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RBA Rate Cuts

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RBA cuts rates to 3.60%: what this means for you

 

In a widely anticipated move on 12 August 2025, the Reserve Bank of Australia (RBA) delivered a 25 basis point rate cut, lowering the cash rate from 3.85% to 3.60%, the third reduction this year. This rate is now at its lowest level since March 2023 signaling renewed monetary easing amid persistent economic fragility.

 

 

 

 

Governor Bullock emphasised that the decision was unanimous and that larger cuts weren’t considered. She did however leave the door open for further action if conditions warrant it. The unanimous decision was made because: 

·        Headline inflation has eased to 2.1% year on year and the RBA’s preferred trimmed mean measure sits at just 2.4–2.7%, comfortably within the desired 2–3% range. So, it’s now within target.

      ·        There’s still soft economic growth, quarter 1 saw GDP grow 0.2% and unemployment has gone up slightly to roughly 4.3%. 

 

This is a welcome move for many with flow-on impacts across a wide section of the community.

Borrowing and mortgages: a borrower with a $600,000 mortgage can expect monthly repayments to fall by around $89, saving over $1,000 annually.

Refinancing: the latest cut has triggered a wave of refinancing, Canstar estimates monthly savings of around $272 on a $600,000 loan, potentially taking years off the loan term and saving tens of thousands in interest expenses.

Housing and lending: the cut may revive home buying sentiment, though the risks of swelling property prices remain. Borrowers and buyers alike are feeling the relief.

 

Currency and markets: the Australian dollar did weaken moderately following the decision. On the ASX 200, financial stocks, particularly the Commonwealth Bank, took a hit as investors fretted over shrinking interest margins.

 

While there are always winners and losers with a decision like this, for many Australians this is a positive change. Either way, please do reach out if we can help you understand how to best manage your debt, exploring refinance options, adjust pricing models or evaluating investment readiness. 

 

 

In a widely anticipated move on 12 August 2025, the Reserve Bank of Australia (RBA) delivered a 25 basis point rate cut, lowering the cash rate from 3.85% to 3.60%, the third reduction this year. This rate is now at its lowest level since March 2023 signaling renewed monetary easing amid persistent economic fragility.

Governor Bullock emphasised that the decision was unanimous and that larger cuts weren’t considered. She did however leave the door open for further action if conditions warrant it. The unanimous decision was made because: 

·        Headline inflation has eased to 2.1% year on year and the RBA’s preferred trimmed mean measure sits at just 2.4–2.7%, comfortably within the desired 2–3% range. So, it’s now within target.

      ·        There’s still soft economic growth, quarter 1 saw GDP grow 0.2% and unemployment has gone up slightly to roughly 4.3%. 

This is a welcome move for many with flow-on impacts across a wide section of the community.

Borrowing and mortgages: a borrower with a $600,000 mortgage can expect monthly repayments to fall by around $89, saving over $1,000 annually.

Refinancing: the latest cut has triggered a wave of refinancing, Canstar estimates monthly savings of around $272 on a $600,000 loan, potentially taking years off the loan term and saving tens of thousands in interest expenses.

Housing and lending: the cut may revive home buying sentiment, though the risks of swelling property prices remain. Borrowers and buyers alike are feeling the relief.

Currency and markets: the Australian dollar did weaken moderately following the decision. On the ASX 200, financial stocks, particularly the Commonwealth Bank, took a hit as investors fretted over shrinking interest margins.

While there are always winners and losers with a decision like this, for many Australians this is a positive change. Either way, please do reach out if we can help you understand how to best manage your debt, exploring refinance options, adjust pricing models or evaluating investment readiness. 

20% reduction in student debt

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A win for those carrying student debt

 

20% reduction in student debt

 

In support of young Australians and in response to the rising cost of living, the Australian Government has passed legislation to reduce student loan debt by 20% and change the way that loan repayments are determined. This should help students significantly more than the advice from outside of Parliament - cut down on the smashed avo.

20% reduction in student debt

The reduction is expected to benefit more than 3 million Australians and remove over $16 billion in outstanding debt. The 20% reduction will be automatically applied to anyone with the following student loans:

      ·        HELP loans (eg, HECS-HELP, FEE-HELP, STARTUP-HELP, SA-HELP, OS-HELP)

20% reduction in student debt

In support of young Australians and in response to the rising cost of living, the Australian Government has passed legislation to reduce student loan debt by 20% and change the way that loan repayments are determined. This should help students significantly more than the advice from outside of Parliament - cut down on the smashed avo.

