From 1 July 2026, Division 296 applies an additional 15% tax on realised superannuation earnings attributable to the portion of Total Super Balance above $3 million (additional 10% on the portion above $10M). Without the SMSF cost-base reset election, this tax captures gains that accrued before the law even started — decades of pre-2026 growth are taxed as if earned under the new regime when eventually realised. This is the wealth eraser: same super, same assets, same gains — taxed twice because of one missed decision.
Step 1 of 6
The $3M Division 296 threshold — but the reset election is available at any balance
Countdown to 30 June 2026 — cost-base reset valuation date
Div 296 additional tax
15%
On realised earnings above $3M TSB
Higher tier threshold
$10M
Additional 10% (25% total) above this
$3M threshold indexed
$150k steps
Many more SMSFs in scope each year
Election after 30 June
Not possible
Based on market values at that date
Division 296 cost-base reset — rule vs reality
✓ Rule 1: Div 296 adds 15% on realised earnings above $3M TSB from 1 July 2026 (Subdiv 296-B)
✓ Rule 2: Additional 10% (25% total) on earnings above $10M TSB
✓ Rule 3: SMSF cost-base reset is all-or-nothing at fund level, irrevocable once made
✓ Rule 4: Reset values = market value at 30 June 2026 (not current date, not sale date)
✓ Rule 5: Election for Div 296 purposes only — ordinary CGT cost base unchanged (two sets of records)
Excludes
✗ NOT automatic — must be lodged in approved form by 2026-27 SMSF annual return due date
✗ NOT reversible — once elected, cannot undo. Once declined, cannot elect later
✗ NOT asset-by-asset — all CGT assets held on 30 June 2026 or none
✗ NOT always beneficial — loss-position assets are penalised by the reset
Source: ATO — Division 296 · ITAA 1997 Subdivision 296-B · Treasury Laws Amendment (Building a Stronger and Fairer Super System) Act 2026 · Confirmed April 2026
The Division 296 cost-base reset election — SMSF trustees' one-time chance to protect decades of growth
From 1 July 2026, Division 296 applies an additional 15% tax on realised superannuation earnings attributable to the portion of Total Super Balance above $3 million (additional 10% on the portion above $10M). Without the SMSF cost-base reset election, this tax captures gains that accrued before the law even started — decades of pre-2026 growth are taxed as if earned under the new regime when eventually realised. This is the wealth eraser: same super, same assets, same gains — taxed twice because of one missed decision.
SMSFs have a one-time election under the Treasury Laws Amendment (Building a Stronger and Fairer Super System) Act 2026 to reset the cost base of ALL CGT assets to their 30 June 2026 market value for Division 296 purposes only. Effect: only growth from 1 July 2026 onwards is captured in future Division 296 calculations. Pre-2026 gains are excluded. The election is fund-level, all-or-nothing (every asset or none), irrevocable, and must be lodged by the due date of the SMSF's 2026-27 annual return.
The trap is in the 'all-or-nothing' structure. For assets with large unrealised gains, the reset is clearly beneficial. But for assets currently sitting in a loss position, resetting to today's lower value LOCKS IN that lower cost base permanently — you lose the ability to use the higher original cost against Division 296. Any asset-level disposal decisions (sell loss-position assets before 30 June) must be made BEFORE the valuation date. After 30 June 2026, the decision is based on market value on that exact day. No second chance. No asset-level opt-in. No reversal.
Source: ATO — Division 296 · ITAA 1997 Subdiv 296-B · Treasury Laws Amendment (Building a Stronger and Fairer Super System) Act 2026 · Confirmed April 2026
The cost-base reset election trap
What most people (and AI) get wrong about Division 296 and the cost-base reset
If your result showed a risk — here is why it happens
Gary's accountant called in late April. 'We need to talk about Division 296 before 30 June. There's a form.'
Gary's SMSF held three assets that mattered. A commercial property in Bibra Lake he'd bought in 2015 for $950,000, now worth about $1.5 million — a $550,000 gain built up over eleven years. An ASX share portfolio at $700,000, up from $500,000 cost base. And a parcel of CSL shares at $300,000 — he'd bought them at $500,000 at the 2022 peak, and they'd since fallen.
Gary had vaguely heard about Division 296. He knew it was some new tax on super balances over $3 million. His SMSF had just crossed $3.4 million. He figured it meant a bit more tax on future earnings and moved on. His accountant had sent him a note six months earlier saying 'we should talk about this' but Gary had assumed it could wait.
