Qualifying as an interdependent or financial dependent

2024-25 FBT Checklist With the due date for FBT returns coming up, the following non-exhaustive checklist may prove useful in determining whether an employer has an FBT liability in the first place. Although it will generally fall to your accountant to prepare the FBT return from your software file or other records, all of the instances where you have provided employees and/or their associates (e.g. spouse) with a potential fringe benefit may not always be apparent to them. To assist you in bringing these potential benefits to the attention of your accountant, following is a general checklist to refer to. CAR FRINGE BENEFITS Does a car fringe benefit arise? For FBT purposes a “car” is: any motor-powered road vehicle (including a four-wheel drive) that is designed to carry: - less than one tonne, and - fewer than nine passengers. Were any vehicles provided to employees (or associates) during the FBT year? You make a car available for private use by an employee on any day that either: a. the car is actually used for private purposes by the employee or b. the car is available for the private use of the employee. A car is treated as being available for private use by an employee on any day that either: a. the car is not at the employer’s premises, and the employee is allowed to use it for private purposes, or b. the car is garaged at the employee’s home. If so, was the vehicle designed to carry less than one tonne and fewer than nine passengers? If so, the vehicle would be classified as a “car” for FBT purposes. If not, the provision of the vehicle may constitute a “residual fringe benefit” (see later). Different requirements in valuing the benefit then apply. Exemptions Is the vehicle a taxi, panel van or utility? If so, an exemption is available where there is private use of the vehicle by a current employee and the vehicle is either: a taxi, panel van or a utility designed to carry less than one tonne, or any other road vehicle designed to carry less than one tonne which is not designed to principally carry passengers, and the employee’s use of such a vehicle is limited to: - travel between home and work - travel incidentals where travel expenses are incurred in the course of performing employment-related duties, and - non-work-related use that is minor, infrequent and irregular. This means (according to the ATO) less than 1,000 kms of private vehicle use, with no single private use journey in excess of 200 kms. (Note: the ATO expects the employer to exercise some oversight over the minor, infrequent and irregular use of the vehicle.) Is the vehicle a dual cab vehicle? If so, the vehicle will qualify for the work-related use exemption only if: it is designed to carry a load of one tonne or more, and more than eight passengers, or while having a designed load capacity of less than one tonne, it is not designed for the principal purpose of carrying passengers. Is the vehicle a “modified” vehicle? Certain modified vehicles are exempt from FBT where modifications permanently change a car and cannot be readily reversed for the car to be regularly used alternately as a passenger or non passenger car. An example of such a vehicle is a hearse. Is the vehicle an unregistered vehicle? If a car is unregistered for the full FBT year and used principally for business purposes (such as off-road or cars used on farms), any private use is exempt from FBT. A car that may be lawfully driven on a public road is regarded as being registered. Does the vehicle qualify for the electric cars exemption? Zero or low emission vehicles (including plug-in hybrids) are exempt from FBT where they are first held from 1 July 2022 and made available to current employees or associates. This incentive will apply until at least 2027, when there is to be a review. The GST-inclusive cost of the EV cannot exceed $91,387, which is the Luxury Car Tax threshold for fuel efficient vehicles for 2024-25. Plug-in hybrids will lose their exemption after 31 March 2025 unless there is a binding commitment to continue to provide the vehicle after that date. CAR PARKING FRINGE BENEFITS Does a car parking fringe benefit arise? A car parking fringe benefit arises in relation to a particular day where all of the following conditions are present on that day: the car is parked on business premises or associated premises of the provider a commercial parking station is located within a 1km radius of the premises at which the car is parked the lowest fee charged by the operator of any such commercial parking station located within a 1km radius for all-day parking on the first “business day” of the FBT year is more than the “car parking threshold” ($10.77 for the 2024/25 FBT year). the car is parked on the premises for more than four hours (cumulative) between 7.00am and 7.00pm on that day the car is used for travel between home and work at least once on that day the provision of the parking facility is in respect of the employment of the employee the car is owned by, leased to, or otherwise under the control of the employee, and the employee has a primary place of employment on that day and the parking is at or in the vicinity of that primary place of employment. Small businesses (gross turnover less than $10 million or aggregated turnover less than $50 million) are exempt from car parking FBT unless employees are using a commercial car parking station. LOAN FRINGE BENEFITS Does a loan fringe benefit arise… Has a loan been made by an employer (or associate) to an employee (or their associate)? Was the loan provided in respect of the employment of the employee? Do you know the date the loan was made? Do you know the amount of the loan? Do you know the purpose of the loan? Has interest been charged on the loan that is at a rate lower than the benchmark interest rate of 8.77% (2024/25)? The loan is not a fringe benefit where it is either: compliant with s109N ITAA 1936 for Division 7A purposes, or treated as a deemed dividend under s109D ITAA 1936 for Division 7A purposes. Exemptions Is the minor benefits exemption under s58P FBT Act applicable? Did the loan constitute an advance of money by the employer