Division 296 passed both Houses of Parliament on 10 March 2026 and takes effect from 1 July 2026. For anyone holding assets in a self-managed super fund with significant capital gains built up over the years, there is a one-time opportunity in the legislation that could materially reduce your tax exposure going forward. It applies whether your balance is already above $3 million or heading in that direction.
But it is not automatic. You need to make an active election, and there are hard deadlines attached.
This post explains what the cost base reset opt-in does, who it applies to, what the key dates are, and what you stand to lose by doing nothing.
What Is Division 296?
Division 296 introduces an additional tax on superannuation earnings for individuals with a Total Superannuation Balance above $3 million. The tax applies per member, not per fund. It operates on a two-tier structure.
For balances between $3 million and $10 million, earnings attributable to the portion above $3 million attract an additional 15 per cent tax on top of the standard 15 per cent concessional tax. That brings the combined rate to 30 per cent on those earnings. For balances above $10 million, the additional rate is 25 per cent, bringing the combined rate to 40 per cent.
A critical point that changed from the original 2023 super tax proposal: the tax now applies only to realised earnings. Unrealised gains, meaning growth in asset values where you have not actually sold anything, are no longer included in the calculation. Both thresholds are indexed to inflation, rising in $150,000 increments for the $3 million threshold and $500,000 increments for the $10 million threshold, in line with the Transfer Balance Cap.
The tax is assessed to the individual member, not the fund. The ATO will issue a Division 296 assessment directly to you. You can then choose to pay it from personal funds or elect to have the amount released from your super.
What Is the Cost Base Reset Opt-In?
The legislation includes a one-time transitional provision for SMSFs and small APRA funds. Trustees can elect to reset the cost base of all CGT assets held in the fund to their market value as at 30 June 2026, for Division 296 purposes only.
The practical effect is significant. Without the reset, when you eventually sell a long-held asset, the entire capital gain from original purchase price to sale price is included in the Division 296 earnings calculation. With the reset, only growth above the 30 June 2026 market value is counted. For funds holding assets that have appreciated substantially over the past decade or more, this difference is not marginal. It is the single biggest planning lever available under the new legislation.
Consider a North Brisbane commercial property purchased in 2010 for $800,000, now valued at $2.4 million, assuming there are other assets within the SMSF bringing the total superannuation balance to exceed $3m. Without the reset, the full $1.6 million gain (above the reset value) eventually flows into the Division 296 calculation when the property is sold. With the reset, the cost base lifts to $2.4 million and only gains above that figure are captured.
This does not change your fund’s normal CGT position. When you sell an asset, the capital gains tax calculation still uses the original acquisition cost. The reset applies exclusively to the Division 296 earnings calculation. In practice, this means your fund will effectively maintain two cost bases for each asset going forward: the original cost base for standard CGT purposes, and the reset cost base for Division 296 purposes. You are not giving up a CGT benefit in exchange for Division 296 relief.
Who Should Consider Opting In?
The obvious group is SMSF members whose Total Superannuation Balance already exceeds $3 million, particularly where the fund holds assets with large embedded gains built up over many years.
But here is the part many people miss: any SMSF can opt in, even if no member currently exceeds the $3 million threshold. If your balance is heading in that direction and your fund holds assets that have appreciated significantly, locking in the 30 June 2026 market value now could save you considerable tax in the future. You will not get a second chance to do this.
For wealth accumulators in their 40s and 50s with strong contribution strategies and growth-oriented portfolios, the threshold may be closer than it appears. While the $3 million cap is indexed, it moves in slow increments and could sit unchanged for several years. With concessional contribution caps set to increase from 1 July 2026, balances that sit at $2 million today could comfortably reach $3 million within a decade through contributions and investment growth alone. The cost of opting in is minimal. The cost of not opting in, if your balance crosses $3 million in five or ten years with large built-up gains in the portfolio, could be substantial.
We are seeing this play out with clients across the Sunshine Coast and Birtinya area, where dual-income professionals and business owners are building super balances faster than they realise.
Key Dates You Need to Know
- 30 June 2026 is the valuation date. This is when all fund assets need to be valued at market value if you intend to opt in. For hard-to-value assets like commercial property, unlisted investments, or units in related trusts, you should be arranging independent valuations now. These figures need to be robust and defensible if the ATO ever queries them.
- 1 July 2026 is when Division 296 commences. The first financial year the tax applies to is 2026-27.
- 30 June 2027 is the first test date. For the transitional 2026-27 year only, your Total Superannuation Balance is assessed solely at 30 June 2027. From 2027-28 onwards, the test uses the higher of your balance at the start or end of the year. If you are considering withdrawing funds to bring your balance below $3 million, you have until this date to do so for the first year. If you are based in North Lakes and want to understand where you sit before this date, a straightforward review of your total super position is a good starting point.