20% reduction in student debt

The reduction is expected to benefit more than 3 million Australians and remove over $16 billion in outstanding debt. The 20% reduction will be automatically applied to anyone with the following student loans:

·        VET Student loans

·        Australian Apprenticeship Support Loans

·        Student Start-up Loans

·        Student Financial Supplement Scheme

 


 

The reduction will be based on the loan balance at 1 June 2025, before indexation was applied. Indexation will only apply to the reduced balance. The ATO will apply the reduction automatically on a retrospective basis and will adjust the indexation that is applied. No action is needed from those with a student loan balance and the Government has indicated that you will be notified once the reduction has been applied.

If you had a HELP debt showing on your ATO account on 1 April 2025 but you paid the debt off after 1 June 2025 then the reduction will normally trigger a credit to your HELP account. If you don’t have any other outstanding tax or other debts to the Commonwealth, then the credit should be refunded to you.. 

 

Changes to repayments

The Government has also modified the way that HELP and student loan repayments operate, primarily by increasing the amount that individuals can earn before they need to make repayments.

The minimum repayment threshold for the 2025-26 year is being increased from $56,156 to $67,000. The threshold was $54,435 for the 2024-25 year.

Under the new repayment system an individual will only need to make a compulsory repayment for the 2025-26 year if their income is above
$67,000. The repayments will be calculated only against the portion of income that is above $67,000.

Repayments will still be made through the tax system and will typically be determined when tax returns are lodged with the ATO.

For many people the change in the rules will mean they have more disposable income in the short term, but it will take longer to pay off student loans. The main exception to this will be when an individual chooses to make voluntary repayments.

 

 

The reduction will be based on the loan balance at 1 June 2025, before indexation was applied. Indexation will only apply to the reduced balance. The ATO will apply the reduction automatically on a retrospective basis and will adjust the indexation that is applied. No action is needed from those with a student loan balance and the Government has indicated that you will be notified once the reduction has been applied.

If you had a HELP debt showing on your ATO account on 1 April 2025 but you paid the debt off after 1 June 2025 then the reduction will normally trigger a credit to your HELP account. If you don’t have any other outstanding tax or other debts to the Commonwealth, then the credit should be refunded to you.. 

Changes to repayments

The Government has also modified the way that HELP and student loan repayments operate, primarily by increasing the amount that individuals can earn before they need to make repayments.

The minimum repayment threshold for the 2025-26 year is being increased from $56,156 to $67,000. The threshold was $54,435 for the 2024-25 year.

Under the new repayment system an individual will only need to make a compulsory repayment for the 2025-26 year if their income is above
$67,000. The repayments will be calculated only against the portion of income that is above $67,000.

Repayments will still be made through the tax system and will typically be determined when tax returns are lodged with the ATO.

For many people the change in the rules will mean they have more disposable income in the short term, but it will take longer to pay off student loans. The main exception to this will be when an individual chooses to make voluntary repayments.

Company Money Crackdown

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Company Money Crackdown

 

The ATO is cracking down on business owners who take money or use company resources for themselves. 

 

It’s common for business owners to utilise company resources for their personal use. The business is often such a part of their life that the line distinguishing ‘the business’ from their life can be blurred.  While there are tax laws preventing individuals accessing profits or assets of the company in a tax-free manner, mistakes are being made and the Australian Taxation Office (ATO) has had enough. The ATO has launched a new education campaign to raise awareness of these common problems and the serious tax consequences that can arise. 

 

 

 

What the tax law requires
Division 7A is an area of the tax law aimed at situations where a private company provides benefits to shareholders or their associates in the form of a loan, payment or by forgiving a debt. It can also apply where a trust has allocated income to a private company but has not actually paid it, and the trust has provided a payment or benefit to the company's shareholder or their associate. Division 7A was introduced to prevent shareholders accessing company profits or assets without paying the appropriate tax. If triggered, the recipient of the benefit is taken to have received a deemed unfranked dividend for tax purposes and taxed at their marginal tax rate. This unfavourable tax outcome can be prevented by: • Paying back the amount before the company tax return is due (this is often done by way of a set-off arrangement involving franked dividends); or • Putting in place a complying loan agreement between the borrower and the company with minimum annual repayments at the benchmark interest rate. 