to the employee to meet employment-related expenditure which will be incurred within six months? If yes, an exemption is available. DEBT WAIVER FRINGE BENEFITS Has an employer (or their associate) released the employee (or their associate) from repaying an outstanding debt? A debt waiver fringe benefit arises. Does the debt forgiveness give rise to a deemed dividend under Division 7A ITAA 1936? If so, the debt waiver does not constitute a fringe benefit. Section 109F ITAA 1936 may operate to treat a forgiven debt as a deemed dividend in the hands of a current or former shareholder (or associate) of a private company even if they are also an employee of the company (see s109ZB(2) ITAA 1936). Does the debt waiver constitute the forgiveness of a genuine bad debt? If so, the debt waiver is exempt from FBT. EXPENSE PAYMENT FRINGE BENEFITS Does an expense payment fringe benefit arise? Did an employer (or their associate) pay or reimburse an employee (or their associate) for any expenses incurred by the employee (or their associate)? Was the payment or reimbursement for an item that was used solely for an income-generating purpose? If yes, a fringe benefit does not arise. Employee to complete Expense payment fringe benefit declaration. Was the expenditure reimbursement by the employer to the employee on a cents-per- kilometer basis? If yes, the payment is FBT-exempt. Note that the employee will be assessed on this reimbursement. Exemptions Is the minor benefits exemption under s58P FBT Act applicable? Is an exemption available for a work-related item which is used primarily in the employee’s employment? These work-related items include a portable electronic device (including mobile phones, laptops and tablet pcs), briefcase, tool of trade or an item of computer software, or protective clothing. Specific conditions apply to the provision of portable electronic devices. Employers who are eligible small businesses (i.e. aggregated annual turnover of less than $50 million) can provide multiple work-related portable electronic devices (such as laptops and tablets) in certain circumstances. Is an exemption available for the reimbursement of the following: membership fees and subscriptions to: - a trade or professional journal - use a corporate credit card, or - an airport lounge membership newspapers and periodicals to employees for business purposes, and expenses relating to emergency assistance such as: - first aid or other emergency health care - emergency meals, food supplies, clothing, accommodation, transport or use of household goods - temporary repairs, and - any similar matter. BOARD FRINGE BENEFITS Does a board fringe benefit arise? Was a meal provided to an employee (or their associate) where the following conditions are satisfied: there is an entitlement under an industrial award or employment arrangement to be provided with residential accommodation and at least two meals per day the meal is supplied by either: - where the employer is not a company – the employer, or - where the employer is a company – the employer or a related company either of the following applies: - the meal is cooked or prepared on the premises of the employer (or related company) and is provided to the recipient on employer’s premises (other than a public dining facility), or the following conditions are satisfied: - the employee’s duties consist principally of duties to be performed in, or in connection with, an eligible dining facility of the employer or a facility for the provision of accommodation, recreation or travel which includes the dining facility - the meal is cooked or prepared in the cooking facility of the dining facility, and - the meal is provided to the recipient in the dining facility the facility in which the meal is cooked or prepared is not used wholly or principally for cooking or meal preparation for the employee or their associates, and the meal is not provided at a social function (eg, party or reception). LIVING-AWAY-FROM-HOME ALLOWANCE (LAFHA) Does a LAFHA benefit arise? Was an employee paid an allowance by an employer as compensation for additional expenses because the employee was required to live away from his or her usual place of residence located in Australia to perform employment duties during the FBT year? If yes: The LAFHA rules may apply. Has documentary evidence been obtained from the employee to substantiate accommodation expenses and food expenses (if reasonable amounts determined by the ATO are not being used)? Alternatively, has a declaration for employee-related expenses been obtained? If a declaration is made, the record must be maintained for five years from its making. Relocation costs Were any of the following expenses incurred in relation to the employee relocating from their usual place of residence to perform employment-related duties: engagement of a relocation consultant removal and storage of household effects sale or acquisition of a dwelling connection or reconnection of certain utilities (eg, water, electricity), or transport of the employee (and family members) and any meals and accommodation en-route to the new location? The provision of such benefits either as an expense payment, property or residual fringe benefit is typically exempt from FBT. Declarations and substantiation Have the relevant LAFHA declarations been sought from employees in receipt of allowances or benefits before the lodgment day of the FBT return? The ATO has released on its website pro-forma LAFHA declarations. The declarations include employees who fly-in, fly-out or drive-in or drive-out, employee-related expenses, and employees who maintain a home in Australia. MEAL ENTERTAINMENT FRINGE BENEFITS Does a meal entertainment fringe benefit arise? Has entertainment been provided to an employee (or their associate) by way of food or drink, accommodation or travel in connection with the provision of food or drink or recreation? Calculation of taxable value Has an election been made to use either the 50/50 split method or the 12 week register method? If no election is made, the benefit is typically treated as either a property, expense payment or residual fringe benefit and the taxable value calculated based on the rules for those types of benefits (i.e. under the actual method). 