Complications of maintaining two cost bases in Div 296

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“In practice, an SMFS can choose to reset the cost base of all their assets as at 30 June 26. If they do so, then going forward the SMFS will have two cost bases, one for normal capital gains tax and a different cost base for Division 296,” Manning said.

“This is going to be quite difficult. If you remember back in 2017 when we reset the cost base for the transfer balance cap, that was a hell of a thing to do, but at least with that we only had one cost base. We were resetting cost bases for everything, whereas for this, we’re going to be having two cost bases going forward, and doing so is an irrevocable election.”

Manning said that an SMSF going into 30 June 2027 with an unrealised loss may not decide to reset.

“Also, we don’t have to be immediately affected by Division 296 to make that election, but you might say, for an example, if you’ve got a husband and wife fund, each have $500,00 and the unrealised capital gains are maybe a few grand, then is the benefit of that in the future?” he said.

“It’s probably going to be nil, because they’re probably never going to be in Div 296 territory, but even if they are, is the advantage of that resetting the cost base, if it’s only a small amount, are going to be worth it when we consider perhaps the cost and the hassle involved on maintaining two cost bases in the future.”

He continued that, for large APRA funds, it’s only going to be a portion of the realised net capital gains that are included in the earnings.

“Basically, the key thing there is that it’s for large APRA funds which will be the majority of people apart from SMFS, we don’t reset the cost base. The APRA funds simply can’t do that. We only reset the cost base for SMFS,” he said.

Manning gave an example of Ingrid, the single member of an SMSF which, as at 30 June 2026, has assets of $3,900,000 (consisting of a $3,300,000 property and $600,000 cash).

The property was purchased in 2015 and has a cost base of $1,800,000. If Ingrid’s SMSF decides to reset the cost base for Div 296 purposes, going forward, the property will have a cost base of $1,800,000 for “normal CGT” and $3,300,000 for Div 296.

Ingrid’s TSB as at 30 June 2027 is $4,300,000; as at 30 June 2028, it’s $5,000,000. During 2027/28, Ingrid’s SMSF sells the property for $4,200,000. The SMSF has other income of $100,000 (rent and interest) and the SMSF’s ECPI is 45 per cent.

“If the cost base is reset, Ingrid’s TSB as of 30 June 2027 is $4,300,000, her Div 296 super earnings are $700,000 and her TSB on June 30 2028 is $5,000,000. If there is no cost base reset, her Div 296 super earnings would be $1.7 million,” Manning said.

“In this instance, by resetting the cost base, the earnings are $1 million or less, so when we subsequently sell the property, we still pay the normal CGT based on the true cost base. But our adjusted cost base for Div 296 is different.

“We’re going to have the advantage of resetting the cost base, but to reiterate, whether we do or don’t reset the cost base for normal CGT, it’s going to be the same. But in this instance, we’re approaching 30 June 26 with a large, unrealised capital gain and as it is an SMSF, we should reset the cost base.”

Keeli Cambourne
June 29, 2026
smsfadviser.com

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