My SMSF is over $3 million. How should I prepare for the new super tax?
I understand that new laws that will impose additional tax on people with superannuation balances over $3 million from the 2026/27 financial year also introduce the option of “cost base zeroing” of assets. Can you explain how this works, what needs to be done and who needs to be informed?
SMSF expert Meg Heffron points out that many self-managed super funds have assets that have increased significantly in value over time. To ensure that this past growth is not caught by the new Section 296 tax, the legislation allows trustees to reset the cost basis of any CGT assets held on 30 June 2026 to the market value on that date. This is an all or nothing option, so you can’t reset some assets and ignore others.
If the trustees choose to use zeroing, the fund must effectively keep two sets of records for each asset. The original cost basis remains in place and is used in preparing the fund’s tax return and calculating capital gains tax in the ordinary way.
In addition, a second adjusted cost basis is established based on the market value on June 30, 2026. This adjusted figure is used only for calculating gains under Section 296 tax and does not affect the fund’s normal tax position.
For example, consider a fund holding two assets on June 30, 2026. One was purchased for $4 million and is now worth $7 million, the other cost $2 million but has fallen in value to $1.5 million. If reset is selected, these market values become reference points for Section 296 purposes while the original purchase prices continue to apply for regular tax.
If the initial asset is later sold for $10 million, the fund will show a capital gain of $6 million on its tax return, which will be the difference between the sales price and the original $4 million cost. But for Section 296 purposes, the gain would be only $3 million compared to the $7 million reset value.
The opposite can also occur. If the second asset is sold for $1.8 million, the fund will record a $200,000 capital loss for tax purposes, but a $300,000 gain for Section 296 because the reset value is less than the original cost.
The detailed mechanism on how the election will be held has not yet been announced. All we know at this stage is that this must be done in a format approved by the ATO and must be completed by the fund’s 2026/27 tax return deadline.
While this is some distance away (even as late as May 2028 for some funds), the relevant asset values for adjustment will be 30 June. The practical implication of this is that trustees will need to consider whether to make the choice much earlier and then obtain accurate market valuations that are well supported by evidence.
I recently retired and have a pension of approximately $900,000. It’s stuck in the spooling stage and I haven’t needed to access it yet. Using the three-year step-up rule, I plan to add another $390,000 in nonconcessional contributions in early July. This money is currently in a time deposit.
Given the current global uncertainty, would you recommend delaying adding these funds until conditions improve and keeping the money in high-interest term deposits for now? Secondly, do you always recommend phasing retirement into retirement, even if the income is not needed? I worry that transforming in the current environment could have a negative impact.
History tells us that timing the market is far more important than trying to time the market. If you have recently retired, you may have 25 or more years ahead of you, during which time you will see normal returns to all markets.
If you have worked in the current financial year, it may be worth exploring the possibility of making a tax-deductible contribution before June 30, which could provide a useful tax refund.
Make sure your asset allocation suits your risk profile and keep at least three years’ worth of planned expenses in cash or similar investments so you never have to sell growth assets at a bad time. As for postponing your non-concessional contribution, it becomes a decision, but history shows that postponing investments in the hope of better conditions is rarely rewarded.
Your savings and retirement accounts are generally invested in similar assets, so switching from one to the other won’t significantly change your market risk. What has changed is the tax treatment.
Once you move into retirement, earnings during this part of your retirement become tax-free, so in most cases, there’s a clear advantage to switching even if you don’t need the income right away.
I understand that when I make a profit on shares, I will pay capital gains tax if I hold the shares for more than 12 months and there is currently a 50 percent discount on the gain. Will I pay CGT as a separate tax on the remaining amount, or will the reduced gain be added to my taxable income?
A hypothetical example may be helpful. Let’s say you have $250,000 worth of stocks and you decide to sell $100,000 of them. If there was a capital gain of $40,000 on that parcel, the gain after the 50 percent discount would be $20,000.
This amount is added to your taxable income and taxed at your marginal rate; This is not a separate tax. The remaining shares retain their existing cost basis, which is used for CGT purposes when you eventually sell them.
Noel Whittaker is the author of: Retirement Made Easy and other books on personal finance. Questions: noel@noelwhittaker.com.au
- The advice given in this article is general in nature and is not intended to influence readers’ decisions about investments or financial products. They should always seek their own professional advice, taking into account their personal circumstances, before making any financial decisions.
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Noel Whittaker, AM is the author of Make Money Made Simple and numerous other books on personal finance.Connect with: X or email.