 

The problem areas

Division 7A is not a new area of the tax law; it has been in place since 1997. Despite this, common problems are occurring. These include: • Incorrect accounting for the use of company assets by shareholders and their associates. Often, the amounts are not recognised; • Loans made without complying loan agreements; • Reborrowing from the private company to make repayments on Division 7A loans; • The wrong interest rate applied to Division 7A loans (there is a set rate that must be used). 

Like life, managing the tax consequences of benefits provided to shareholders and their associates can get messy quickly. Avoiding problems can often come down to a few simple steps: • Don't pay private expenses from a company account; • Keep proper records for your company that record and explain all transactions, including payments to and receipts from associated trusts and shareholders and their associates; and • If the company lends money to shareholders or their associates, make sure it's on the basis of a written agreement with terms that ensure it's treated as a complying loan – so the full loan amount isn't treated as an unfranked dividend.

There are strict deadlines for managing Division 7A problems. For example, if the borrower is planning to repay the loan in full or put a complying loan agreement in place, this needs to be done before the earlier of the due date and actual lodgement date of the company’s tax return for the year the loan was made.

 

 

The ATO is cracking down on business owners who take money or use company resources for themselves. 

It’s common for business owners to utilise company resources for their personal use. The business is often such a part of their life that the line distinguishing ‘the business’ from their life can be blurred.  While there are tax laws preventing individuals accessing profits or assets of the company in a tax-free manner, mistakes are being made and the Australian Taxation Office (ATO) has had enough. The ATO has launched a new education campaign to raise awareness of these common problems and the serious tax consequences that can arise. 

What the tax law requires
Division 7A is an area of the tax law aimed at situations where a private company provides benefits to shareholders or their associates in the form of a loan, payment or by forgiving a debt. It can also apply where a trust has allocated income to a private company but has not actually paid it, and the trust has provided a payment or benefit to the company's shareholder or their associate. Division 7A was introduced to prevent shareholders accessing company profits or assets without paying the appropriate tax. If triggered, the recipient of the benefit is taken to have received a deemed unfranked dividend for tax purposes and taxed at their marginal tax rate. This unfavourable tax outcome can be prevented by: • Paying back the amount before the company tax return is due (this is often done by way of a set-off arrangement involving franked dividends); or • Putting in place a complying loan agreement between the borrower and the company with minimum annual repayments at the benchmark interest rate. 

The problem areas

Division 7A is not a new area of the tax law; it has been in place since 1997. Despite this, common problems are occurring. These include: • Incorrect accounting for the use of company assets by shareholders and their associates. Often, the amounts are not recognised; • Loans made without complying loan agreements; • Reborrowing from the private company to make repayments on Division 7A loans; • The wrong interest rate applied to Division 7A loans (there is a set rate that must be used). 

Like life, managing the tax consequences of benefits provided to shareholders and their associates can get messy quickly. Avoiding problems can often come down to a few simple steps: • Don't pay private expenses from a company account; • Keep proper records for your company that record and explain all transactions, including payments to and receipts from associated trusts and shareholders and their associates; and • If the company lends money to shareholders or their associates, make sure it's on the basis of a written agreement with terms that ensure it's treated as a complying loan – so the full loan amount isn't treated as an unfranked dividend.

There are strict deadlines for managing Division 7A problems. For example, if the borrower is planning to repay the loan in full or put a complying loan agreement in place, this needs to be done before the earlier of the due date and actual lodgement date of the company’s tax return for the year the loan was made.

Buying Property with Your Children

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Should you be the 'bank of Mum & Dad'?

 

The great wealth transfer from the baby boomer generation has begun and home ownership is the catalyst. 

 

If you provide a loan to your child to purchase a home, it’s essential that the terms of the loan are documented, preferably by a lawyer.  There are many ways to structure the loan depending on what you’re trying to achieve. For example, the loan might mimic a bank loan with interest and regular payments, require repayment when the property is sold or ownership changes, and/or managed by your estate in the event of your death (treated as an asset of the estate, offset against the child’s share of the estate, or forgiven). There is a lot to think about before lending large amounts of money; what should happen in a divorce, if your child remortgages the property, if you die, if your child dies, if the relationship becomes acrimonious, etc. As always, hope for the best but plan for the worst.  

