Highlights

  • Division 296 is the new tax on Earnings attributable to members with large super balances.
  • The ATO has said it is drafting a law companion ruling on the measure, so further guidance is expected.
  • The cost-base election, however, needs a cost base and a 30 June 2026 Market Value for each individual asset.
  • The election matters only for funds with at least one member who may be affected by Division 296.

SMSF trustees who hold investments through a Wrap account or Investment platform are being encouraged to act sooner rather than later if they want to use the Division 296 cost-base adjustment.

For trustees who may want to make the election, the message is that record-keeping decisions made now could make the process far easier later.

What the cost-base adjustment does

  • the election applies to all CGT Assets held by the fund at the end of 30 June 2026, generally covering assets held directly, as well as those held through a Custodian or a look-through arrangement such as an LRBA holding trust;
  • the adjusted cost base is used only for working out Division 296 fund earnings, not for the fund's ordinary income tax;
  • the election must be made in the approved form, which the ATO says will be provided in due course, by the due date of the fund's 2026–27 annual return;
  • the election does not need to be given to the ATO, but it cannot be revoked; and
  • the fund must keep records of each element of the cost base and reduced cost base for each affected asset, generally for five years after it becomes certain no further CGT events can happen to that asset.

Why wrap accounts create a problem

Many SMSFs that use a wrap or platform record the investment as a single holding in their financial statements, relying on the provider's reports for the underlying detail.

The guidance indicates that most funds are choosing to break wrap holdings out into individual assets in their 2026 financial statements.

The approach suggests splitting the assets out in the 2027 financial statements could also be acceptable, but that trustees should first consider how much data the wrap provider can supply, whether the fund trades during 2026–27 and whether they are comfortable tracking cost bases manually.

Practical considerations for trustees

  • confirm with their Accountant whether any member is likely to be affected by Division 296;
  • ask the wrap provider what asset-level cost base and transaction data it can supply, and for which dates;
  • decide whether to split holdings in the 2025–26 or 2026–27 accounts, and record that decision;
  • keep the 30 June 2026 market values and cost base records together in a dedicated file; and
  • remember that the election is irrevocable, so it should be considered carefully with advice.

The takeaway

The Division 296 cost-base adjustment is made asset by asset, and the ATO expects detailed records to support it.