While acknowledging that the key to housing affordability is supply, the Government clearly sees changes to negative gearing and the capital gains tax (CGT) discount as being important pieces in the housing affordability puzzle.
The Government has called this its most ambitious budget and if the proposed measures are implemented, the impact will be felt directly by a wide cross-section of Australian society, including individual taxpayers, investors, businesses, employers and those suffering from a disability.
The year’s budget has been released against a backdrop of significant economic challenges, including global fuel price shocks, persistent inflation, rising interest rates and growing concerns around housing affordability. These themes are reflected in the measures that have been announced by the Treasurer.
While the Government has announced some significant changes to the tax system, the superannuation system looks to have been left alone this year.
Key initiatives include:
Housing
Health
Defence
Fuel
Important: Unless otherwise noted, the measures discussed below are only announcements at this stage. There is no guarantee that they will be implemented as per the Government’s announcements (or at all). We will keep you up to date with key developments as things progress.
Start date: 1 July 2027
The Government will provide a $250 ‘Working Australians Tax Offset’ from the 2027–28 income year.
The offset will be a permanent feature of the tax system and is aimed at taxpayers who derive income from work, such as employees who receive salary or wages and sole traders who carry on a business.
The offset basically operates to increase the effective tax-free threshold for income derived from work by nearly $1,800 to $19,985 (or up to $24,985 for workers eligible for the Low Income Tax Offset).
Start date: 1 July 2026
During the 2025 federal election campaign the Labor party committed to introduce a $1,000 instant tax deduction for work-related expenses. On 20 April 2026 Treasury released draft legislation on this proposal for public consultation.
The key feature of the proposal is that Australian residents will be able to claim a standard deduction from the 2026-27 income year onwards for work-related expenses, with the deduction being capped at the lower of $1,000 and the individual’s assessable labour income. The normal substantiation rules would not apply when claiming the standard deduction.
Charitable donations, union fees and fees relating to professional association memberships would be claimed on top of the standard deduction.
Taxpayers who have incurred more than $1,000 in qualifying work-related expenses can instead choose to claim their actual expenditure as a deduction, but will need to substantiate these expenses.
The draft legislation contains some other proposed changes to the tax system including:
Start date: 1 July 2026
Legislation has already been passed to ensure that the 16% tax rate on taxable income between $18,201 and $45,000 will drop to 15%. The rate will then drop to 14% from 1 July 2027.
This was announced in the 2025-26 Federal Budget.
Start date: 1 July 2025
The Government will increase the Medicare levy low‑income thresholds for singles, families, and seniors and pensioners.
The threshold for singles will be increased from $27,222 to $28,011.
The family threshold will be increased from $45,907 to $47,238.
For single seniors and pensioners, the threshold will be increased from $43,020 to $44,268.
The family threshold for seniors and pensioners will be increased from $59,886 to $61,623.
The family income thresholds will increase by $4,338 for each dependent child or student, up from $4,216.
Start date: 1 July 2027
The term ‘negative gearing’ refers to the situation where a rental property owner claims deductions for expenses associated with holding the property that exceed the rental income that is received in the relevant income year.
The loss that is generated from a rental property can typically be offset against other income (including salary, wages and net capital gains) to reduce overall taxable income or create a tax loss that can be carried forward to future years.
However, the parameters around negative gearing for residential property are set to change with the Government announcing that existing negative gearing rules will only be available in connection with new builds from 1 July 2027.
From this date onwards, losses from established residential properties that are acquired from 7:30pm (AEST) on 12 May 2026 will only be deductible against rental income or capital gains from residential properties. Excess losses will be carried forward to be offset against residential property income in future years.
‘New builds’ are residential properties which genuinely add to supply, such as dwellings constructed on vacant land and situations where existing properties are demolished and replaced with a greater number of dwellings.
Knock-down rebuilds or substantial renovations that do not increase supply will not be treated as new builds.
Properties acquired before 12 May 2026 will be exempt from the changes and the changes won’t apply to managed investment trusts or superannuation funds. Also, the changes don’t impact on other asset classes such as commercial properties or shares.
Start date: 1 July 2027
The CGT discount has enabled individuals, trusts and complying superannuation funds to reduce the taxable capital gain made on disposal of an asset that has been held for more than 12 months. The standard discount rate is 50% for trusts and individuals (although lower discount rates can apply to non-residents and temporary residents in some cases), with a 1/3 discount applying to superannuation funds.
However, from 1 July 2027 the Government is planning to revert to an indexation system based on the Consumer Price Index (CPI), much like the system that applied between 1985 and 1999. Indexation would only be available for assets that have been held for more than 12 months.
In addition to this, a minimum tax rate of 30% will apply to capital gains that accrue from 1 July 2027. There will be some exceptions to this for recipients of means-tested income support payments (eg, Age Pension, JobSeeker).
Assets acquired before 20 September 1985 (referred to as pre-CGT assets) have historically been exempt from CGT, but this exemption will no longer apply from 1 July 2027.
Transitional rules will limit the impact of these changes for existing investments. The existing CGT discount and exemption for pre-CGT assets will continue to apply the gains that accrued before 1 July 2027. Taxpayers will need to determine the value of existing assets on 1 July 2027 to enable CGT calculations to be undertaken.
The CGT changes apply to all asset classes, including property and shares. The changes will apply to individuals, trusts and assets held by partnerships.
Having said all that, investors in new residential properties will be able to choose to apply either the 50% CGT discount or cost base indexation and the minimum tax.
Start date: 1 July 2028
The Government has announced that a minimum 30% tax rate will apply to distributions made by discretionary trusts.