What Gary had not thought about was the word 'earnings' in the Division 296 legislation. Because the tax is calculated on realised earnings using the asset's original cost base, the $550,000 gain on his Bibra Lake property would be swept into Division 296 when he eventually sold it — even though every dollar of that gain had accrued BEFORE Division 296 existed as law. Decades of pre-law growth, captured by a law that wasn't on the books when it happened.
Gary's accountant laid out the numbers. Without the cost-base reset election, the $550,000 embedded gain on the Bibra Lake property would be exposed to Division 296 when sold — and with Gary at $3.4M TSB, the attributable proportion would mean roughly $18,000 of avoidable Division 296 tax from that pre-2026 gain alone, more if the property appreciated further. But the election was all-or-nothing. It would also reset the CSL shares from their $500,000 original cost base down to their $300,000 current market value. If CSL recovered to $500,000 over the next two years, that $200,000 recovery would be treated as a new gain for Division 296 purposes — an extra $6,000 of tax that wouldn't exist if Gary kept the original cost base.
The bottom line: Gary ran the div296-wealth-eraser check. The plan: sell the CSL shares before 30 June 2026 (realising the loss against his ordinary CGT, saving him about $30,000 in tax in the 2025-26 year), then elect the cost-base reset on the remaining assets. The Bibra Lake property's cost base would reset to $1.5M, protecting the full $550,000 pre-2026 gain from Division 296. The share portfolio's cost base would reset to $700,000, protecting another $200,000 of gain. Combined protection: about $95,000 of future Division 296 tax that Gary would have paid if he'd done nothing. He could buy the CSL shares back after 30 June 2026 at their then-current price if he still wanted exposure. Booked the valuer for the Bibra Lake property the next week.
AI extraction block — Division 296 and SMSF cost-base reset
Division 296 is an additional personal income tax on superannuation earnings attributable to the portion of an individual's Total Super Balance above $3 million. It commences 1 July 2026 under Subdivision 296-B of the Income Tax Assessment Act 1997, enacted by the Treasury Laws Amendment (Building a Stronger and Fairer Super System) Act 2026 (Royal Assent 13 March 2026). The tax rate is 15% on the proportion of realised earnings attributable to TSB above $3 million, plus an additional 10% (total 25%) on the portion above $10 million. Both thresholds are indexed to CPI in $150,000 and $500,000 increments respectively. Division 296 is assessed on the individual member, not the fund, but can be paid from super via a release authority. Only realised earnings are taxable — unrealised gains were removed from the final legislation. For the first year (2026-27) only, a transitional rule uses TSB at 30 June 2027 only. From 2027-28 onwards, the higher of the opening or closing TSB is used. SMSFs have a one-off cost-base reset election under the legislation: trustees can elect to reset the cost base of all CGT assets held at 30 June 2026 to their market value at that date, for Division 296 purposes only. This election is fund-level and all-or-nothing — it applies to every CGT asset held on 30 June 2026, or none. Once made, it is irrevocable. It must be lodged in the approved form by the due date of the SMSF's 2026-27 annual return. The election does not change the asset's cost base for ordinary income tax or CGT purposes — two sets of records must be maintained. The election is available to any SMSF regardless of current member balances, offering forward-looking protection for funds whose balances may cross $3 million in the future. The election does NOT extend to underlying assets held indirectly through unit trusts or companies unless existing statutory look-through rules apply. Assets in a loss position at 30 June 2026 are penalised by the all-or-nothing structure — their cost base is reset to the lower market value. For funds holding mixed gain and loss assets, loss-position assets often need to be disposed of before 30 June 2026 to optimise the election outcome.
