Division 296 CGT Election – Key Considerations for SMSF Trustees
From time to time, clients raise questions regarding the Capital Gains Tax (CGT) election available under the proposed Division 296 superannuation tax framework. This election may be relevant for Self-Managed Superannuation Funds (SMSFs) holding assets that could be impacted by the new rules.
Overview of Division 296
Division 296 of the Income Tax Assessment Act 1997 proposes an additional tax on superannuation earnings for individuals with high superannuation balances. Importantly, this tax is imposed on the member personally, rather than the superannuation fund.
Under the proposal:
Earnings attributable to the portion of a member’s total superannuation balance above $3 million will be taxed at an additional 15%
Earnings attributable to the portion of a member’s balance above $10 million will attract an additional 10%
These measures apply to earnings derived on or after 1 July 2026.
What is the Division 296 CGT Election?
The Division 296 CGT election allows SMSF trustees to choose to reset the cost base of eligible CGT assets held by the fund as at 30 June 2026 to their market value at that date.
The purpose of this election is to ensure that unrealised capital gains accrued prior to 1 July 2026 are not inadvertently captured under the Division 296 calculation.
It is important to note that this election applies only for Division 296 purposes and does not affect the fund’s normal income tax or CGT calculations.
All or Nothing Election
A key feature of the election is that it must be applied on an all-or-nothing basis. This means:
The election must apply to all CGT assets held by the SMSF at 30 June 2026, or
It must not apply to any of them
Partial application is not permitted.
Planning Considerations Before 30 June 2026
Where trustees wish to apply different treatment to certain assets, careful planning is required prior to 30 June 2026. This may involve disposing of specific assets before year-end to ensure they are not included in the election scope.
Accordingly, trustees will need to assess well in advance which assets should remain within the election and which should be realised prior to the relevant date, allowing sufficient time to implement any changes.
Timing of the Election
While the formal election is expected to be made at or before lodgement of the SMSF’s 2025/26 annual return, in practice the decision must be effectively finalised before 30 June 2026.
This is because transactions occurring around this date may impact the ability to validly apply the election across all relevant assets.
Risk of Disposals After the Election Decision
A further complexity arises where trustees intend to make the election but subsequently dispose of assets after 30 June 2026 and before the election is formally lodged. In such cases, the election may become ineffective if it can no longer apply to all relevant assets held at the test date.
This highlights the importance of ensuring the election strategy is finalised prior to undertaking any post-30 June 2026 disposals.
Key Takeaways
In summary:
Trustees wishing to apply the CGT election selectively must plan disposals before 30 June 2026
The election must cover all or none of the CGT assets held at that date
Timing is critical, and decisions should ideally be made well before year-end
The interaction between existing CGT rules and Division 296 outcomes may be complex and requires careful consideration
Given the potential complexity and tax implications, professional advice should be sought before making any election decisions.
Source: SuperCentral – Division 296 CGT Election in Detail
For tailored advice on how Division 296 may impact your SMSF strategy, please contact ODV Private Wealth on (08) 8352 2522 or email planning@odvwealth.com.au.
General Advice DisclaimerThe information on this website is general in nature and does not take into account your personal objectives, financial situation, or needs. You should consider whether the information is appropriate for you and read the relevant Product Disclosure Statement (PDS) before making any investment decision. ODV Private Wealth Pty Ltd ABN 28 679 606 583 | Corporate Authorised Representative (No. 001313599) of Humble Goode Financial Pty Ltd AFSL 349026.