Discretionary trusts (often referred to as family trusts) have become a widely used structure for both investment and business activities. One of the key features of a discretionary trust is that the trustee is typically given the power to decide how to allocate income and capital gains made by the trust across family members and related entities.
This flexibility means that discretionary trusts can be used as an effective tax planning tool in many cases. For example, income distributed to an adult child could potentially be tax-free if the child has no other income and distributions are capped at the tax-free threshold for individuals.
However, the Government has announced that from 1 July 2028 onwards the trustee of a discretionary trust will pay a minimum 30% tax on the taxable income of the trust. Individuals and other non-corporate beneficiaries will receive a non-refundable tax credit for the tax paid by the trustee.
The non-refundable credit will not be available for corporate beneficiaries (often referred to as bucket companies). It seems like the changes are being made partly to discourage trustees from distributing income to corporate beneficiaries.
The Government has indicated that a limited form of rollover relief will be available for three years from 1 July 2027 for small businesses and others who wish to restructure out of a discretionary trust into a company or fixed trust. The rollover relief might help to minimise CGT and other income tax implications, but broader issues such as stamp duty will need to be carefully considered before any changes to an existing structure are implemented.
The minimum tax will not apply to fixed and widely held trusts, complying superannuation funds, special disability trusts, deceased estates and charitable trusts.
Some types of income such as primary production income, certain income relating to vulnerable minors, amounts that are subject to non-resident withholding tax and income from assets of testamentary trusts existing at 12 May 2026 will also be excluded.
Start date: The first day of the next quarter after receiving Royal Assent
The Government will provide a concession in the foreign resident CGT regime for investment in the renewables sector.
The transitional arrangement will apply to foreign investors disposing of certain renewable energy infrastructure assets from the start date until 30 June 2030.
Start date: 1 July 2027
The Government will expand the scope of existing tax incentives which relate to venture capital limited partnerships and early stage venture capital limited partnerships.
Start date: 1 July 2026
The Government has announced that the cost threshold for the purpose of applying the instant asset write-off for small business entities will be permanently increased to $20,000 from 1 July 2026.
The instant asset write-off allows eligible small business entities with aggregated turnover of less than $10 million to claim an immediate deduction for the full cost of depreciating assets which cost less than a specified dollar threshold. While the default threshold is $1,000, higher temporary thresholds have been implemented on a year-to year basis since 2015, often leading to confusion and uncertainty.
A permanent increase in the cost threshold to $20,000 should be welcome news to small business taxpayers who will have a greater level of confidence when it comes to investing in new plant or equipment or upgrading business assets.
In order to qualify for the immediate deduction, the cost of the asset must be less than $20,000, after subtracting any GST credits that can be claimed.
The cost threshold applies on an asset-by-asset basis, so an immediate deduction could potentially apply to multiple assets that are purchased for less than $20,000 in a particular income year, even if the aggregated cost of those assets is $20,000 or more.
Assets that cost $20,000 or more can continue to be added to a small business pool.
Just a quick reminder, the threshold for the current income year that ends on 30 June 2026 had already been increased to $20,000.
Start date: 1 April 2027
On 5 May 2026 the Government announced that the FBT exemption for electric cars would be gradually scaled back over the next few years.
The FBT exemption for electric cars was introduced in the 2022-23 income year as part of a broader initiative to reduce the cost of electric vehicles and increase uptake.
While the exemption has been phased out for plug-in hybrid electric vehicles from 1 April 2025 (with pre-existing arrangements still qualifying for the exemption in some cases), a full FBT exemption still applies to battery electric vehicles and hydrogen fuel cell electric vehicles that are provided as fringe benefits to employees if certain conditions can be satisfied.
However, the Government is planning to progressively reduce the scope of the FBT exemption on the following basis:
The Government indicates that existing lease arrangements won’t be impacted by these changes.
When an electric car is provided to an employee and it qualifies for concessional FBT treatment under these measures it will still be necessary for employers to calculate the reportable fringe benefits amount, ignoring the application of the FBT exemption or discount. This can impact on other areas of the tax and social security systems.
Start date: 1 July 2026
For income years commencing on or after 1 July 2026 the Government will allow companies with aggregated annual global turnover of less than $1 billion to carry back a tax loss and offset it against tax paid up to two years earlier.
The ability to carry back a loss will only apply to tax losses (not capital losses) and will be limited by the company’s franking account balance.
Start date: 1 July 2028
Start‑up companies with aggregated annual turnover of less than $10 million that generate a tax loss in their first two years of operation will be able to utilise the loss to generate a refundable tax offset.
The offset will be limited to the value of fringe benefits tax and withholding tax on wages paid in respect of Australian employees in the loss year.
Start date: 1 July 2027
The Government will provide funding to the ATO to expand its pilot of dynamic PAYG instalment calculations.
From 1 July 2027, small and medium businesses will be able to opt in to reporting and paying PAYG instalments monthly and will be able to use an ATO-approved calculation that is embedded in accounting software to calculate and vary instalments.
Start date: 1 July 2028
The Government will reform the Research and Development (R&D) Tax Incentive which provides a tax offset for eligible companies that undertake R&D activities.
While the Government is planning to increase the tax offset rate for core R&D expenditure, supporting R&D expenditure will no longer qualify and the minimum amount of expenditure that must be incurred in an income year to qualify for the offset will be increased from $20,000 to $50,000 (with some limited exceptions).
Start date: 1 January 2026
The Government will amend Australia’s global and domestic minimum tax legislation as part of broader reforms to the international corporate tax system.
Start date: 1 July 2026
The Government will provide $86.3 million over four years to help detect and prevent fraud in the tax system.