50/50 split method – has all expenditure in respect of all persons been included? 12-week register method: - Has all expenditure in respect of all persons been included? - Does the register include details of the date, cost, location and persons in relation to the meal entertainment? See TR 97/17 for guidance on the various circumstances where food and drink is provided and the applicable FBT and income tax treatment. Where the actual method is used: Has the food or drink been consumed by current employees on the employer’s business premises on a working day? If so, apply the s41 FBT Act exemption relating to property benefits. Is the minor benefits exemption pursuant to s58P FBT Act applicable? Reduction in taxable value Did the employee contribute towards the provision of the benefit? If so, reduce the taxable value by the amount of the employee’s contribution. HOUSING FRINGE BENEFITS Does a housing fringe benefit arise? Has an employer (or their associate) provided an employee (or their associate) with a right to occupy a “unit of accommodation” as the usual place of residence of the employee (or their associate)? A housing fringe benefit will arise except where an exemption applies. An exemption will arise where the benefit constitutes remote area housing. Reduction in taxable value Did the employee contribute towards the provision of the benefit? Reduce the taxable value by the amount of the employee’s contribution. ENTERTAINMENT LEASING FACILITY EXPENSES Did an entertainment leasing facility expense fringe benefit arise? Has entertainment been provided to an employee (or their associate) by way of the employer incurring “entertainment leasing facility expenses”? This includes the hire or leasing of a corporate box, boats or planes or “other premises or facilities” for providing entertainment. Expenses, or parts of expenses, that are not entertainment facility leasing expenses for these purposes are: expenses attributable to providing food or beverages, and expenses attributable to advertising that would be an allowable income tax deduction. TAX-EXEMPT BODY ENTERTAINMENT FRINGE BENEFITS Does a tax-exempt body entertainment fringe benefit arise? A charity must be endorsed in order to be income tax-exempt. Has entertainment been provided to an employee by a tax-exempt body (an organisation that is wholly or partially exempt from tax)? Where this is the case, a separate category of fringe benefit arises (referred to as a “tax-exempt body entertainment fringe benefit”). It is only non-deductible entertainment that falls within this category of benefit (eg, a meal at a party). Refer to TR 97/17 for further guidance. A tax-exempt body is an entity which is either: wholly exempt from income tax (eg, a club that earns income from members only), or partially exempt from income tax (eg, a club that earns income from both members and non-members). Calculation of taxable value Equal to the expenditure incurred in the provision of the entertainment. Reduction in taxable value Did the employee contribute towards the provision of the benefit? Reduce the taxable value by the amount of the employee’s contribution. Exemption Is the minor benefits exemption under s58P FBT Act applicable? PROPERTY FRINGE BENEFITS Does a property fringe benefit arise? Was any property provided in respect of an employee’s employment? Property includes both tangible and intangible property e.g. goods, shares and real property. Exemption Is the minor benefits exemption under s58P FBT Act applicable? Is an exemption available for a work-related item which is used primarily in the employee’s employment? i.e. a portable electronic device (including mobile phones, laptops and tablet pcs), briefcase, tool of trade or an item of computer software, or protective clothing. Is an exemption available for the provision of: membership fees and subscriptions to: - a trade or professional journal, - use of a corporate credit card, or - an airport lounge membership newspapers and periodicals to employees for business purposes, or expenses relating to emergency assistance such as: - first aid or other emergency health care - emergency meals, food supplies, clothing, accommodation, transport or use of household goods - temporary repairs, and - any similar matter? RESIDUAL FRINGE BENEFITS Does a residual fringe benefit arise? Has a fringe benefit been provided by an employer to an employee which does not fall within any other specific fringe benefit category in the FBT Act? Exemption Is the minor benefits exemption under s58P FBT Act applicable? Is an exemption available for a work-related item which is used primarily in the employee’s employment? i.e. a portable electronic device (including mobile phones, laptops, tablet, PC), briefcase, tool of trade or an item of computer software, or protective clothing. Employers who are eligible small businesses (ie, aggregated annual turnover of less than $50 million) can provide multiple work-related portable electronic devices. FBT REBATE Are you a rebatable employer? Certain non-government, non-profit organisations are eligible for the FBT rebate. These include: certain religious, educational, charitable, scientific or public educational institutions trade unions and employer associations organisations established to encourage music, art, literature, science, a game, a sport or animal races organisations established for community service purposes organisations established to promote the development of aviation or tourism organisations established to promote the development of information and communications technology resources, and organisations established to promote the development of agricultural (etc.), fishing, manufacturing or industrial resources. Endorsement for FBT rebatable status is required from the ATO for charities. Reduce FBT liability by a rebate equal to 47% of the gross liability subject to a capping threshold. The capping threshold is $30,000 per employee per FBT year. The full capping threshold applies for the FBT year even if the employee was not employed by the organisation for the full year.

