A sector specialist has suggested the strategy regarding benefit splits in the event of a relationship breakdown might need to be reconsidered, given how the capital gains tax (CGT) cost-base adjustment for Division 296 tax purposes is treated in these situations.
Accurium head of SMSF education Mark Ellem made the recommendation due to the fact any CGT cost-base adjustment made on 30 June 2026, as per the Division 296 relief measure, will not apply to any transfer of assets into a new SMSF stemming from a family law split.
Ellem highlighted his point with an example where a spouse, Wendy, transferred a property, originally valued at $3.875 million but CGT adjusted for Division 296 purposes at 30 June 2026 to $4.35 million, to a new SMSF because of her marriage breakdown with her husband Harry and then sold that asset for $4.75 million a few years later.
“Does [the property keep] the Division 296 [CGT] cost base of $4.35 million?” he asked attendees of a technical webinar Accurium hosted last week.
“[By] our understanding of how it all works, the answer is no. The main reason why the answer is no is because the fund that is selling the asset, Wendy’s SMSF, didn’t own the asset at 30 June 2026 nor did it make the election [to have the asset cost base adjusted for Division 296 purposes],” he explained.
According to Ellem, this is something that needs to be considered as to how family law split arrangements should be executed.
“If Wendy’s getting the property and Harry’s kept the other assets, which may be just cash, maybe it’s Harry who should roll out to the other fund [with] Wendy [staying in the original SMSF] with the property [in it] so [the asset] would retain the Division 296 cost base,” he indicated.