SMSF members who elect to use the cost base adjustment with regard to the Division 296 tax will find it is not portable beyond their current fund despite the impost being levied on them personally, a specialist lawyer has observed.
Sladen Legal principal Phil Broderick noted the adjustment, in which an SMSF member can elect to adopt a market value cost base for assets held at 30 June 2026 for Division 296 purposes, is limited to the fund itself.
“Even though Division 296 is really an individual tax, for the [cost base adjustment] purposes it’s actually owned by the fund,” Broderick told delegates at the recent SMSF Association National Conference 2026 in Adelaide.
“If you are in a fund that’s got a great cost base reset, maybe you added an asset such as property for $500,000 and now it’s worth $2 million, you get the cost base reset to $2 million. Then if you roll out of the fund and that asset is left behind you also leave behind that cost base adjustment,” he explained.
“If you have left behind members who have less than [a total super balance of] $3 million they are not going to be able to use the adjustment either and you won’t be able to use it in your new fund.
“It also works the other way and you can actually roll into a fund with a cost base reset and take advantage [of it] even though you weren’t a member on 30 June 2026.”
Broderick recognised the cost base adjustment also had other limitations with regard to SMSF administration.
“We’re going to have to maintain two sets of records. We’re going to have the normal records of the cost base and also have records for this additional Divisions 296 cost base,” he said.
“We will then have this structural issue with those Division 296 cost base adjustments, and where they create carry forward losses in the future they don’t carry forward for Division 296 purposes.
“So normal super fund losses carry forward but our deemed capital loss for Division 296, because of the adjustment, can’t carry that forward.”