On 25 March 2025, the Federal Government delivered its fourth Budget, focusing on five key priorities, including cost-of-living relief, housing, and education. From a tax and superannuation perspective, there weren’t any surprises, although the Treasurer did pull a rabbit out of the hat by announcing a small (very small) tax cut for individuals. Not many commentators had been expecting that. Below you will find the key tax, superannuation and cost of living highlights together with measures already announced but not yet implemented to help you understand the changes that will impact you. Please feel free to contact this office if you have any queries about them or how they may impact you in your circumstances. Income tax measures Personal tax cuts It wouldn’t be an election Budget without at least a modest tax cut, and in his Budget Speech the Treasurer unveiled a small tax cut that will benefit all taxpayers, although they will have to wait more than two years to enjoy the full benefits. As from 1 July 2026 the government proposes to shave 1% off the lowest tax bracket ($18,200 to $45,000), from 16% to 15%. Then, from 1 July 2027, another 1% comes off by taking the rate down to 14%. All this cutting will leave a taxpayer earning at least $45,000 better off by $268 in 2026-27 and $536 in 2027-28. Economic times are tough, with the Budget sliding back into long-term deficits, so we suppose taxpayers should be grateful for whatever extra money comes their way, even $10 a week when it all finally comes through. With nominal wages on the rise, however, bracket creep will more than replenish the government’s coffers over time. Of course, Labor needs to be re-elected before any of this comes to pass, although the Coalition may come along with tax cuts of their own. Bring it on. Medicare Levy low income thresholds increased The Medicare levy low‑income thresholds for singles, families, and seniors and pensioners are to be increased as from 1 July 2024. This is another form of a tax cut, and not one people have to wait two years for, so the proposed increases should be welcomed.  Higher education loan repayment changes The government will reduce all outstanding Higher Education Loan Program (HELP) and other student debts by 20%, before indexation is applied on 1 June 2025. The proposed cut will remove a total of $16 billion in student debt. In addition, the minimum repayment threshold is to increase substantially, moving from $54,435 in 2024-25 to $67,000 in 2025-26. Both these changes had been previously announced late in 2024, but the Budget announcement shows the government remains committed to implementing them. The missing Instant Asset Write-Off legislation With the year end fast approaching, there are concerns that last year’s Budget announcement extending the $20,000 threshold for the small business Instant Asset Write-off to 30 June 2025 remains unenacted. As things stand, the threshold reverts back down to $1,000 for the 2024-25 financial year unless the law is changed to give effect to last year’s announcement. And there are unlikely to be any law changes this side of the election. We also note there has been no announcement for the 2025-26 financial year. Readers may recall there were similar delays last year in relation to the 30 June 2024 extension, with amending legislation being passed at the eleventh hour. Our preference would be to make the threshold a permanent feature of the law and to increase the threshold to at least $30,000. Superannuation measures Super Guarantee payable on payday from 1 July 2026 From 1 July 2026, employers will have to pay super at the same time as wages instead of every three months. This means if you’re paid weekly or fortnightly, your super will be too. What this means: Better tracking of super payments – you'll be able to see your super being paid in real time, making it easier to spot any missing contributions. More money for retirement – getting super more frequently means it can start earning interest sooner, which adds up over time. According to the Treasurer, a 25-year-old earning a median income could have around $6,000 extra at retirement. Cashflow impact for businesses – employers will need to adjust their cashflow planning to accommodate more frequent super payments. This change is designed to protect workers and boost retirement savings, making super payments more reliable and transparent. Extra tax for super earnings for account balances above $3 million The 15% additional tax on superannuation “earnings” for individuals with account balances above $3 million from 1 July 2025 appears to remain government policy. This will be on top of the existing 15% tax on superannuation earnings. The Budget papers confirm that the government isn’t backing down on this