The Government will also strengthen the ATO’s ability to combat fraud by tax agents and other intermediaries. The ATO will be given powers to pause the recovery of tax debts of taxpayers who are victims of fraud by tax intermediaries, and waive those debts in appropriate circumstances, and to recover the debts from the tax intermediaries.
The ATO will undertake additional targeted compliance activities to further address fraud in the system, including in relation to the R&D Tax Incentive.
The conflict in the Middle East has triggered substantial economic and energy disruptions across the world, driving global inflation higher, global growth lower, and compounding uncertainty and volatility. The impacts on the Australian economy will be felt for some time.
Higher inflation is expected to impact on growth in real incomes and household consumption.
As a result, growth in the Australian economy is forecast to slow from 2.25% in 2025-26 to 1.75% in 2026-27.
Growth in the Australian economy is expected to increase to 2.25% in 2027-28.
The budget deficit for 2026–27 is forecast to be $31.5 billion, which represents an improvement of $2.8 billion compared to the Mid-Year Economic and Fiscal Outlook (MYEFO).
The budget is projected to return to balance in 2034–35 and a surplus of 0.8% of GDP in 2036–37.
Gross debt is estimated to reach $1,051 billion (that’s over $1 trillion) at 30 June 2027. This represents 34% of GDP.
This figure is expected to increase to $1,249 billion (35.6% of GDP) at 30 June 2030.
Net debt in 2026–27 is expected to be 19.9% of GDP.
Interest payments on Australian Government Securities are estimated to be $27.7 billion in 2026–27, increasing to $40.4 billion by 2029–30.
The unemployment rate has been broadly stable over the last year and is expected to remain relatively low by historical standards.
The unemployment rate is expected to rise gradually from 4.25% in the June quarter 2026 to 4.5% in the June quarter 2027.
Employment is forecast to grow by 1.5% through the year to the June quarter 2026 and the June quarter 2027 and 1.75% through the year to the June quarter 2028.
The Wage Price Index is forecast to grow by 3.25% through the year to the June quarter 2026, before increasing to 3.5% through the year to the June quarter 2027 and the June quarter 2028.
The recent increase in inflation is expected to result in a decline in real wages over 2025–26. Real wages are forecast to grow again in 2026–27 and 2027–28 as inflationary pressures ease.
Headline inflation is forecast to be 5% through the year to the June quarter 2026.
Headline inflation is forecast to decline to 2.5% by the June quarter 2027, but this is based on the assumption that global oil prices will ease over 2026-27, which remains to be seen.
It’s called Payday Super, and it became law on 4 November 2025. The new rules are designed to close Australia’s $6.25 billion unpaid super gap and make sure employees — especially casual and part-time workers — get their retirement savings when they get paid.
From 1 July 2026, you’ll need to pay superannuation guarantee (SG) contributions at the same time as wages, rather than weeks or months later. Employers will have seven business days from payday to ensure contributions hit employees’ super funds.
If payments are late, the Superannuation Guarantee Charge (SGC) will apply — that means paying the missed super plus an interest and administration penalty. Once SGC has been assessed, additional interest and penalties may apply if the SGC liability isn’t paid in full.
Unlike the existing system, SGC amounts will normally be deductible to employers, although penalties for late payment of SGC won’t be deductible.
On top of this, the ATO will retire the Small Business Superannuation Clearing House (SBSCH) platform from 1 July 2026 for all users and alternative options should be sought.
The change isn’t just about compliance — it’s about impact. The Government estimates the earlier payments could boost an average worker’s retirement balance by around $7,700.
This reform might sound like extra admin, and it might take a bit of getting used to, but it can actually simplify your payroll process and strengthen your reputation as an employer.
The ATO will take a “risk-based” approach for the first year, focusing on education and helping businesses transition smoothly. If you pay on time, you’ll likely be flagged as low risk, meaning fewer compliance checks.
You’ve got time before the rules kick in, but the smart move is to prepare early. Here’s how:
1. Check your payroll software.
Most modern systems (like Xero, MYOB, or QuickBooks) already support payday-aligned super. Confirm your setup and check if any updates or integrations are needed.
2. Map your pay cycles.
Note how often you pay staff (weekly, fortnightly, monthly) and calculate the seven-day payment window for each.
3. Brief your team.
Make sure whoever manages payroll understands the changes. The ATO has free online resources and webinars to help.
4. Plan your cash flow.
Consider shifting from quarterly to more regular payments now to get used to the timing. Smaller, frequent super payments can reduce cash flow shocks.
5. Monitor and review.
Set up a monthly check to ensure super contributions have cleared correctly. Keep an eye on ATO updates as final guidance is released.
If you outsource payroll, contact your provider soon — many are already updating systems for Payday Super and can help you make a seamless switch.
Payday Super isn’t just a compliance change — it’s an opportunity to make your payroll more efficient, your staff happier, and your business more compliant with less effort. With the laws now passed and just over 6 months to prepare, it’s time to get ahead of the curve.
If you’d like help reviewing your payroll setup or planning the transition, get in touch with our team — we can help you make sure your business is ready to go when Payday Super commences.
The ATO has provided its views on how home-based businesses interact with the small business capital gains tax (CGT) concessions, providing a warning on how the ATO approaches a long-standing area of confusion.
See: Home-based business and CGT implications | Australian Taxation Office
When an individual sells their main residence, they will often enjoy a full CGT exemption. However, if part of the home is used for business purposes, this can potentially impact on the scope of the exemption.
If a full exemption isn’t available under the main residence rules then we typically look to other CGT concessions, including the CGT discount for assets that have been held for more than 12 months or the small business CGT concessions.
