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Bonus Lesson · SMSF Tax Rules

Tax Rules That Shape Your Share Returns

General information only — not personal tax advice. Speak to a registered tax agent before acting on any of it.

1. The 45-Day Rule (Franking Credits)

Franking credits are the tax the company has already paid on the profit before it declared the dividend. They can offset your fund’s tax, or even be refunded in cash if your fund is in pension phase. But you only get them if you satisfy the ATO’s holding period rule:

  • Hold the shares at risk for at least 45 continuous days — excluding the day you bought and the day you sold. Preference shares need 90 days.
  • “At risk” means you cannot use hedges or derivatives to remove your economic exposure during the period.
  • Small-shareholder exemption: if your total franking credit entitlement for the whole year is $5,000 or less, the 45-day rule does not apply to you.
  • Miss the 45 days → the ATO can deny the franking credit offset entirely. You still keep the cash dividend, but you lose the tax credit / refund.
Practical example
Fund buys 500 CBA shares on 1 September. CBA goes ex-dividend on 15 September and the fund sells on 20 September. Held only 19 days ex-buy/sell → franking credit denied. If the fund had waited until at least 16 October to sell (45 clear days), the credit would be kept.

2. The 12-Month CGT Discount

Hold a share (or ETF) for more than 12 months before you sell and the capital gain is discounted:

Held for… Personal investor SMSF (accumulation) SMSF (pension)
≤ 12 months Full gain at marginal rate (to 47%) Full gain at 15% 0% (exempt current pension income)
> 12 months 50% discount (eff. up to 23.5%) 1/3 (33.33%) discount (eff. 10%) 0%
Why this matters for traders
If you sell in less than 12 months you give up 33.33% of the gain your SMSF could have kept. Frequent short-term trading also risks the ATO reclassifying the activity as a share trading business — which taxes gains on revenue account instead of CGT account, killing the discount entirely.

3. The New CGT Indexation Method (from 1 July 2027)

The 2026-27 Federal Budget announced a fundamental change to how personal capital gains will be taxed. From 1 July 2027, the flat 50% CGT discount is being replaced with:

  • Inflation-adjusted indexation — you tax only the “real” gain above CPI, not the nominal gain.
  • A 30% minimum tax on the indexed capital gain, regardless of your marginal tax bracket. Age pensioners are exempt from this floor.
  • Transitional treatment: gains accrued before 1 July 2027 keep the 50% discount; gains accrued from that date onward use the new method.
The SMSF advantage nobody is talking about
The change applies to personal investors. Complying superannuation funds (including SMSFs) are exempt and continue to use the existing 33.33% CGT discount at the 15% fund tax rate — for an effective rate of just 10% on long-term share gains. From 1 July 2027, holding growth-focused shares inside the SMSF becomes materially more tax-efficient than holding them personally, especially for high-marginal-rate members. This is a major reason to keep your long-term equity allocation in the fund.

4. Watch: How Franking Credits Actually Work

Franking Credits Explained (Australia) — Everything You Need to Know When Dividend Investing

Activity & Assessment

Activity
Pull one of your fund’s recent dividend statements. Identify the franking credit amount, and check the buy date vs the ex-dividend date. Did you satisfy the 45-day rule?
Assessment
Text response: describe your SMSF’s current holding-period discipline. Would you fail the 45-day rule on any position sold in the last 12 months?
General information only. Tax rules change. The 45-day rule, small-shareholder exemption, CGT discount rates and the 2027 indexation transition are described here for education. Always confirm with a registered tax agent (or ATO ato.gov.au) before acting.

Watch: The 2027 tax change — personal vs SMSF

A visual walk-through of everything in this lesson — the old 50% CGT discount, the new indexation + 30% minimum tax coming from 1 July 2027, why SMSFs are exempt, and the franking credit bonus in pension phase:

MySMSF explainer — 60 seconds + call to action
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