Smail added a one-under 69 to earlier rounds of 66 and 68 to move to 7-under, and leads by three over Australian Brad Andrews (67), compatriot Steve Alker (69) and Englishman Roger Chapman (68).
With a quintet of birdies through his first eight holes, Alker had established a commanding four-stroke lead over a slow-starting Smail earlier in the day at 8-under.
Smail birdied his third hole, but a bogey at the fourth and double bogey at the fifth saw him slip to 4-under and the four-stroke deficit behind Alker.
But Smail began to steady his round with a birdie at the sixth to go to 5-under, and when Alker had bogeyed nine and 13, and double bogeyed the 12th, Smail was back in front.
Another bogey by Smail at the 11th saw him share the lead again momentarily, before he claimed it outright for the final time with an immediate birdie at 12. When he added more at the 14th and 17th he was three clear.
Alker meanwhile steadied his round towards the end, closing with five consecutive pars, but would have nonetheless been disappointed to let the field back in after being so far in front.
Andrews, who started poorly on Thursday with a 72 before bouncing back with a 67 yesterday, continued his improvement today, collecting four birdies and a single bogey.
Chapman did some rebuilding during his round, coming back from a double at the first and bogey at the third that dropped him to plus one with six birdies and one more bogey on the way to his 68.
Next best on 3-under are a group of five players, Brett Ogle (67), Euan Walters (69), David Bransdon (70), Nathan Gatehouse (70) and Scott Hend (72).
Ogle steadily and quietly climbed into contention with his solid 3under 67, carding three birdies on the front nine and then twice recovering from bogeys at 10 and 13 with birdies at the 12th and 14th holes.
Dual New Zealand Open winner Greg Turner was 5-under for the day and the tournament after 12 holes, but had to settle for a 68 as he added three bogeys over the closing holes.
Turner shares 10th place with Peter O'Malley at 2-under. After grabbing a share of second place overnight, O'Malley stumbled back down the board today with a 73 that included a birdie and four bogeys.
Leigh McKechnie, defending champion and tournament favorite Michael Campbell, and American Mark Wilson shared round of the day honors after signing for 4-under 66's, and suddenly loom as strong contenders after the tricky afternoon conditions held back those threatening to get away.
That leaves them at 1-under, and tied for 12th alongside James McLean (67), local amateur Eddie Lee (69), Paul Sheehan (72), Marcus Norgren (72) and Bob Charles (73).
Campbell had a rocky start, birdying one and three but on each occasion making bogeys at the very next holes, including an air swing at the second when he found himself in trouble under the trees lining the fairway.
But the world No. 16 got some momentum with a birdie at six and an eagle at 12. Not even another bogey at the 13th could slow him down for long as he also birdied 15 and 17. Campbell says he now gives himself a realistic hope of retaining his title.
'Now that I'm in closer than I was at the start of this morning I feel that I have got a chance of winning now,' Campbell said. 'The way the course is playing right now, four-under's quite a good score. It's just so hard to keep it on the fairway now.'
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