The small business CGT concessions can potentially reduce or eliminate a capital gain made on sale of a property, but only if certain conditions are passed. One of the key conditions is that the property must pass an active asset test.
In very broad terms, to pass the active asset test you need to show that the property has been actively used in a business activity for at least 7.5 years across the ownership period or for at least half of the ownership period.
The ATO is clear: the active asset test applies to the entire property, not just the business portion. When you are applying the active asset test, an asset either passes this test or fails it. It is not really possible for an asset to partially pass the active asset test. The entire property is either an active asset or it is not.
Simply having a home office, workshop, or even being able to claim home occupancy expenses as a deduction does not necessarily make your home an active asset. Where business use is incidental to the home’s primary residential purpose, the ATO’s view is that the small business CGT concessions generally do not apply.
The view that the entire property must qualify as an active asset—and that incidental or minor business use (such as a home office or storage in a largely residential setting) is insufficient—draws support from case law, particularly the Administrative Appeals Tribunal (AAT) decision in Rus and Commissioner of Taxation [2018] AATA 1854 (Rus v FCT).
In that case, a taxpayer sought access to the small business CGT concessions on the sale of a 16-hectare largely vacant rural property, where only a small portion (less than 10% by area) was used for business purposes: a home office, shed for storing tools/equipment/vehicles, and related supplies tied to a plastering and construction business operated through a controlled company. The balance of the land remained vacant or used residentially.
The AAT upheld the ATO's ruling that the property as a whole did not satisfy the active asset test, reasoning that the business activities were not sufficiently integral to the asset overall.
Minor or incidental use did not make the entire property an active asset, especially where the business was primarily conducted off-site. This precedent reinforces the ATO's strict approach in home-based business scenarios: the property is assessed holistically. This means that limited business use typically fails to tip the scales toward qualifying for the concessions.
Let’s take a look at how the ATO approaches some common scenarios.
Minor home-based business: Harriet runs a hairdressing salon in a spare room, using 7% of the total floor space of the property and seeing clients eight hours a week. She claims deductions for occupancy expenses and gets a 93% main residence exemption. However, because her business use is minor, she cannot access small business CGT concessions. The 50% CGT discount can still apply.
Significant business use: Sue and Rob own a two-storey building, with the ground floor operating as a takeaway store (50% of the total floor area of the property) and the top floor as their private residence. The business has been running for decades with employees. Here, the property qualifies as an active asset, potentially giving them access to the small business CGT concessions for the portion of the capital gain that isn’t covered by the main residence exemption.
The ATO’s updated guidance suggests that many home-based business owners won’t have access to the small business CGT concessions on sale of their home, but this always depends on the facts. Business owners need to plan proactively, rather than assume that tax relief will be available.
By understanding how your home’s business use is treated, you can make smarter decisions. For example, will the profits generated from a small business operated at home end up being wiped out by a higher CGT liability on sale of the property down the track?
After all, when it comes to CGT, every dollar you keep counts toward your next venture or your retirement nest egg.
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.
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:
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.
The HELP debt estimator is a useful tool to get an idea of the reduction amount, please reach out if you need any help in working out eligibility.
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.
As we move into the 2025/2026 financial year there are some key changes in superannuation that are set to impact on a range of individuals and business owners. If you have questions about how these changes affect your business or personal situation, we’re always here to help.
From 1 July 2025, the superannuation guarantee (SG) rate officially rose to 12% of ordinary time earnings (OTE). This is the final step in the gradual increase legislated under previous reforms.
Old rate: 11.5% (up to 30 June 2025)
New rate: 12% (from 1 July 2025)
This increase affects cash flow, payroll accruals and employment contracts, especially where total remuneration includes superannuation.
Update payroll software: ensure systems are calculating 12% SG correctly from 1 July 2025 pay runs
Review employment agreements: if contracts are set to inclusive of super, the take-home pay of employees may reduce unless renegotiated or the employer decides to bear the cost of the increased SG rate
Budget for higher super contributions: consider possible cash flow impacts
Remember that significant penalties can be imposed for late or incorrect SG payments, including loss of deductions, interest and other administration charges.
The annual concessional contribution cap will remain at $30,000 for the 2025/2026 financial year. The annual non-concessional contribution (NCC) cap is set at four times the concessional contribution cap meaning it will also remain at $120,000.
Although the annual NCC cap has not changed, NCCs can now be made by individuals with a total super balance (TSB) of less than $2,000,000 on 30 June 2025 (assuming they have not reached the age 75 deadline and any prior bring forward periods are considered). This is due to the fact that the upper TSB limit links to the general transfer balance cap (TBC) which has increased to $2,000,000.
The relevant TSB amounts for NCCs in the 2025/2026 financial year are summarised in the table below:
| Total Super Balance - 30 June 2025 | NCC Cap | Allowable bring forward period |
| Less than $1.76m | $360,000 | 3 Years |
| $1.76m to $1.88m | $240,000 | 2 Years |
| $1.88m to $2.0m | $120,000 | No bring forward |
| $2.0m and above | Nil | Nil |
A superannuation fund member may be able to claim a deduction for personal contributions made to their super fund with personal after-tax funds. A member will normally be eligible to claim a deduction if:
The member makes an after-tax contribution to their superannuation fund in the relevant financial year
They are aged under 67 or 67 to 74 and meet a work test or work test exemption
They have provided the superannuation fund with a valid notice of intent to claim
The super fund has provided the member with acknowledgement of the notice of intent to claim
If the member is eligible and would like to claim a deduction, then they must notify their super fund that they intend to claim a deduction.