Due date of the 2026-27 SMSF annual return is the deadline for the opt-in election. The approved form must be lodged by this date. Critically, your 2025-26 return must be lodged on time to qualify for the extended lodgement window. If it is late, your opt-in deadline gets pulled forward. Talk to your accountant now to make sure your lodgement history is clean.
If your fund holds assets that are difficult to value, such as commercial property, business real property, or units in unlisted trusts, start the valuation process well ahead of 30 June 2026. These valuations need to be from a qualified independent valuer and should be completed as close to the 30 June 2026 date as possible. Leaving this to the last minute creates unnecessary risk.
What Happens If You Don’t Opt In?
The opportunity is permanently forfeited. There is no second window, no extension, and no retrospective application. Once the deadline passes, the decision is made for you by default.
Your fund’s assets retain their original cost bases for Division 296 purposes. When those assets are eventually sold, the full capital gain from acquisition to sale feeds into the Division 296 earnings calculation. For a fund holding multiple long-held assets with embedded gains built up over a decade or more, the cumulative additional tax over a full retirement horizon could run well into six figures.
It is also worth remembering what happened in 2017 when a similar cost base relief was available for the Transfer Balance Cap changes. Some funds missed the window because returns were lodged late or the election was not properly made by their accountant. The consequences were permanent. The same risk applies here, and the stakes for many funds are higher.
The Trade-Off You Need to Understand
The opt-in is an all-or-nothing decision at the fund level. You cannot pick and choose which assets to reset. If the fund opts in, every CGT asset held at 30 June 2026 gets its cost base reset to market value, including assets that are currently sitting in a loss position. This is one of the most common questions we hear, and it is also where the decision gets more nuanced.
That matters. If an asset has dropped below its original purchase price and you reset the cost base to the lower market value, you are locking in a reduced cost base for Division 296 purposes. If that asset later recovers and is sold above the original purchase price, the Division 296 calculation captures a larger gain than it otherwise would have. This is not a theoretical risk. Funds holding listed shares or managed fund units that dipped during recent market volatility could be caught by this if they opt in without checking the numbers first.
For most funds with significant net unrealised gains across the portfolio, the benefit of the reset will outweigh this downside. But it requires modelling, not a blanket assumption. Your financial adviser should work through the numbers on a fund-wide basis before you commit, particularly where the decision intersects with your broader estate planning and recontribution strategy.
Frequently Asked Questions
No. The reset applies exclusively to the Division 296 earnings calculation. When you sell an asset, the CGT gain is still calculated using the original acquisition cost. Your fund’s standard income tax treatment does not change. The two calculations run side by side, each using a different cost base for the same asset.
No. The election applies to all CGT assets held by the fund at 30 June 2026. You cannot opt in for some and leave others. This differs from the 2017 Transfer Balance Cap relief, which did allow asset-by-asset elections. It is why modelling the net effect across your entire portfolio before making the decision is essential.
You can still opt in. Any SMSF can make the election regardless of current member balances. If your balance is likely to exceed $3 million in the future and your fund holds assets with significant built-up gains, opting in now protects those gains from Division 296 when you eventually cross the threshold. Given the thresholds are indexed, it is worth modelling your projected balance trajectory before assuming this will not affect you.
It depends on the asset type. Listed shares and securities simply use the closing market price on 30 June 2026. No professional valuation is needed for those. For assets where there is no objective market price, such as commercial property, business real property, unlisted units in related trusts, or collectibles, you will need a valuation from a qualified independent valuer as close to 30 June 2026 as possible. These are the figures the ATO is most likely to scrutinise, so they need to be robust and defensible. If your fund holds hard-to-value assets, start the valuation process well ahead of the deadline.
If you want to know how Division 296 applies to your fund, whether the cost base reset makes sense for your specific assets, and what your estimated tax exposure looks like with and without the election, we can help. Scott Westerweller is an SMSF Specialist Advisor (SSA) accredited by the SMSF Association and holds specialist accreditation in self-managed super fund strategy. As an independent, self-licensed advisory firm, our advice is built around your circumstances, not product commissions. We will review your fund’s asset composition, model the impact of the opt-in across your portfolio, and give you a clear picture of your options before the deadline.
Contact Precision Wealth Management today to book a Division 296 review.
This article is general information only and does not constitute financial advice. Division 296 legislation passed Parliament on 10 March 2026 and is awaiting Royal Assent. Some operational details are still subject to ATO guidance and regulations. You should seek advice from a qualified financial adviser before making any decisions about your superannuation.
