A sector specialist has recommended SMSF trustees choose to invoke the capital gains tax (CGT) cost base adjustment under the Division 296 tax rules if the portfolio of their fund is in a gain position.
The Division 296 tax measure allows SMSF trustees to adjust all of the assets held in the fund to reflect their value on 1 July 2026.
“There is nothing lost by making the CGT [adjustment] election because it’s only for Division 296 purposes. [Doing so] doesn’t reset anything from a pure fund tax point of view. So for those [members who] are in the gain position, make the election,” Smarter SMSF education and technical manager Tim Miller told attendees of a SuperGuardian technical webinar held today.
He acknowledged the decision is not as straight forward for SMSF members whose portfolio is in a loss position and the decision to take up the cost base adjustment did not have to be made straight away but if trustees want to act upon their asset value losses they will have to do so before 30 June.
SuperGuardian chief executive Josh Williams recognised the scenarios SMSF trustees may find themselves in that would or would not justify realising capital losses before the end of the 2025/26 financial year.
“If you have a portfolio that is in a net gain position at 30 June there is really no benefit to realising losses before [the end of the financial year]. That is unless you are selling down assets in a gain position and that means by 30 June you are in a net loss position and therefore wouldn’t elect to [utilise] the cost base adjustment,” Williams noted.
“To be clear from a tax perspective there is no real downside to realising assets in a loss position now because they are either offset against gains in the current year or carried forward.
“If your client portfolio is in a net loss position at the present…but close to being in a net gain position if you were to realise those losses between now and 30 June, and [if doing so would shift] the fund portfolio into a net gain position and as a result create value in electing to use the CGT adjustment, that’s where it can be beneficial [to act now].”
Miller added the ATO is still yet to provide a form on which SMSF trustees can elect to use the Division 296 CGT cost base adjustment.
Darin Tyson-Chan
Editor
Darin is the founder and publisher of Benchmark Media, an independent publishing house whose mastheads include financialobserver, selfmanagedsuper and smstrusteenews. He has been covering the financial services space for over a decade and in this time he has worked for a variety of trade publications. Darin has also written for the Money section published in The Sydney Morning Herald and The Age.
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