The notice must be valid and in the approved form – Notice of Intent to Claim or vary a deduction for personal super contributions (NAT 71121).
The tax legislation provides a notice of intent to claim will be valid if:
The member must provide the notice of intent to claim to the fund by the earlier of:
However, if a super fund member provides a notice of intent after they have rolled over their entire super interest to another fund, withdrawn the entire super interest (paid it out of super as a lump sum), or commenced a pension with any part of the contribution, the notice will not be valid.
This means the individual will not be able to claim a deduction for the personal contributions made before the rollover or withdrawal.
| 2024/2025 | 2025/2026 | |
| General transfer balance cap | $1,900,000 | $2,000,000 |
| Defined benefit income cap | $118,750 | $125,000 |
| CGT lifetime Cap | $1,780,000 | $1,865,000 |
| Untaxed plan cap - Lifetime | $1,780,000 | $1,865,000 |
| Superannuation Guarantee – Maximum Contributions base(per quarter) | $65,070 | $62,500 |
| PCG 2016/5 Safe Harbour rates for related party LRBA’s | 9.35% | 8.95% |
The following thresholds will remain unchanged for the 2025/2026 financial year.
| Concessional contribution cap | $30,000 |
| Non-concessional contribution cap - standard | $120,000 |
| Non concessional contribution cap – maximum bring forward over 3 financial years | $360,000 |
| Division 293 – Annual adjusted taxable income | $250,000 |
Now is the time to start planning and reviewing your records to maximise your tax deductions for the 2024/2025 financial year.
1. Pay Quarterly Super early
Super Guarantee (SG) contributions must be paid before 30 June to qualify for a tax deduction in the 2024/2025 financial year. Consider bringing forward your June quarter SG payments to increase the benefit.
2. Write-off bad debts
Review your debtor list to identify those who owe you money but are unlikely to pay. Write-off bad debts before 30 June - the debt must not be merely doubtful and must have been previously included as assessable income.
3. Prepaid Expenses
Small business entities may bring forward deductible expenses such as rent, repairs and office supplies, that cover a period of no more than 12 months.
4. Stock Take
Trading stock should be reviewed before 30 June to identify any obsolete, slow moving or damaged stock. Obsolete stock must be physically disposed of for income purposes to receive a deduction.
5. Take advantage of the instant asset write off
On 14 May 2024, as part of the 2024–25 Budget, the government announced it will continue to provide support for small businesses by extending the $20,000 instant asset write-off limit for a further 12 months until 30 June 2025.
Please note that this measure has not been passed through Parliament, and is not yet law.
6. Review and postpone some of your invoicing for the current tax year, if appropriate.
7. Contribute to your Super
Top up your voluntary superannuation contributions. You can contribute up to $30,000 in deductible super contributions each year.
If you have a super balance of less than $500,000 at the 30th June then consider using the carry forward rules to claim a deduction for any unused super contribution caps from previous years.
8. Capital Gains Tax Planning
Strategically time the sale of assets to manage CGT liabilities by holding assets for more than a year to qualify for a 50 percent CGT discount.
9. Negatively Geared Rental Properties
You may be eligible to claim a deduction for expenses such as interest, insurance, and rates that you prepay for up to 12 months in advance.
10. Undertake strategic tax planning with your accountant
Great accountants look at two types of tax planning: short-term and long-term tax planning. Short-term planning looks at what you can do before 30 June to minimise your tax this financial year. Long-term tax planning looks at how you can utilise your business structure and the type of investments you can make to minimise tax over the long term. Consider whether restructuring your business into a trust or company could improve tax efficiency.
The Government’s big moment in the 2025-26 Federal Budget was the personal income tax cuts. Income tax cuts are a dazzling headline but in reality they deliver a tax saving of up to $268 in the 2026-27 year, with a tax saving of up to $536 from the 2027-28 year.
At the same time, the Australian Taxation Office has been allocated almost $1bn in funding to extend and enhance its compliance programs.
Two previously announced measures of note that have not passed Parliament but remain in the Budget are:
Both of these measures have stalled in Parliament and, assuming they are not approved in the final days of Parliament, will lapse when an election is called.
Budget 2025-26 is a budget for voter appeal with over $7bn in additional spending measures in 2025-26 and over $20bn across five years. Most measures extend previously announced and Budgeted items for another year. Key initiatives include:
Energy
Healthcare
Education
Housing
Families
Lifestyle
Economically, trade tensions have magnified global uncertainty. Global growth is already subdued. The indirect effect of tariffs is estimated to be nearly four times as large as the direct effect on Australia, reflecting the relative importance of affected trade flows between Australia, China, and the United States.
Australia’s economy is expected to grow, albeit slowly at 2.25% in 2025-26 and 2.5% in 2026-27.
The Budget will be in deficit at -$42.1bn in 2025-26, before improving marginally but remaining in the red.
| From | 1 July 2026 |
The Government will provide a “modest” tax cut to all taxpayers from 1 July 2026 and again from 1 July 2027.
The tax rate for the $18,201-$45,000 tax bracket will reduce from its current rate of 16%, to 15% from 1 July 2026, then to 14% from 2027-28 at a cost of $648m over four years.
The saving from the tax cut represents a maximum of $268 in the 2026-27 year and $536 from the 2027-28 year.
| From | 1 July 2024 |
The Medicare levy low-income threshold exempts low-income earners from having to pay the levy. From 1 July 2024, the threshold for the exemption will increase.
The change will mean low-income earners will pay less when they lodge their income tax returns for 2024-25.
| 2024-25 | 2025-26 | |
| Singles | $26,000 | $27,222 |
| Families | $43,846 | $45,907 |
| Single seniors & pensioners | $41,089 | $43,020 |
| Family seniors & pensioners | $57,198 | $59,886 |
| Family additional child or student | $4,216 | $4,027 |
The threshold changes come at a cost of $648m over 5 years.