 

 

 

Providing security to lenders
A family guarantee can be used to support a loan in part or in full. For example, with some lenders you can use your security to contribute towards your child’s deposit to avoid lender’s mortgage insurance (which ranges between 1% to 5% of the loan). When you act as a guarantor for a loan, you provide equity (cash or often your family home) as security. In the event your child defaults, you are responsible for the amount guaranteed. If you have secured your child’s loan against your home and you do not have the cashflow or capacity to repay the loan, your home will be sold.  If you are contemplating acting as guarantor for your child, you need to look at the impact on your finances and planning first. Your retirement should not be sacrificed to your child’s aspirations. And, where you have more than one child, look at equalising the impact of the assistance you provide in your estate.  

 

Co-ownership

There are two potential structures for buying property with your children: • Joint tenants - the property is split evenly and in the event of your death, the property passes to the other owner(s) regardless of your will. • Tenant-in-common – the more popular option as it allows for proportions other than 50:50 (i.e., 70:30). If you die, your share is distributed according to your will. Regardless of ownership structure, if the property is mortgaged and the other party defaults on the loan, the loan might become your responsibility. It is vital to consider this before loan arrangements are entered into. 

It’s also essential to have a written agreement in place that defines how the co-ownership will work. For example, what happens if your circumstances change and you need to cash out? What if your children want to sell and you don’t? Will the property be valued at market value by an independent valuer if one party wants to buy the other one out? It’s not uncommon for children to assume that they will only need to pay the original purchase price to buy your share with no recognition of tax, stamp duty or interest. And, what happens in the event of death or dispute?

If you are not living in the home as your primary residence, then it is likely that capital gains tax (CGT) will apply to any increase in the market value of the property on disposal of your share (not the price you choose to sell it for). And, you will not benefit from the main residence exemption. In these situations, it is essential to keep records of all costs incurred in relation to the property to maximise the CGT cost base of the property and reduce any capital gain on disposal.

Be wary of state tax issues. For example, in some states, owning property through a trust will mean that the tax-free land threshold will not apply, increasing any land tax liability. Also, if the trust has any foreign beneficiaries, this could result in higher rates of stamp duty. 

 

 

 

 

Reduced or rent free property 

Buying a house and allowing your child to live in the house rent-free or at a reduced rent enables you to put a roof over their heads but adds no value to your child’s ability to secure a loan or utilise the equity of the property to build their own wealth.  If you intend to treat the property your child is living in as an investment property and claim a full deduction for expenses relating to the property, then rent needs to be paid at market rates. If rent is below market rates, the ATO may deny or reduce deductions for losses and outgoings depending on the discount provided. Any rental income received is assessable to you. In addition, CGT will be payable on any gain when the property is sold, or ownership is transferred. If the intention is to provide this property to your child in your estate, ensure your will is properly documented to support this intent. 

 

 

The great wealth transfer from the baby boomer generation has begun and home ownership is the catalyst. 

If you provide a loan to your child to purchase a home, it’s essential that the terms of the loan are documented, preferably by a lawyer.  There are many ways to structure the loan depending on what you’re trying to achieve. For example, the loan might mimic a bank loan with interest and regular payments, require repayment when the property is sold or ownership changes, and/or managed by your estate in the event of your death (treated as an asset of the estate, offset against the child’s share of the estate, or forgiven). There is a lot to think about before lending large amounts of money; what should happen in a divorce, if your child remortgages the property, if you die, if your child dies, if the relationship becomes acrimonious, etc. As always, hope for the best but plan for the worst.  

Providing security to lenders
A family guarantee can be used to support a loan in part or in full. For example, with some lenders you can use your security to contribute towards your child’s deposit to avoid lender’s mortgage insurance (which ranges between 1% to 5% of the loan). When you act as a guarantor for a loan, you provide equity (cash or often your family home) as security. In the event your child defaults, you are responsible for the amount guaranteed. If you have secured your child’s loan against your home and you do not have the cashflow or capacity to repay the loan, your home will be sold.  If you are contemplating acting as guarantor for your child, you need to look at the impact on your finances and planning first. Your retirement should not be sacrificed to your child’s aspirations. And, where you have more than one child, look at equalising the impact of the assistance you provide in your estate.  