policy, making it a likely election issue. What this means: This extra tax has some major flaws, including: Taxing unrealised gains – meaning you could be taxed on profits you haven’t actually received. A fixed $3 million cap – as super balances grow over time, more people will be affected. Cashflow risks for SMSFs – especially for those holding property, farms, or land, where selling assets just to pay tax could be a real issue. With the federal election approaching, time is running out for the Senate to debate this tax. If it doesn’t pass before the election is called, it will automatically disappear – a huge win after two years of industry pushback. Cost of living measures The government has announced a range of measures to help with everyday costs, including energy bill rebates, bulk billing incentives, and cheaper medicines. Energy bill relief Good news for households and small businesses – the government is extending energy bill rebates for another six months until 31 December 2025. The changes include: Eligible households will receive $150 in total ($75 per quarter) from 1 July 2025. Small businesses that meet their state’s definition of a ‘small electricity customer’ will also receive $150 in total. The discount will be automatically applied to your electricity bill by your energy provider. Expanding bulk billing incentives From 1 November 2025, bulk billing incentives will be expanded to all Medicare-eligible Australians – not just children under 16 and concession card holders. A new Bulk Billing Practice Incentive Program will also reward general practitioners (GP) who bulk bill all Medicare consultations, making it easier to find doctors who bulk bill. The goal? Nine out of ten GP visits bulk billed by 2030. Cheaper medicines The Government is lowering the maximum cost of medicines on the Pharmaceutical Benefits Scheme (PBS) for everyone with a Medicare card and no concession card. From 1 January 2026, the maximum co‑payment will be lowered from: $31.60 to $25.00 per script for general Medicare cardholders For concession card holders, the co-payment will stay frozen at $7.70 These measures aim to ease financial pressure and improve access to essential services for Australians.

If you own Bitcoin, or any other crypto currency, you may have been the beneficiary of Donald Trump’s election as President last November – which saw Bitcoin prices jump by almost 50% almost immediately after the election (and certainly in the following weeks). And if you decided to take advantage of this and realise your gain by selling your Bitcoin you may have a capital gains tax (CGT) problem, and a nasty one at that (albeit, it is only a tax problem – it is not a “no-profit” problem!). So, if you have made a capital gain, you should consider a few things. Firstly , the Tax Office’s data matching capabilities regarding the buying and selling of Bitcoin are very extensive (and very good) – so, any idea of just not declaring your gain would bring with it big risks. Secondly , like anything to do with tax, keep good records of your dealings with Bitcoin: it is both a legal requirement and will help you manage your tax affairs. Thirdly , if you also have capital losses from your dealings in Bitcoin (or any other CGT assets) in either this income year or previous ones, you can use those losses to reduce any assessable capital gains from Bitcoin – and this will result in less tax being payable. And the same rules applies to using any current or prior-year “revenue” or trading losses you have from any other activities. They too can be used to reduce your capital gains from Bitcoin. Fourthly, and importantly, like most capital gains from other assets, you are entitled to use the 50% discount to reduce the amount of assessable capital gain – provided you have owned the Bitcoin for more than 12 months. Finally, don’t forget that if you become a foreign resident for tax purposes you will be deemed to have sold your Bitcoin for its market value at the time you left the country – or the CGT rules will subject you to Australian CGT if you sell it while you are overseas. (And don’t forget about the ATO’s extensive data matching capability in this regard!) However, all this assumes you aren’t in the business of trading in Bitcoin. If this were the case you would generally be taxed on your profits as ordinary business or other income – without the benefit of the accompanying concessions. The other thing to be wary of is that the ATO has specific guidelines about how it treats Bitcoin and these can be difficult to apply to a particular situation. So, if you have a “Bitcoin problem”, come and speak to us about it – and we will help you get things right (and maybe even find a legitimate way to reduce the ultimate tax payable on it).