Proposed personal income tax threshold
| Thresholds ($) | Rates in 2024–25 and 2025–26 (%) | Rates in 2026–27 (%) | Rates in 2027–28 (%) |
| 0 – 18,200 | Tax free | Tax free | Tax free |
| 18,201 – 45,000 | 16 | 15 | 14 |
| 45,001 – 135,000 | 30 | 30 | 30 |
| 135,001 – 190,000 | 37 | 37 | 37 |
| >190,000 | 45 | 45 | 45 |
| From | 1 July 2025 |
Households and small business will receive an additional automatic credit of $150 on their energy bills in quarterly instalments between 1 July 2025 and 31 December 2025.
The extension of energy bill rebates will cost $1.8 billion over two years.
From 1 July 2025, the way in which foreign residents interact with the tax system were scheduled to come into effect. These changes have now been delayed.
The start date for proposed amendments to the capital gains tax (CGT) rules for foreign residents has been delayed until 1 October 2025 at the earliest, and potentially later depending on the passage of the reforms through Parliament.
The changes would broaden the range of assets subject to CGT for foreign residents when they dispose of them, amend the rules which determine whether the sale of shares in a company or units in a trust are subject to CGT and require foreign residents to disclose transactions involving shares or trust interests with a value of at least $20 million to the ATO before they occur.
From 1 April 2025, the Government has banned foreign and temporary residents, and foreign-owned companies, from purchasing established dwellings to prevent ‘land banking’. The ban applies for 2 years but is subject to some limited exceptions.
The extension of the cleaning building management investment trust (MIT) withholding tax concession was due to commence from 1 July 2025. This has now been delayed until the first 1 January, 1 April, 1 July or 1 October after the Act receives Royal Assent.
The Government will also amend the tax laws to clarify arrangements for MITs to ensure that legitimate investors can continue to access concessional withholding rates. The changes will apply to find payments from 13 March 2025 and will complement the ATO’s increased focus in this area to prevent misuse – see Taxpayer Alert 2025/1.
The Government’s ‘Help to Buy’ program reduces the deposit required to buy a home by providing an equity contribution. Under the program, Housing Australia provides eligible participants with a Commonwealth equity contribution of up to 30% of the purchase price of an existing home and up to 40% of the purchase price of a new home. That is, they will give you the money and take a stake in your home.
Originally, to be eligible for the program, the income threshold for a single was $90,000 and, for joint participants, $120,000. The Budget increases this threshold to $100,000 and $160,000 respectively. Additional conditions apply.
The program is not currently available to applicants.
| Date | From 2027 |
The Government has announced that it will ban non-compete clauses for low and middle-income employees (under the Fair Work Act high income threshold is currently $175,000). Non‑compete clauses are conditions in employment contracts that prevent or restrict an employee from moving to a competitor. Back in April 2024, Treasury released an issues paper for consultation on Worker non-compete clauses and other restraints. The review stated that, “The direct consequence of a non-compete clause is that it hinders competition among businesses: it disincentivises workers from leaving their current job, creating a barrier to the entry of new businesses and the expansion of existing businesses.”
The Government is also make changes to competition law to prevent businesses from:
| Date | August 2025 (beer excise) 1 July 2026 (other measures) |
Indexation on the draught beer excise and excise equivalent customs duty rates will be paused for two years from August 2025. This just means that the price of beer won’t go up because of tax.
Support is also provided under the Excise remission scheme for manufacturers of alcoholic beverages increasing caps for all eligible brewers, distillers and wine producers to $400,000 per financial year, from 1 July 2026 (up from $350,000).
The Government has extended additional 35% trade tariffs imposed on goods that are the produce or manufacture of Russia or Belarus. The measure is symbolic support for Ukraine as it delivers a negligible increase in revenue over five years.
| Date | From 1 July 2025 |
The Government has set aside $999m over 4 years for the ATO to expand its compliance programs:
The compliance programs are expected to deliver a threefold return of $3.2bn.
The Government intends to further pair back its use of consultants, contractors and labour hire. The budget estimates that the Government will save $718m in 2028-29 by continuing cuts to external labour.
Growth
Australia’s economy is expected to grow, albeit slowly, at 2.25% in 2025-26 and 2.5% in 2026-27.
The direct impact of Ex-Tropical Cyclone Alfred on economic activity is estimated to be up to 0.25% of GDP.
We’re back in a deficit
The underlying cash balance will be a deficit at -$42.1bn in 2025-26, before improving but remaining in the red for several years.
Debt is also higher, rising from 18.4% of GDP in 2023-24 to an estimated 21.5% in 2025-26, rising to 23.1% by 2028-29.
Employment
The unemployment rate has stayed low, the participation rate remains elevated, and employment has grown by more than one million people since May 2022 with around 80% of jobs created in the private sector since the June quarter 2022.
Unemployment is expected to peak at 4.25%.
Wages
Annual real wages have grown for five consecutive quarters and are forecast to grow by 0.5% in 2024-25.
The Wage Price Index (WPI) grew by 3.2% through the year to the December quarter 2024 and is expected to grow by 3% through the year to the June quarter of 2025 and 3.25% to June 2026.
Inflation
Inflation is expected to be 2.5% through the year to the June quarter 2025.
The moderation of inflation was helped by cost of living relief and a decline in petrol prices towards the end of 2024. Electricity rebates and indexation of rent assistance (Commonwealth and State) reduced headline inflation by 0.75% through the year to the December quarter of 2024.
