Highlights

  • The Division 296 election form is held within fund records and is not lodged directly with the ATO.
  • Trustees face a separate obligation to report earnings of in-scope members in the SMSF annual return.
  • Elections can be made at any time before the May 2028 deadline aligned with the 2026-27 return due date.
  • ATO assessments for Division 296 are expected to issue in the latter half of the 2027-28 income year.

A common misconception about Division 296 is that the cost base election form must be sent to the Australian Taxation Office. In practice, the election stays within the fund's own records while a separate annual return obligation handles ATO reporting for in-scope members.

Election Form Stays in the Fund

When a trustee makes a Division 296 cost base election, the completed form is retained in the fund's records. Trustees do not lodge it separately with the ATO. This distinguishes the election process from other fund reporting obligations where documents are formally submitted.

The election can be made at any point before the deadline of May 2028. Trustees are not required to wait until close to the deadline or to make all elections at once. This means the decision can be taken as part of regular strategic reviews conducted with advisers.

Separate Reporting Obligation in the Annual Return

Distinct from the election itself, trustees carry a separate obligation: reporting the earnings of in-scope members through the SMSF annual return. An in-scope member is one whose total superannuation balance exceeds the $3 million threshold, triggering Division 296 liability.

This reporting feeds the ATO's assessment process. The two obligations, holding the election in fund records and completing the annual return earnings disclosure, are related but distinct. Failing to meet either carries compliance risk.

When ATO Assessments Are Expected

Based on the reporting timeline, ATO assessments for Division 296 tax liabilities are expected to issue during the latter half of the 2027-28 income year. This timing reflects the lag between annual return lodgement and the ATO's processing and assessment cycle.

Funds with members approaching or above the $3 million threshold should plan for this assessment timeline when managing cash flow and liquidity. The tax liability, once assessed, falls on the member, not the fund, though arrangements for payment from the fund can be made.