Highlights

  • Division 296 is enacted law, applying from 1 July 2026.
  • For large APRA funds, net capital gains included in Division 296 earnings are multiplied by a CGT adjustment factor.
  • Small APRA funds and self-managed super funds do not use the factor.
  • The election covers all CGT assets the fund held at that date.

Capital gains in large super funds face a staged calculation under Division 296, with the proportion counted increasing each year.

How the 0.2 factor works

Division 296 is enacted law, applying from 1 July 2026. It imposes an extra 15% tax on the share of a member's super earnings linked to the part of their total superannuation balance (TSB) above $3 million. As the ATO describes it, a further 10% applies above $10 million. Only realised earnings count. For large APRA funds, net capital gains included in Division 296 earnings are multiplied by a CGT adjustment factor. The factors are:

0.2 for 2026–27

The logic is practical. Big funds generally cannot track cost bases asset by asset for each member, so the factor stands in as a rough proxy for gains that accrued before 1 July 2026, when the tax started. Small APRA funds and self-managed super funds do not use the factor. Instead, they have an optional, irrevocable election to reset the cost bases of their assets to market value at 30 June 2026. The election covers all CGT assets the fund held at that date. It cannot be made selectively. It must be made by the due date of the fund's 2026–27 return, and members do not need to have balances above $3 million for the fund to opt in. The Bills Digest notes several submissions wanted the small-fund reset to be available asset by asset. That did not happen, so trustees need to weigh the whole portfolio when deciding. The two approaches create a structural difference in how big-fund and SMSF members over $3 million are taxed in the early years. A big-fund member gets a fixed discount on every realised gain for four years. An SMSF that elects the reset instead excludes growth up to 30 June 2026, but gains accrued after that date count in full. For an SMSF holding assets with large unrealised gains at 30 June 2026, the reset can take that earlier growth out of the calculation. For a fund whose assets had fallen below their original cost, resetting to a lower market value would increase later measured gains, which helps explain why the election is optional rather than automatic.

Hypothetical example: one gain, five years

Hypothetical example: suppose a large fund realises a net capital gain of $100,000 attributable to a particular member. The amount counted in that member's Division 296 earnings would depend on the year the gain is realised: Now assume that member has a TSB of $4 million at 30 June 2027. This example assumes the share of earnings subject to the extra tax is the portion of the balance above $3 million divided by the total balance, following the ATO's description of a "share of earnings linked to the amount above $3m". That gives ($4 million − $3 million) ÷ $4 million, or 25%. Looking only at this gain, the extra tax in 2026–27 would be 15% × 25% × $20,000, or $750. Without the factor, the same calculation on $100,000 would give $3,750. The formula should be checked against the legislation and final ATO guidance, and the figures are illustrative only. For an SMSF, a different hypothetical applies. If an asset bought for $500,000 was worth $900,000 at 30 June 2026 and the fund made the reset election, its cost base for these purposes would become $900,000.