After more than two years of consultation, amendments, and political negotiation, Division 296 — the additional 15% tax on earnings attributable to large super balances — received Royal Assent on 13 March 2026 and commences on 1 July 2026. For SMSF trustees with high balances, the legislation closes one chapter and opens another.
The headline numbers are familiar: an extra 15% tax on earnings attributable to balances above $3 million, and an additional 10% on top of that for the portion above $10 million. But the most important detail isn’t the rate — it’s the one-off cost base reset that becomes available between now and 30 June 2026.
What Made It Into the Final Legislation
The version that passed differs in two material ways from the original 2023 exposure draft:
Unrealised gains are out. The final law calculates "earnings" using realised gains only. The originally proposed inclusion of unrealised gains — the most controversial feature of the measure and a major concern for SMSF trustees holding lumpy, illiquid assets like direct property — was removed.
Carry-forward losses can be used. Capital losses carried forward from earlier years can now be applied to reduce earnings under Division 296. This is a material win for trustees whose funds have realised losses in previous years.
The first measurement date is 30 June 2027, with the first liability calculated and notified to affected members during the 2027–28 year.
The One-Off Cost Base Reset
For SMSF trustees whose total super balance is anywhere near the $3 million or $10 million thresholds, the most important short-term decision is whether to elect to reset the cost base of fund assets to market value as at 30 June 2026.
A few key points about this election:
- It applies to all assets held by the fund — you cannot pick and choose individual assets
- It is irrevocable once made
- It must be lodged by the due date of the 2026–27 tax return
The strategic logic is straightforward. Resetting the cost base to 30 June 2026 market value crystallises pre-existing capital gains at the lower (pre-Division 296) tax rate. Future gains on those assets are then measured from a higher base, reducing the realised gains that Division 296 will tax going forward.
For funds holding long-held, well-appreciated property, the reset can be especially valuable. For funds where the cost base is already close to market value, the election may add little benefit and could lock in disadvantages.
What to Do Before 30 June 2026
For members near the thresholds, several planning levers are worth reviewing now:
- Withdrawals or asset transfers out of super before the first measurement date, where the member is eligible to access their balance (typically having met a condition of release such as age 65 or retirement after preservation age).
- Contribution restraint — for members already above $3 million, additional contributions don’t escape the new tax.
- Member splitting between spouses, where appropriate, to keep individual balances below the threshold.
- Asset selection — favouring assets where the cost base reset offers the greatest benefit.
These decisions are technical, irreversible in some cases, and highly dependent on individual circumstances. There is no general answer.
The Window Is Short
The reset election applies to assets held at 30 June 2026 — six weeks away as this article is published. Trustees who want to preserve the option need to:
- Get an up-to-date market valuation for every fund asset by 30 June 2026
- Document the valuation methodology in line with SIS Regulations
- Make the formal election by the 2026–27 return due date
Property valuations in particular take time. Independent appraisals, comparable sales analysis, and trustee minutes all need to be completed and filed. Leaving this work to the last week of June risks losing the option entirely.
Don’t Wait for the First Tax Bill
The first Division 296 assessments won’t land until the 2027–28 year. But the decisions that determine how much tax each affected member pays are being made now — between Royal Assent on 13 March 2026 and the first measurement date on 30 June 2027. The one-off cost base reset is the single biggest of those decisions for many SMSF trustees with large, long-held property positions.
Speak to your SMSF accountant and a licensed adviser before 30 June 2026 if your total super balance is — or could grow to be — anywhere near the $3 million threshold.
This article is general information only and reflects Division 296 as passed into law with Royal Assent on 13 March 2026. It does not constitute personal financial, tax, or legal advice.