Global tensions
Economically, trade tensions have magnified global uncertainty. Global growth is already subdued. The indirect effect of tariffs is estimated to be nearly four times as large as the direct effect on Australia, reflecting the relative importance of affected trade flows between Australia, China, and the United States. Retaliatory tariffs, if they occur, will only amplify losses in real GDP.
Beyond the difficult task of dividing up your assets and determining who should get what, it’s essential to look at the tax consequences of how your assets will flow through to your beneficiaries.
When assets pass from a deceased individual to a beneficiary of the estate, the tax impact will generally depend on the nature of the asset and the tax characteristics of the beneficiary, such as their residency status.
When cash passes from a deceased individual to their estate and then to a beneficiary, generally, there should not be any direct tax issues to deal with, assuming that the cash is denominated in AUD.
Death is a taxing event. When a change of ownership of an asset occurs, generally, a capital gains tax event (CGT) is triggered. However, the tax rules provide some relief from CGT when someone dies. The basic rule is that a capital gain or loss triggered by a death is disregarded unless the asset is transferred to one of the following:
The exemption applies if the asset passes to the deceased’s legal personal representative (i.e., executor) or to a beneficiary of the estate, which is not one of the entities listed above.
Once the asset has been transferred to the beneficiary, the beneficiary will need to manage the tax impact when they sell the asset.
Let’s assume you inherit an ASX listed share portfolio under your mother’s will. The tax outcome will depend on whether your mother was an Australian resident for tax purposes when she died, and whether the shares were acquired by your mother before or after 20 September 1985 (i.e., pre-CGT or post-CGT).
If your mother was an Australian resident for tax purposes when she died, and the shares were acquired post-CGT, then the cost base of the shares is normally based on the original purchase price. That is, the tax rules treat the inherited shares as if you purchased them. For example, if your mother purchased BHP shares for $17.82 on 2 January 1997, when you sell the shares, the gain is calculated based on your mother’s purchase price of $17.82.
If your mother was a resident of Australia when she died, and the shares were acquired pre-CGT, then the cost base of the shares is normally reset to their market value at the date of death. That is, if your mother passed away on 1 October 2024, the share price at close was $45.96. If you subsequently sold the shares in three years, the gain or loss is calculated using this value.
If your mother was a non-resident when she died, then the cost base of the shares is normally based on their market value at the date of death.
But it’s not all about the tax. Managing shares in your will can be difficult as prices and allocations change over time, and the companies you are invested in evolve. A portfolio that was once worth a small amount 20 years ago, might be worth significantly more when you die.
Let’s assume you inherit an Australian residential property from your father under his will. For certain tax purposes, you are taken to have acquired the property at the date of his death.
The general rule is that the executor and/or beneficiaries of the estate inherit the cost base and reduced cost base of the CGT assets (the house) owned by the deceased just before their death, but this isn’t always the case, especially when it comes to pre-CGT properties and a property that was the main residence of the deceased individual just before they died.
Special rules exist that enable some beneficiaries or estates to access a full or partial main residence exemption on the inherited property. If the house was your father’s main residence before he died, he did not use the home to produce income (did not rent it out or use it as a place of business) and he was a resident of Australia for tax purposes, then a full CGT exemption might be available to the executor or beneficiary if either (or both) of the following conditions are met:
For example, if the house was your father’s main residence and was eligible for the full main residence exemption when he died, if you sell the house within the 2 year period, no CGT will apply. However, if you sell the house 10 years later, the CGT impact will depend on how the property has been used since the date of your father’s death.
An extension to the two year period can apply in limited certain circumstances, for example when the will is contested or is complex.
If your father did not live in the property just before he died, it still might be possible to apply the full exemption if your father chose to continue treating the home as his main residence under the ‘absence rule’. For example, if he was living in a retirement village for a few years but maintained the property as his main residence for CGT purposes (even if it was rented out).
If your father was not an Australian resident for tax purposes when he died, the cost base for CGT purposes will normally be based on the purchase price paid by your father if he acquired it post-CGT.
If you are an Australian resident who has inherited a foreign property or asset from an individual who was a non-resident just before they died, the cost base is normally taken to be the market value at the time of death. For example, if you inherited a house from your uncle in the UK, the cost base is likely to be the value of the house at the date of his death.
If a taxable gain arises on sale, then it is necessary to consider whether the CGT discount can apply, but the discount will sometimes be less than 50%. If the gain is also taxed overseas, then a tax offset can sometimes apply to reduce the amount of tax payable in Australia.
Managing an inheritance can become complex. For assistance with estate planning, or to understand the tax implications of an inheritance, please contact us.
The main residence exemption exempts your family home from capital gains tax (CGT) when you dispose of it. But, like all things involving tax, it’s never that simple.
As the character of Darryl Kerrigan in The Castle said, “it’s not a house. It’s a home,” and the Australian Taxation Office’s (ATO) interpretation of a main residence is not fundamentally different. A home is generally considered to be your main residence if:
The length of time you have lived in the home is important, but there are no hard and fast rules. Your intention takes precedence over time spent as every situation is different.
In general, CGT applies to the sale of your home unless you have an exemption, partial exemption, or you can offset the tax against a capital loss.
If you are an Australian resident for tax purposes, you can access the full main residence exemption when you sell your home if:
If you have used your home to produce income, you won’t normally be able to claim the full main residence exemption, but you might be able to claim a partial exemption.
Common scenarios impacting your main residence exemption include:
In these scenarios, from the time you started to use the home to generate income, that part of the home is likely to be subject to CGT. And, a word of caution here, as of 1 July 2023, platforms such as Airbnb must report all transactions to the ATO every 6 months. This data will be used to match against the income reported on income tax returns.