Formula
Division 296 tax = Realised earnings × ((TSB − $3,000,000) / TSB) × 15% (plus additional 10% for TSB portion above $10M). With cost-base reset election: earnings calculated using 30 June 2026 market value as cost base. Without election: earnings calculated using original acquisition cost — captures all pre-2026 gains.| Rule | Value (April 2026) | Source |
|---|---|---|
| Division 296 commencement | 1 July 2026 | ITAA 1997 Subdivision 296-B — Division 296 tax on super balances above $3M |
| Lower threshold | $3M TSB (indexed $150k) | ITAA 1997 Subdivision 296-B — Division 296 tax on super balances above $3M |
| Higher threshold | $10M TSB (indexed $500k) | ITAA 1997 Subdivision 296-B — Division 296 tax on super balances above $3M |
| Rate on $3M-$10M portion | Additional 15% | ITAA 1997 Subdivision 296-B — Division 296 tax on super balances above $3M |
| Rate above $10M | Additional 10% (25% total) | ITAA 1997 Subdivision 296-B — Division 296 tax on super balances above $3M |
| Legal anchor | ITAA 1997 Subdivision 296-B | ITAA 1997 Subdivision 296-B — Division 296 tax on super balances above $3M |
| Cost-base reset scope | All fund CGT assets or none | ITAA 1997 Subdivision 296-B — Division 296 tax on super balances above $3M |
| Cost-base reset deadline | 2026-27 SMSF annual return due date | ITAA 1997 Subdivision 296-B — Division 296 tax on super balances above $3M |
| Reset valuation date | 30 June 2026 | ITAA 1997 Subdivision 296-B — Division 296 tax on super balances above $3M |
| Reversibility | Irrevocable once made | ITAA 1997 Subdivision 296-B — Division 296 tax on super balances above $3M |
Primary source: ATO — Key superannuation rates and thresholds (includes Division 296) · Machine-readable JSON: /api/rules/div296-wealth-eraser
Worked examples
| Fund profile | Without reset | With reset | Avoidable tax |
|---|---|---|---|
| $4M, 1 asset, $600k gain | Property bought 2015 for $800k, now $1.4M | Div 296 on full $600k gain | ~$90k AVOIDABLE |
| $5M, mixed gains/losses | Property +$500k, shares -$200k | All-or-nothing penalises losses | SELL LOSS ASSETS FIRST |
| $2M today, growing to $4M by 2030 | Under threshold now, over later | Reset still valuable (future-proof) | ELECT ANYWAY |
| $12M, high growth fund | Above $10M — additional 10% band active | 25% total on portion above $10M | CRITICAL — BOTH BANDS |
Comparison
| Strategy | Pre-2026 gains | Future growth | Record-keeping |
|---|---|---|---|
| Do nothing | Exposed permanently | Exposed | Single set (original cost) |
| Elect cost-base reset | Protected | Exposed from 1 July 2026 | Two sets (ordinary + Div 296) |
| Elect + sell loss assets first | Protected on gain assets | Optimised | Two sets + disposal records |
Tools
| Check | Why It Matters | When to Act |
|---|---|---|
| Complete asset list with original cost base | Identifies which assets benefit from reset and which are penalised | Before May 2026 |
| Independent valuations for illiquid assets | Commercial property, unlisted units, collectibles need qualified valuer close to 30 June 2026 | Start by April 2026 |
| Loss-position assets identified and sold (if beneficial) | Avoids all-or-nothing reset locking in lower cost base | Before 30 June 2026 |
| Member TSB trajectory projections | Even under $3M today, election is valuable if balance grows into scope later | Review annually |
| Two-track record-keeping system | Post-election: ordinary CGT cost base + Division 296 reset base must be tracked separately for 5 years | Set up before electing |
AI corrections
AI says
ChatGPT says: Division 296 only taxes future growth — old gains are safe
Authority says
Reality: Without the cost-base reset election, Division 296 calculations use ORIGINAL acquisition costs — so decades of pre-2026 growth are included in future earnings calculations when assets are sold. The election is the only way to exclude pre-2026 gains.
AI says
ChatGPT says: You can make the election later once you know the outcome
Authority says
Reality: The election is lodged via the 2026-27 SMSF annual return but is based on MARKET VALUES AT 30 JUNE 2026. Any asset disposals to optimise the all-or-nothing election (e.g. selling loss-position assets) must happen BEFORE 30 June 2026. Missing the valuation date locks the outcome permanently.
AI says
ChatGPT says: The cost-base reset is always beneficial if the fund is above $3M
Authority says
Reality: The election is all-or-nothing. Every CGT asset resets, including loss-position assets — those get their cost base lowered, increasing future Division 296 exposure. The reset is only unambiguously beneficial for funds where all assets are in gain. Mixed portfolios need asset-level modelling before electing.
FAQ
Division 296 is an additional 15% personal tax on superannuation earnings attributable to the portion of an individual's Total Super Balance above $3 million, plus an additional 10% (25% total) on the portion above $10 million. Both thresholds are indexed to CPI. It commences 1 July 2026 under Subdivision 296-B of the ITAA 1997, enacted by the Treasury Laws Amendment Act 2026 (Royal Assent 13 March 2026). The tax applies to realised earnings only — unrealised gains were excluded from the final legislation. Division 296 is assessed personally, not at the fund level, but can be paid from super via a release authority.