Co-ownership

There are two potential structures for buying property with your children: • Joint tenants - the property is split evenly and in the event of your death, the property passes to the other owner(s) regardless of your will. • Tenant-in-common – the more popular option as it allows for proportions other than 50:50 (i.e., 70:30). If you die, your share is distributed according to your will. Regardless of ownership structure, if the property is mortgaged and the other party defaults on the loan, the loan might become your responsibility. It is vital to consider this before loan arrangements are entered into. 

It’s also essential to have a written agreement in place that defines how the co-ownership will work. For example, what happens if your circumstances change and you need to cash out? What if your children want to sell and you don’t? Will the property be valued at market value by an independent valuer if one party wants to buy the other one out? It’s not uncommon for children to assume that they will only need to pay the original purchase price to buy your share with no recognition of tax, stamp duty or interest. And, what happens in the event of death or dispute?

If you are not living in the home as your primary residence, then it is likely that capital gains tax (CGT) will apply to any increase in the market value of the property on disposal of your share (not the price you choose to sell it for). And, you will not benefit from the main residence exemption. In these situations, it is essential to keep records of all costs incurred in relation to the property to maximise the CGT cost base of the property and reduce any capital gain on disposal.

Be wary of state tax issues. For example, in some states, owning property through a trust will mean that the tax-free land threshold will not apply, increasing any land tax liability. Also, if the trust has any foreign beneficiaries, this could result in higher rates of stamp duty. 

 


Reduced or rent free property 

Buying a house and allowing your child to live in the house rent-free or at a reduced rent enables you to put a roof over their heads but adds no value to your child’s ability to secure a loan or utilise the equity of the property to build their own wealth.  If you intend to treat the property your child is living in as an investment property and claim a full deduction for expenses relating to the property, then rent needs to be paid at market rates. If rent is below market rates, the ATO may deny or reduce deductions for losses and outgoings depending on the discount provided. Any rental income received is assessable to you. In addition, CGT will be payable on any gain when the property is sold, or ownership is transferred. If the intention is to provide this property to your child in your estate, ensure your will is properly documented to support this intent. 

Claiming Crypto Losses and Gains in Your Tax Return

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Can I claim my crypto losses？

 

The ATO has released updated information on claiming cryptocurrency losses and gains in your tax return. 

 

The first point to understand is that gains and losses from crypto are only reported in your tax return when you dispose of it - you sell it, convert it to fiat currency, exchange it for another type of asset, buy something with it, etc. You cannot recognise market fluctuations or claim a loss because the value of your crypto assets changed until the loss is realised or crystallised. Gains and losses from the disposal of cryptocurrency should be reported in your tax return in the year that the disposal occurred. 

 

 

 

If you made a capital gain on crypto that was held as an investment, and you held the crypto for more than 12 months then you may be able to access the 50% Capital Gains Tax (CGT) discount and halve the tax you pay. If you made a loss on the cryptocurrency (capital loss) when you disposed of it, you can generally offset the loss against capital gains you might have (unless the crypto is a personal use asset). But you can only offset capital losses against capital gains. You cannot offset these losses against other forms of income like salary and wages, unfortunately. If you don’t have any capital gains to offset, you can hold the losses and carry them forward for another future year when you can use them.

 

If you earned income from crypto such as airdrops or staking rewards, then these also need to be reported in your tax return.

 

 

And remember, keep records of your crypto transactions. The ATO has sophisticated data matching programs in place and cryptocurrency reporting is a major area of focus.

 

 

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Can I claim my crypto losses？

The ATO has released updated information on claiming cryptocurrency losses and gains in your tax return. 

The first point to understand is that gains and losses from crypto are only reported in your tax return when you dispose of it - you sell it, convert it to fiat currency, exchange it for another type of asset, buy something with it, etc. You cannot recognise market fluctuations or claim a loss because the value of your crypto assets changed until the loss is realised or crystallised. Gains and losses from the disposal of cryptocurrency should be reported in your tax return in the year that the disposal occurred. 