Salary Sacrifice vs Personal Deductible Contributions: And the winner is… Super is a great way to save for retirement. It offers an opportunity to invest in long-term growth assets and enjoy generous tax concessions along the way. For those wanting to make extra contributions and reduce their personal tax bill, there are two options: Salary sacrifice, and Personal deductible contributions (PDCs) Both have their benefits, and choosing the right method depends on your cash flow, flexibility needs and personal preference. Let’s break them down. What are salary sacrifice and personal deductible contributions? Salary sacrifice – Your employer deducts a portion of your pre-tax salary and contributes it to your super fund. Personal deductible contributions (PDCs) – You make voluntary contributions from after-tax money and later claim a tax deduction when you lodge your tax return. Benefits of salary sacrifice Timing – Salary sacrifice contributions reduce your taxable income immediately, meaning your employer will withhold less tax and you will immediately enjoy the tax saving. PDCs provide a tax deduction when you lodge your tax return meaning you do not get the tax benefit until later. Discipline – Salary sacrifice is automatic and helps maintain savings discipline. Simplicity – salary sacrifice can be much simpler and less administrative. PDCs require you to submit paperwork to the super fund known as a ‘notice of intent’ form. This paperwork must be submitted within strict timeframes. With salary sacrifice you do not need to worry about such paperwork. When salary sacrifice is a winner Salary sacrifice is a winner for employees who: Prefer a “set-and-forget” approach to growing their super. Have regular income and want a simple way to contribute. Want to ensure their contributions are made gradually over the year to benefit from ‘dollar cost averaging’. This reduces the risk of ‘going all in’ at the peak of the market. Benefits of personal deductible super contributions Availability – Salary sacrifice is only available to employees. If you are not employed, you can’t salary sacrifice. Instead, you might able to make a PDC to super. Flexibility – PDCs offer greater flexibility, allowing you to contribute lump sums at any time during the financial year. Reversibility – After making the contribution and submitting paperwork to claim the deduction you might change your mind. Perhaps you have insufficient income to justify claiming a deduction and would prefer that contribution not be subject to the 15% ‘contributions tax’. It may be possible to ‘reverse’ the contributions tax and not claim the deduction, but unless you have retired or met a condition of release the contribution will remain ‘stuck’ in super. When personal deductible contributions are a winner PDCs are a winner for people who: Want greater control over when and how much they contribute. Have variable income or expect a large one-off payment (e.g., bonus, inheritance, asset sale). Are self-employed or receive income from multiple sources. Want to contribute additional amounts closer to the end of the financial year to maximise their tax deduction. Enjoy the best of both worlds: Combining salary sacrifice and PDCs Many people use both strategies to maximise their super contributions efficiently. For example: Setting up salary sacrifice to contribute steadily throughout the year. Making a PDC at the end of the financial year if additional concessional contribution (CC) cap space is available. Adjusting contributions based on unexpected income or bonuses. Conclusion Salary sacrifice and PDCs each have their advantages, and the right choice depends on your employment, cash flow and personal preference. By speaking to your adviser as to how each method works, you can make informed decisions to optimise your retirement savings while reducing your tax bill.

Most people know that if you inherit a person’s home and you sell it within two years of their death, it can be exempt from capital gains tax (CGT). However, there is another way you can get a full CGT exemption on an inherited home – and that is if a “relevant” person occupies it as their home from the time of the deceased’s death until its later sale (or other transfer or disposal, etc). And these “eligible” persons are the deceased’s surviving spouse of the deceased, a person who is given a right to occupy it under the deceased’s will (eg, a niece or nephew or a friend) or a beneficiary who inherits the home (or an interest in it). However, there are lots of things to bear in mind when using this rule – some good and some not so good. These include the following: It is not necessary to occupy the home immediately from the deceased’s death – as soon as “practicable” will do (which will depend on the circumstances) – albeit in the case of a surviving spouse, presumably this would be no problem. The requirement can be met if more than one of these relevant persons occupy the property as their home successively (eg, a surviving spouse, followed by a beneficiary who inherited the home). The exemption applies on an “interest by interest basis” – which means that if more than one beneficiary inherits the home, then only the beneficiary who occupies the home gets an exemption – and only in respect of their interest (except in rare cases). But this problem can be readily overcome in a number of ways. Where a person or persons are given a right to occupy the home under the will, they must be named or specified under the will; a general power given to the executor to grant such a right will not suffice – well at least that is the position the ATO takes.  For a surviving spouse to qualify for the exemption, they cannot be “living permanently and separately apart from the deceased”. They must, in effect, be living with the deceased at the time of their death. Finally, it may be even possible to use another CGT concession – namely, the “building concession” - to preserve the CGT exempt status of the home where renovations are undertaken or intended to be undertaken on the home’s acquisition. And this may mean it may not have to occupied by a relevant person (or sold within two years of the deceased’s death) to get the CGT exemption. However, if this concession can be used in this case, it comes with one big drawback – no other home can be taken to be your CGT main residence for the period that this building concession is used. As always, come and seek our advice if you inherit a home and wish to occupy the home – or even beforehand for some appropriate planning.

