Former Open champion Smith, aiming for his fourth Australian PGA title, pulled level with fellow Queenslander Smylie on 10-under par with Marc Leishman a shot behind. David Micheluzzi and South Africa's Aldrich Potgieter share fourth place on eight-under-par.
Play had been abandoned on Friday as heavy rain caused flooding around the course, reducing the tournament to a 54-hole event.
Smylie went into Saturday's second round holding a one-shot lead after a round of 65 on Thursday with Smith a further shot back but the former champion pulled ahead with three birdies in the first four holes as the 22-year-old bogeyed the first.
It was Potgieter who had set the early pace, hitting six birdies on the front nine to establish a two-shot lead, although bogeys on the 10th and 18th saw him drop from top spot.
Smith, meanwhile, picked up his seventh birdie of the round at the par-three 17th to move onto 10-under and Smylie ensured he kept pace with a birdie at the last.