If you made a capital gain on crypto that was held as an investment, and you held the crypto for more than 12 months then you may be able to access the 50% Capital Gains Tax (CGT) discount and halve the tax you pay. If you made a loss on the cryptocurrency (capital loss) when you disposed of it, you can generally offset the loss against capital gains you might have (unless the crypto is a personal use asset). But you can only offset capital losses against capital gains. You cannot offset these losses against other forms of income like salary and wages, unfortunately. If you don’t have any capital gains to offset, you can hold the losses and carry them forward for another future year when you can use them.

If you earned income from crypto such as airdrops or staking rewards, then these also need to be reported in your tax return.

 

And remember, keep records of your crypto transactions. The ATO has sophisticated data matching programs in place and cryptocurrency reporting is a major area of focus.

The tax refund many Australians expect has dramatically reduced

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Why is my tax refund so small？

 

The tax refund many Australians expect has dramatically reduced. We show you why.

 

There is a psychology to tax refunds that successive Governments have been reticent to tamper with. As a nation, Australia relies heavily on personal and corporate income tax, with personal income tax including taxes on capital gains representing 40% of revenue compared to the OECD average of 24%. And, for the amount we pay, we expect a reward.

The reward is in the form of tax deductions that reduce the amount of net income that is assessed for tax purposes and tax offsets that reduce the tax payable, generating a refund for some. And, refunds have a positive impact on tax compliance. 

As part of the previous Government’s efforts to flatten out the progressive individual income tax system, a time-limited low and middle income tax offset was introduced. The lifespan of the offset was extended twice, partly as a stimulus measure in response to COVID-19. The offset delivered up to $1,080 from 2018-19 to 2020-21, and up to $1,500 in 2021-22 for those earning up to $126,000. This was a significant boost for many people each tax time and bolstered the tax returns of millions of Australians. For many, the end of this offset has meant that their tax refund has reduced dramatically compared to previous years.

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From Uber to Airbnb: ATO’s New Data Reporting Rules for Platforms

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From 1 July 2023, a new reporting regime will require platforms that enable taxi services including ride sourcing, and short-term accommodation to report their transactions to the ATO each year. From 1 July 2024, the regime will expand to include all other platforms.While the legislative instrument for the reporting regime is still in draft, it is expected that platform providers will report their transactions to the ATO every six months.

 

What information on sellers will the ATO know?

The platforms will submit data on the sellers for transactions on their platform including:

·     ABN and business / trading name (where applicable)

·     First, middle and surname/family name (for individuals)

·     Date of birth (for individuals)

·     Residential or business address

·     Email address and telephone numbers

·     Bank account details.

·     And, for platforms facilitating short-term accommodation:

·     Listed property name

·     Listed property address

·     Number of nights booked.

In addition, the platforms will provide aggregate quarterly data on the value of transactions, industry types, total gross income etc.

 

 

The reporting regime does not include platforms that simply match suppliers to sellers and are not engaged in the transaction such as quotes for hiring tradies where the job is not accepted through the website.

 

 

 

 

 

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From 1 July 2023, a new reporting regime will require platforms that enable taxi services including ride sourcing, and short-term accommodation to report their transactions to the ATO each year. From 1 July 2024, the regime will expand to include all other platforms.While the legislative instrument for the reporting regime is still in draft, it is expected that platform providers will report their transactions to the ATO every six months.

What information on sellers will the ATO know?

The platforms will submit data on the sellers for transactions on their platform including:

·     ABN and business / trading name (where applicable)

·     First, middle and surname/family name (for individuals)

·     Date of birth (for individuals)

·     Residential or business address

·     Email address and telephone numbers

·     Bank account details.

·     And, for platforms facilitating short-term accommodation:

·     Listed property name

·     Listed property address

·     Number of nights booked.

In addition, the platforms will provide aggregate quarterly data on the value of transactions, industry types, total gross income etc.

The reporting regime does not include platforms that simply match suppliers to sellers and are not engaged in the transaction such as quotes for hiring tradies where the job is not accepted through the website.



Downsizer Contribution Rules for Superannuation

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From 1 January 2023, those 55 and over can make a ‘downsizer’ contribution to superannuation.

What's a 'downsizer' contribution?

