The new fan-dangled Div 296 legislation has now passed the upper house and lower house and is just awaiting Royal Assent from the GG to be passed into law.

The Final Version of the Law

Because the bill passed with some significant amendments made during the 2025-2026 consultation period, here is exactly what is now set in stone:

• No Tax on Unrealized Gains: The controversial plan to tax "paper profits" was scrapped. The tax only applies to realized earnings (dividends, interest, rent, and gains from assets actually sold).
• Thresholds are Indexed: The $3 million threshold (and the new $10 million tier) will now be indexed to the CPI in $150,000 and $500,000 increments, respectively.
• The Cost Base Reset is In: For SMSFs, you have the optional, one-time election to reset the cost base of all your assets to their market value on 30 June 2026.
• Start Date: The rules officially commence on 1 July 2026.

What this means for your 30 June 2027 deadline

Since the law has passed, the Special Transitional Rule for the first year is confirmed. For the 2026–27 financial year only, the ATO will ignore your opening balance on 1 July 2026. They will only look at your balance on 30 June 2027.

If you are currently sitting somewhere approaching (good for some) the $3M mark, you have a clear 15-month window (from now until June 2027) to manage your balance or decide whether to trigger that cost-base reset.

I think the cost base reset is the most important and least talked about provision in Div 296. Remember that the election to reset your cost base to 30 June 2026 values must be made prior to 30 June 2026 (so a bit over 3 months) or at least that is my interpretation. It is important to note the resetting of your cost base has to be all or nothing. i.e. you can't select your winning shares or property to reset to 30 June 2026 values and leave your losing assets at the original purchase coast base. All in or All out!!

Even if you manage to stay under the $3M cap in 2027 by withdrawing funds, it is often still worth making the election. This protects you if the fund grows back over the limit in future years, as you'll have that higher 2026 cost base locked in for Division 296 purposes. Obviously, this would present anyone with an SMSF as a great time to reassess their entire portfolio and to jettison any shares that have been non-performing, even if you expect them to get better in time. Yes, buying them back is legal, as long as you don't go down the wash trade path. Some SMSF online advisors suggest as an example to buy back a different ETF with the same characteristics or over time, the same company in smaller increments, etc. Just don't do the stupid and obvious sell in the last week of June 2026 and buy back the same entities in July 2026. That would be an obvious wash trade by the ATO. Anyway, it should be best seen as a way to start afresh for non-performing assets and undoubtedly, if you have property in your SMSF, it's a huge bonus.

Strategic Considerations for Your SMSF

If your fund is in retirement mode (0% tax) and currently near the $3M mark, here is how the timeline looks for you:

Of course, do your own research and follow all of the guidelines of the ATO, whilst still utilizing the new cost base reset rule!!