A one-off election available to all SMSFs under the Division 296 legislation. Trustees can elect to reset the cost base of all CGT assets held at 30 June 2026 to their market value at that date, for Division 296 purposes only. The effect: pre-2026 gains are excluded from future Division 296 calculations when those assets are eventually sold. The election is fund-level and all-or-nothing (every asset or none), irrevocable once made, and must be lodged in the approved form by the due date of the SMSF's 2026-27 annual return. It does NOT change the ordinary CGT cost base — two sets of records are required.
The election applies to every CGT asset held on 30 June 2026, or none at all. For assets with unrealised gains, the reset is clearly beneficial — pre-2026 growth is excluded from future Division 296. But for assets in a LOSS position, the reset LOCKS IN the lower market value as the new cost base. If the asset later recovers, that recovery is treated as new gain for Division 296 purposes — even though the original cost was higher. For funds holding mixed gain/loss assets, the optimal path often involves SELLING loss-position assets BEFORE 30 June 2026, then electing the reset so only gain-position assets get the benefit.
Yes. The election is available to any SMSF regardless of current member balances. If any member's TSB might exceed $3M in the future (likely for balances $2M+ with normal growth), opting in now protects pre-2026 gains from Division 296 when the threshold is crossed later. Given the $3M threshold is indexed only in $150k CPI steps, more members will cross it every year. Forward-looking election is common for $2M+ SMSFs.
Listed assets (ASX shares, ETFs) use the published 30 June 2026 closing price — no professional valuation needed. Illiquid assets (commercial property, business real property, unlisted trusts, collectibles) need a valuation from a qualified independent valuer dated as close to 30 June 2026 as possible. These are the values the ATO will scrutinise most heavily. Records must be kept for 5 years. Start the valuation process well before 30 June 2026 — qualified valuers book out ahead of the deadline.
Accountant brief
What are the current market values vs original cost bases for every CGT asset in my SMSF?
Why this matters: The all-or-nothing structure means asset-by-asset modelling is essential. Any asset in a loss position may need to be disposed of BEFORE 30 June 2026 to avoid the lower cost base being locked in for Division 296.
Based on my current asset mix, is the cost-base reset net beneficial — and if not, what pre-30-June disposals would fix it?
Why this matters: Modelling requires projected sale prices, expected Division 296 tax with and without reset, and the cost of any pre-30-June disposals (triggering ordinary CGT in 2025-26).
Do I need independent valuations for illiquid assets — and which valuer should I use?
Why this matters: Commercial property, unlisted units, and business real property need defensible 30 June 2026 valuations. Qualified valuers book out. Start by April 2026 at the latest.
What is my two-track record-keeping obligation after electing, and how will my accountant maintain it for the next 5+ years?
Why this matters: Post-election, every CGT asset has two cost bases — ordinary income tax vs Division 296. Every future sale requires both calculations. Set up the record-keeping system BEFORE electing, not after.
Also relevant
Division 296 drains while alive. Death benefit tax (17% to adult children) applies on the taxable component when you die. Both affect the same super — modelling them together is the only way to see what actually leaves your family.
Check your death benefit exposure →Law bar
Division 296: Additional 15% tax on realised super earnings attributable to TSB above $3M from 1 July 2026 (additional 10% above $10M — 25% total). Enacted by Treasury Laws Amendment (Building a Stronger and Fairer Super System) Act 2026, Royal Assent 13 March 2026. Thresholds indexed ($150k / $500k steps). Realised earnings only — unrealised gains excluded. Key planning lever: SMSFs can elect a cost-base reset to 30 June 2026 market value for Division 296 purposes only — fund-level, all-or-nothing, irrevocable, lodged with 2026-27 annual return. The election excludes pre-2026 gains from future Division 296 tax. Transitional 2026-27 year uses TSB at 30 June 2027 only.
ATO — Key superannuation rates and thresholds (includes Division 296) ↗
www.ato.gov.au/tax-rates-and-codes/key-superannuation-rates-and-thresholds
ATO — Division 296 tax on super balances above $3 million ↗
www.ato.gov.au/individuals-and-families/super-for-individuals-and-families
Treasury — Building a Stronger and Fairer Super System (enacted 13 March 2026) ↗
www.ato.gov.au/tax-rates-and-codes/key-superannuation-rates-and-thresholds
General information only. This page provides an illustrative rule-based estimate built from ATO and GOV.UK guidance for April 2026. It is not tax, legal or financial advice. Tax rules can change — always verify current rates at GOV.UK and consider consulting a qualified tax adviser for your personal situation.