If you are aged 55 years or older, you can contribute $300,000 from the proceeds of the sale of your home to your superannuation fund. Downsizer contributions are excluded from the existing age test, work test, and the transfer balance threshold (but are limited by your transfer balance cap). For couples, both members of a couple can take advantage of the concession for the same home. That is, if you and your spouse meet the other criteria, both of you can contribute up to $300,000 ($600,000 per couple). This is the case even if one of you did not have an ownership interest in the property that was sold (assuming they meet the other criteria).

Sale proceeds contributed to superannuation under this measure count towards the Age Pension assets test. Because a downsizer contribution can only be made once in a lifetime, it is important to ensure that this is the right option for you.

 

 

Let’s look at the eligibility criteria:

 

·     You are 55 years or older (from 1 January 2023) at the time of making the contribution.

·     The home was owned by you or your spouse for 10 years or more prior to the sale – the ownership period is generally calculated from the date of settlement of purchase to the date of settlement of sale.

·     The home is in Australia and is not a caravan, houseboat, or other mobile home.

·     The proceeds (capital gain or loss) from the sale of the home are either exempt or partially exempt from capital gains tax (CGT) under the main residence exemption, or would be entitled to such an exemption if the home was a post-CGT asset rather than a pre-CGT asset (acquired before 20 September 1985). Check with us if you are uncertain.

·     You provide your super fund with the Downsizer contribution into super form (NAT 75073) either before or at the time of making the downsizer contribution.

·     The downsizer contribution is made within 90 days of receiving the proceeds of sale, which is usually at the date of settlement.

·     You have not previously made a downsizer contribution to super from the sale of another home or from the part sale of your home.

Do I have to buy another smaller home?

The name ‘downsizer’ is a bit of a misnomer. To access this measure you do not have to buy another home once you have sold your existing home, and you are not required to buy a smaller home - you could buy a larger and more expensive one.

 

 

 

 

 

house

From 1 January 2023, those 55 and over can make a ‘downsizer’ contribution to superannuation.

What's a 'downsizer' contribution?

If you are aged 55 years or older, you can contribute $300,000 from the proceeds of the sale of your home to your superannuation fund. Downsizer contributions are excluded from the existing age test, work test, and the transfer balance threshold (but are limited by your transfer balance cap). For couples, both members of a couple can take advantage of the concession for the same home. That is, if you and your spouse meet the other criteria, both of you can contribute up to $300,000 ($600,000 per couple). This is the case even if one of you did not have an ownership interest in the property that was sold (assuming they meet the other criteria).

Sale proceeds contributed to superannuation under this measure count towards the Age Pension assets test. Because a downsizer contribution can only be made once in a lifetime, it is important to ensure that this is the right option for you.

Let’s look at the eligibility criteria:

 

·     You are 55 years or older (from 1 January 2023) at the time of making the contribution.

·     The home was owned by you or your spouse for 10 years or more prior to the sale – the ownership period is generally calculated from the date of settlement of purchase to the date of settlement of sale.

·     The home is in Australia and is not a caravan, houseboat, or other mobile home.

·     The proceeds (capital gain or loss) from the sale of the home are either exempt or partially exempt from capital gains tax (CGT) under the main residence exemption, or would be entitled to such an exemption if the home was a post-CGT asset rather than a pre-CGT asset (acquired before 20 September 1985). Check with us if you are uncertain.

·     You provide your super fund with the Downsizer contribution into super form (NAT 75073) either before or at the time of making the downsizer contribution.

·     The downsizer contribution is made within 90 days of receiving the proceeds of sale, which is usually at the date of settlement.

·     You have not previously made a downsizer contribution to super from the sale of another home or from the part sale of your home.

Do I have to buy another smaller home?

The name ‘downsizer’ is a bit of a misnomer. To access this measure you do not have to buy another home once you have sold your existing home, and you are not required to buy a smaller home - you could buy a larger and more expensive one.



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To cut or not to cut? Stage three personal tax cuts

Heading into the 2022-23 Federal Budget on 25 October, the question for the Australian Government is different. It is not whether to introduce personal income tax cuts but whether to keep, amend or repeal the cuts legislated to commence on 1 July 2024.

