The ability to use the cost-base adjustment under the Division 296 rules should not be dismissed where an SMSF member’s balance is under $3 million and its application may be highly suitable for those invested via a trust structure, a tax and super specialist has noted.
Westover Advisory principal Liz Westover said pending capital losses may be regarded as a reason not to take advantage of the adjustment, but this strategy can overlook future liabilities that could be partly addressed in the present.
“If you’re in a net loss position, you would probably think twice about whether or not you want to make the [cost-base adjustment] election,” Westover said at the recent ASF Audits Technical Summit 2026 in Adelaide.
“The other area of consideration is if you’re selling assets in the foreseeable future, and not yet at the $3 million mark. You might not make the election because you are weighing up where the losses and gains actually sit.
“You don’t actually have to be a member with more than $3 million for the fund to elect to make the adjustment and it won’t be long for many people before they might make significant contributions, such as downsizer or non-concessional contributions, to quickly get over that. Over time, with investment earnings, you could very quickly do it.
“So don’t think those clients will never be in that area. If there’s no compelling reason not to make the election, then they probably would make it. It’s going to be a no-brainer for most people.”
She pointed out the approach of looking ahead could be applied to trusts as the cost-base adjustment rules made no provision for capital gains distributed from indirectly held assets and those would come into the fund without any change.
“In those cases, especially in closely held or privately held trusts, you might look at is it worth collapsing the trust,” she added.
“Timing is going to be everything and it’s not going to work in all circumstances, but if you have massive distributed gains coming out of a trust and can collapse it to create a loss to offset the distributed gain, that could be worth it.
“We do have clients who have very specific unit trusts set up for a particular asset, and that’s all there was in those trusts, so when the asset’s gone, can you collapse the trust to actually get yourself a better tax outcome out of it?”
Jason Spits
SENIOR JOURNALIST
Jason is a senior journalist with Benchmark Media and writes for the selfmanagedsuper website and magazine and smstrusteenews website. He has covered financial services since 1999 and has written about life insurance, superannuation, investment management and financial advice, in both a freelance and in-house capacity, and also did a brief stint as a media manager for an industry association. He has been the editor of trade titles Money Management and Financial Standard, and was most recently senior journalist with life insurance title Riskinfo.
Articles by Jason