Foreign residents cannot access the main residence exemption even if they were a resident for part of the time they owned the property.
If you are a non-resident at the time you enter into the contract to sell the property, you are unlikely to be able to access the main residence exemption. Conversely, if you are a resident at the time of the sale, and you meet the other eligibility criteria, the rules should apply as normal even if you were a non-resident for some of the ownership period. For example, an expat who maintains their main residence in Australia could return to Australia, become a resident for tax purposes again, then sell the property and if eligible, access the main residence exemption.
It’s important to recognise that the residency test is your tax residency, not your visa status. Australia’s tax residency rules can be complex. If you are uncertain, please contact us and we will work through the rules with you.
You might have heard about the ‘absence rule’. This rule allows you to continue to treat your home as your main residence for tax purposes:
When you apply the absence rule to your home, this normally prevents you from applying the main residence exemption to any other property you own over the same period. Apart from limited exceptions, the other property is exposed to CGT.
Let’s say you moved overseas in 2020 and rented out your home while you were away. Then, you came back to Australia in 2023 and moved back into your house. Then in early 2024, you decided it is not your forever home and sold it. You elected to apply the absence rule to your home and didn’t treat any other property as your main residence during that same period. In this case, you should be able to access the full main residence exemption assuming you are a resident for tax purposes at the time of sale.
The 6 year period also resets if you re-establish the property as your main residence again, but later stop living there. So, if the time the home was income producing is limited to six years for each absence, it is likely the full main residence exemption will be available if the other eligibility criteria are met.
Your home normally qualifies as your main residence from the point you move in and start living there. However, if you move in as soon as practicable after the settlement date of the contract, that home is considered your main residence from the time you acquired it.
If you buy a new home but haven’t yet sold your old home, you can treat both properties as your main residence for up to six months without impacting your eligibility to the main residence exemption. This applies if the old home was your main residence for a continuous period of 3 months in the 12 months before you disposed of it and you did not use your old home to produce income in any part of that 12 months when it was not your main residence.
If the sale takes more than six months and if eligible, the main residence exemption could apply to both homes only for the last six months prior to selling the old home. For any period before this it might be possible to choose which home is treated as your main residence (the other becomes subject to CGT).
If your new home is being rented to someone else when you purchase it and you cannot move in, the home is not your main residence until you move in.
If you cannot move in for some unforeseen reason, for example you end up in hospital or are posted overseas for a few months for work, then you still might be able to access the main residence exemption from the time you acquired the home if you move in as soon as practicable once the issue has been resolved. Inconvenience is not a valid reason and you will need to ensure that you have documentation to support your position.
Let’s say you and your spouse each own homes that you have separately established as your main residences.
The rules don’t allow you to claim the full CGT exemption on both homes. Instead, you can:
If you and your spouse nominate different dwellings, the exemption is split between you:
The same rule applies to your spouse.
The rule applies to each home that the spouses own regardless of how the homes are held legally, i.e., sole ownership, tenants in common or joint tenants.
Assuming the home is transferred to one of the spouses (and not to or from a trust or company), both individuals used the home solely as their main residence over their ownership period, and the other eligibility conditions are met, then a full main residence exemption should be available when the property is eventually sold.
If the home qualified for the main residence exemption for only part of the ownership period for either individual, then a partial exemption might be available. That is, the spouse receiving the property may need to pay CGT on the gain on their share of the property received as part of the property settlement when they eventually sell the property.
The main residence exemption looks simple enough but it can become complex quickly.
The instant asset write-off threshold increased from $1,000 to $20,000 for 2023-24.
The increase to the instant asset write-off threshold provides a major cashflow advantage by enabling small businesses to claim an immediate tax deduction for certain assets in the year of purchase, instead of spreading the deduction over a number of years.
Remember that the deduction is not a refund, it will only reduce the taxable income of the business entity, or in some cases, it will create or increase a tax loss that needs to be carried forward to future years. For example, if your business operates through a company structure, the economic benefit of the write-off is limited to the relevant company tax rate (25% for base rate entities, 30% for other companies). If your business is likely to make a tax loss for the year, then a larger deduction might not provide any short-term benefit.
Eligibility to access the instant asset write-off looks at both your business entity and the asset.
To utilise the instant asset write-off, your business entity must:
And, for an asset to be eligible, it must:
The provisions that prevent small business entities from re-entering the simplified depreciation regime for five years if they opt-out will continue to be suspended until 30 June 2024 (the lock-out rules).
If your business is a small business entity and chooses to apply the simplified depreciation rules, then assets costing $20,000 or more (that cannot be immediately deducted) can continue to be placed into the small business general pool and depreciated at 15% in the first income year and 30% each income year thereafter.
The increased instant asset write-off threshold also means that a $20,000 threshold applies for the purpose of determining whether the full pool balance is written off in the 2024 income year. Just remember that when you are applying these rules, you don’t look at the closing pool balance, you are looking at what the pool balance would have been if you ignored the current year depreciation deductions for the pool for the 2024 year.
The write-off threshold applies per asset, so a small business entity can potentially deduct the full cost of multiple assets. Assuming all the other conditions are met, an immediate deduction should be available for each individual item costing less than $20,000 - just be careful of cashflow.
The instant asset write-off does not distinguish between new or second-hand goods. For example, second hand machinery may qualify if it meets the other requirements.
In the 2024-25 Federal Budget, the Government announced an extension to the increased instant asset write-off threshold to 30 June 2025. A Bill is currently before Parliament to enact this change.