In Australia, the 2018-19 Budget introduced the Personal Income Tax Plan. The plan implemented three stages of income tax cuts over seven years that will, by 2024-25, simplify the tax brackets and enable taxpayers to earn up to $200,000 before paying a new top marginal tax rate of 45%. Stages of the plan, bringing relief for low and middle income earners, were brought forward in the 2019-20 Budget and again in 2020-21.

Labor’s pre-election Lower Taxes policy states, “An Albanese Labor Government will deliver tax relief for more than 9 million Australians through the legislated tax cuts that benefit everyone with incomes above $45,000.” But this month, the Treasurer has subtly changed the narrative 

The public appeal of repealing the final stage three tax cuts is understandable. Back in 2018-19 when the plan was first introduced, the economy was in surplus and Australia was yet to feel the effects of a global pandemic, environmental extremities, and the Russian invasion of Ukraine. The tax cuts forego around $240bn of tax revenue over the next 10 years, and because it is percentage based, favours high income earners. The public policy think tank, the Grattan Institute, previously warned that if the government progressed with the stage three cuts “Australia’s income tax system will be less progressive than it’s been since the 1950s”.

Conversely, the rationale for reforming the current personal income tax regime where the highest marginal tax rate applies from around 2.5 times average full-time earnings (compared to around 4 times in Canada and 8 times in the US), is also understandable. When it comes to international competitiveness, New Zealand’s top marginal tax rate is 33% (from $180,000) and Singapore’s is 22%, increasing to 24% in 2023-24. If implemented, stage 3 of the income tax plan would see around 95% of taxpayers paying a marginal tax rate of 30% or less.

Stage three of the Personal Income Tax Plan is legislated to take effect from 1 July 2024. The second 2022-23 Federal Budget will be announced on 25 October 2022. If the Government make no mention of the stage three tax cuts, they have another opportunity to refine their position in the 2023-24 Federal Budget released in May 2023, more than a year before the 1 July 2024 tax cuts come into effect.

Our best guess? The Government will announce a review of the stage three tax cuts, then open the issue to consultation, locking in the position, whatever it is, in the 2023-24 Federal Budget.  

 



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The Government has reinvigorated the 120% skills training and technology costs deduction for small and medium business

An election ago, the 2022-23 Budget proposed a 120% tax deduction for expenditure by small and medium businesses on technology, or skills and training for their staff. This proposal has now been adopted by the current Government and details released in recent exposure draft by Treasury.  

The Technology Investment Boost is a 120% tax deduction for expenditure incurred on business expenses and depreciating assets that support digital adoption, such as portable payment devices, cyber security systems, or subscriptions to cloud-based services. The boost is capped at $100,000 per income year with a maximum deduction of $20,000.

To be eligible, the expenditure must be wholly or substantially for the entity’s digital operations or digitising its operations. For example:

• digital enabling items – computer and telecommunications hardware and equipment, software, systems and services that form and facilitate the use of computer networks;

• digital media and marketing – audio and visual content that can be created, accessed, stored or viewed on digital devices; and

• e-commerce – supporting digitally ordered or platform enabled online transactions.

Repair and maintenance costs can be claimed as long as the expenses meet the eligibility criteria. 

Where the expenditure has mixed use (i.e., partly private), the bonus deduction applies to the proportion of the expenditure that is for an assessable income producing purpose. The bonus deduction is not intended to cover general operating costs relating to employing staff, raising capital, the construction of the business premises, and the cost of goods and services the business sells. The boost will not apply to:

• Assets that are sold while the boost is available

• Capital works costs (for example, improvements to a building used as business premises)

• Financing costs such as interest expenses

• Salary or wage costs

• Training or education costs

• Trading stock or the cost of trading stock .

The Skills and Training boost is a 120% tax deduction for expenditure incurred on external training courses provided to employees. External training courses will need to be provided to employees in Australia or online, and delivered by training organisations registered in Australia. Only the amount charged by the training organisation is deductible. In some circumstances, this might include incidental costs such as manuals and books, but only if charged by the training organisation.Some exclusions will apply, such as for in-house or on-the-job training and expenditure on external training courses for persons other than employees.  

The training boost is not available to:

• Sole traders, partners in a partnership, or independent contractors (who are not employees)

• Associates of the business such as a relative, spouse or partner of an entity or person, a trustee of a trust that benefits an entity or person and a company that is sufficiently influenced by an entity or person.