant test is a member’s total superannuation balance on 30 June 2027. Under the rules described in the SMS Magazine feature on preparing for Division 296, individuals above $3 million may face an additional 15% tax on the portion of taxable super earnings attributable to balances over the threshold. A further 10% applies to the component corresponding to balances above $10 million. Both thresholds are subject to indexation.
Do not assess members using their SMSF balance alone. Total superannuation balance can include interests in other Australian super funds, including APRA-regulated funds and certain reversionary or successor income stream interests. A member below $3 million in your SMSF may still be in scope when their other interests are counted.
For later income years, Division 296 may apply if a member’s balance exceeds the relevant threshold immediately before the year begins or at its end. Review the ATO’s Division 296 guidance for SMSFs and keep members’ circumstances under review.
Use this trustee checklist now
You do not need to wait for the form to start preparing. Take these steps to support a timely, well-documented decision:
- Identify potentially affected members. Ask members to consider their total superannuation interests across all Australian funds. This helps you spot exposure that may not be visible in the SMSF’s own records.
- Complete 30 June 2026 valuations. Gather evidence for assets whose market value may be difficult to establish later.
- Document your valuation method. Record the information considered, the valuation approach and the basis for the value at the relevant date.
- Assess every CGT asset together. Model the all-or-nothing election across the fund’s asset mix before choosing whether to proceed.
- Keep the election and supporting records. Once the ATO releases the form, retain the completed election and relevant cost-base calculations with the fund’s records for audit.
The ATO has identified market valuations as an area of focus for SMSF auditors in 2026/27. Property, private companies, trusts, collectables and other unlisted investments may require particular attention. Retain reasonably available evidence that supports ownership, existence and market value. Delays can make it harder to reconstruct the position at 30 June 2026 or obtain evidence created close to that date.
This is an execution window: gather member information, complete the valuation work and establish the records now, while the relevant date is recent. For related Australian SMSF compliance coverage, read our update on the ATO’s refreshed SMSF borrowing rules for business real property.
FAQs
What is the Division 296 CGT cost-base adjustment election?
It is a one-off election that allows an SMSF to use the 30 June 2026 market value of its CGT assets as their cost base for calculating future Division 296 fund earnings. It applies across the fund’s relevant assets and cannot be revoked.
How is the election made?
The election will be made on a standalone ATO form, separate from the SMSF annual return. The ATO has not yet released the form. The completed form is kept in the fund’s records rather than lodged with the ATO, and the auditor may ask to see it.
Can a fund elect if no member is currently above $3 million?
Yes. A fund may make the election even if no member currently exceeds the threshold. Consider the fund’s assets and members’ potential future circumstances before deciding.
What should SMSF trustees do now?
Identify members who may be in scope, gather information about their other super interests, complete 30 June 2026 valuations, preserve supporting evidence and assess the election’s whole-of-fund effect.
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