Most people know that if you inherit a person’s home and you sell it within two years of their death, it can be exempt from capital gains tax (CGT). However, there is another way you can get a full CGT exemption on an inherited home – and that is if a “relevant” person occupies it as their home from the time of the deceased’s death until its later sale (or other transfer or disposal, etc). And these “eligible” persons are the deceased’s surviving spouse of the deceased, a person who is given a right to occupy it under the deceased’s will (eg, a niece or nephew or a friend) or a beneficiary who inherits the home (or an interest in it). However, there are lots of things to bear in mind when using this rule – some good and some not so good. These include the following: It is not necessary to occupy the home immediately from the deceased’s death – as soon as “practicable” will do (which will depend on the circumstances) – albeit in the case of a surviving spouse, presumably this would be no problem. The requirement can be met if more than one of these relevant persons occupy the property as their home successively (eg, a surviving spouse, followed by a beneficiary who inherited the home). The exemption applies on an “interest by interest basis” – which means that if more than one beneficiary inherits the home, then only the beneficiary who occupies the home gets an exemption – and only in respect of their interest (except in rare cases). But this problem can be readily overcome in a number of ways. Where a person or persons are given a right to occupy the home under the will, they must be named or specified under the will; a general power given to the executor to grant such a right will not suffice – well at least that is the position the ATO takes.  For a surviving spouse to qualify for the exemption, they cannot be “living permanently and separately apart from the deceased”. They must, in effect, be living with the deceased at the time of their death. Finally, it may be even possible to use another CGT concession – namely, the “building concession” - to preserve the CGT exempt status of the home where renovations are undertaken or intended to be undertaken on the home’s acquisition. And this may mean it may not have to occupied by a relevant person (or sold within two years of the deceased’s death) to get the CGT exemption. However, if this concession can be used in this case, it comes with one big drawback – no other home can be taken to be your CGT main residence for the period that this building concession is used. As always, come and seek our advice if you inherit a home and wish to occupy the home – or even beforehand for some appropriate planning.

Superannuation is often seen as untouchable savings for retirement, but did you know it can also be a lifeline during financial difficulty? While super is designed for retirement, there are rules to allow it to provide financial support in several situations. Let’s explore these rules and how super might offer relief in times of crisis. Accessing super on compassionate grounds If you're dealing with specific expenses that you simply can’t afford, you may be able to access your super on “compassionate grounds”. This option allows you to withdraw a lump sum to cover certain expenses, which may include: Eligible medical treatment or associated transport costs Modifications to your home or vehicle to accommodate a disability Palliative care for yourself or a dependent with a terminal illness Funeral expenses for a dependent Preventing the foreclosure or forced sale of your home There is no set limit on how much super you can access under compassionate grounds, except when it comes to mortgage relief which is restricted to the sum of 3 months repayments and 12 months of interest on the outstanding balance of the loan. Mortgage relief only applies to principal homes and not investment properties. To apply, you’ll need to submit your application to the Australian Taxation Office (ATO). This can be done online through myGov or by requesting a paper form from the ATO. This process also applies to individuals with a self-managed super fund (SMSF). SMSF trustees also require the ATO’s approval before accessing their super early under compassionate grounds. Once approved, you’ll need to provide the approval letter to your super fund to facilitate the release of funds. Keep in mind that tax may apply to your withdrawal. Severe financial hardship If you do not qualify for an eligible expense under “compassionate grounds” but are struggling financially and receiving a Centrelink income support payment, you may qualify to access your super under severe financial hardship. The rules for this depend on your age: If you’re under 60 and 39 weeks: You can make one withdrawal of up to $10,000 in a 12-month period if: You’ve been receiving an income support payment (like JobSeeker Payment) for at least 26 continuous weeks, and You can’t meet immediate and reasonable family living expenses, such as mortgage repayments. If you’re older than 60 and 39 weeks: There are no limits on the amount you can withdraw if: You’ve received an income support payment for at least 39 weeks since reaching 60 years of age, and You’re not currently employed. For those in this category, you may be able to access your full super balance. To apply for early super release due to severe financial hardship, you’ll need to contact your super fund directly, as they are responsible for assessing your claim. The same rules apply to individuals with an SMSF, where trustees are legally required to evaluate member applications using the same severe financial hardship eligibility criteria. Final thoughts It can be reassuring to know that your super isn’t entirely locked away if you find yourself in financial difficulty. Whether it’s to cover urgent medical expenses, prevent losing your home, or simply make ends meet, these provisions can provide much-needed relief. Of course, accessing your super early means you’ll have less saved for retirement, so it’s important to weigh up your options carefully. Also keep in mind, tax may apply on your withdrawal. If you are thinking of accessing your super due to financial difficulty, consider reaching out to your adviser who can help you navigate the process.

