Much of the discussion around Division 296, which comes into effect 1 July 2026, has been around the 15% additional tax on superannuation balances exceeding $3 million. What's not being emphasised enough is the one-off opportunity before SMSF trustees to reset the cost base of assets to market value as at 30 June 2026 for Division 296 purposes.
SMSF trustees have until their 2026-27 income tax return is due to 'elect' a cost base reset of assets to their market value as at 30 June 2026 for Division 296 purposes only. Let's break this down.
What will electing to reset the cost base do?
Electing to reset the cost base will allow future Division 296 calculations to be based off the value of your assets as at 30 June 2026, effectively quarantining – for Division 296 purposes only – gains accumulated before 30 June 2026.
The option to reset the cost base of assets has been provided as a way to prevent the new Division 296 tax from unfairly penalising historical, pre-existing asset growth or unrealised gains.
You'll note that the wording is around 'electing' to reset, meaning this is a choice trustees can make based on whether the reset will benefit the fund overall.
Which assets held by the fund can you reset?
If the decision to reset is made, it's important to note that ALL assets held by the fund will be reset to their cost base. You cannot pick-and-choose which assets you can reset.
This is an all-or-nothing decision and is permanent and irreversible.
By when do you have to make the decision to reset?
Before your 2026-27 income tax return is due.
If you work with a tax agent, you have until 15 May 2028.
If you're lodging for the first time (new SMSF) it may be due around 28 February 2028.
Self-lodgers have until 31 October 2027.
So, why is the 30 June 2026 date important?
Because the reset will be based on asset values as at 30 June 2026.
This makes it critical for trustees to find a good valuer and book in their valuation sooner rather than later.
While the $3 million threshold may not apply to you right now, it may in the future: whether that’s from unexpected changes in personal circumstances or broader market movements.
Getting appropriate valuation evidence for assets by 30 June 2026 is about two things:
Giving yourself flexibility (and certainty) to decide whether you want to elect the asset reset. (Your financial advisor will be able to tell you which assets have gains, which have losses, and whether the reset will benefit the fund overall.)
Ensuring that the additional 15% of Division 296 tax only applies to asset growth that occurs after 1 July 2026.
For listed investments, historical pricing information can be obtained after the event.
This is not the case for property, related-party investments, unlisted shares, or units in private trusts.
After 30 June 2026, the opportunity to record the value of these assets as at that point in time will be permanently lost.
With just days left to get valuation records in place, valuers will be in high demand. If you've begun making enquiries, you might already be finding this to be the case.
If you haven't, we encourage you to book in your valuation as a matter of priority.
You don't want to end up paying more tax than you have to, because you couldn't find a valuer.
Here’s a useful illustration of why the timing of the cost base reset matters.
Say your SMSF owns a warehouse with the following values:
If the fund elects to reset the cost base to $2,000,000 (market value as at 30 June 2026), then only the gains after 30 June 2026 — $500,000 — will be relevant for Division 296 purposes. The earlier increase in value of $1.5 million is effectively quarantined.
But you cannot get to this outcome without documented evidence of the property's market value as at 30 June 2026.
Recording valuation as at 30 June is key to having flexibility and certainty when deciding whether a cost-base reset will benefit the fund overall.
To quote from an article in the Australian Financial Review by SMSF advisor Meg Heffron:
"If ever there was a year to pay for a formal valuation, [...] this is it."
At Azure Group, we can answer any questions you may have about your SMSF and provide referrals for valuers. Drop us a line here.