With interest rates remaining stubbornly high, and some property investors bailing out altogether, others are taking steps to refinance their debt in order to secure a lower rate and obtain better terms. Before deciding to go down the refinancing route there are broader financial issues to weigh up and you may need to seek separate financial advice that takes into account your personal and financial circumstances. This article only examines the tax consequences of refinancing your investment property loan and some other issues around interest deductibility. Basic rule for interest deductibility The basic rule is that where you borrow money to acquire an income producing asset, the interest is deductible against your assessable income generally, including income from salary and wages. It’s about following the money and being able to demonstrate that a loan was used for income producing purposes. Any security given over a loan does not determine the deductibility of the interest. Maximising tax deductible debt There is nothing improper or untoward about maximising your tax deductible debt. We live in an after tax world and it’s perfectly legitimate to factor tax into your financial decision making. Lower rate on refinancing Where the refinancing involves no more than obtaining a reduced rate or better terms, there has been no additional borrowing and the interest on the new loan remains deductible in full, assuming the property is let or available to let. Releasing equity Where the refinancing releases equity in the investment property, interest deductibility depends on how the additional loan funds are applied. If they are used to maintain or renovate the investment property (or to buy other income producing assets), all the interest payable on the increased loan balance will be deductible. However, where all or part of the equity released is applied for private purposes (like renovating the house you live in, to pay for a holiday or to buy a car), the interest would need to be apportioned between the amount originally used to acquire the investment property (deductible) and the amount used for private purposes (non-deductible). Refinancing costs Refinancing costs for the investment property such as exit fees, valuation fees, break costs and legal fees are deductible over five years or the term of the new loan if that is shorter. Change in use What if there is a change in use of the investment property? You might decide to move into the property yourself or to make it available to a family member free of charge. As soon as the investment property stops being used to generate rental income, the interest associated with the loan taken out to acquire the property stops being deductible. By the same token, if you move out of your main residence to go and live somewhere else and you put tenants in, any interest on the mortgage over the property will become deductible. Debt in the wrong place Sometimes, through circumstances beyond your control, you can end up having debt in the wrong place. For example, you may have a mortgage over the house you live in and inherit the house of a relative which is unencumbered by debt. If you decide to keep the inherited property and put tenants in, you will have non-deductible home mortgage interest as well as an investment property that is debt-free. While you could borrow using the inherited property as security and use the funds to pay off your home mortgage, that would not get you a tax deduction, as the borrowed funds would have been used to pay off private debt. Remember, it’s the use to which the funds are put that determine tax deductibility – not the nature of the security provided. The only way to make the interest tax deductible in this situation would be through a change in use. For example, you may decide to move into the inherited property and let out your main residence. Forced sale Real estate values can go down as well as up, and sometimes life’s events (rising interest rates, unemployment, illness, divorce) can leave the property owner with no other option but to sell the property, sometimes with part of the borrowing remaining unpaid. Any interest on the outstanding balance would generally be tax deductible, although the ATO would expect the investor to make a reasonable effort to pay down the remaining debt rather than acquire more assets. Before deciding how to refinance an investment loan or taking any other steps that could impact on the tax deductibility of interest, come in and have a chat with us. We may be able to help you protect the interest deductibility you are legitimately entitled to.

Have you ever wondered how your super balance compares to others in your age group? Or maybe you’re curious about how much you should have saved by now to ensure a comfortable retirement? It’s not always easy to figure out if your super is on track, but understanding how it stacks up can help you make smarter decisions now that will benefit you later. This article looks into the average super balances for people of different ages and explores how much you may need in retirement. Average balances of Australians The Australian Taxation Office (ATO) has released data showing average super balances for different age groups. The data gives a helpful overview of where Australians are at in terms of their retirement savings. Here’s how the averages break down: Age Averages ($) Men Women Under 18 7,666 5,088 18-24 8,069 7,297 25-29 25,407 23,273 30-34 53,154 44,053 35-39 90,822 71,686 40-44 131,792 102,227 45-49 180,958 136,667 50-54 237,084 176,824 55-59 301,922 228,259 60-64 380,737 300,717 65-69 428,533 379,483 70-74 474,898 422,348 75 or more 487,525 416,279 Source: ATO Statistics 2021–22: Median super balance, by age and sex, 2021–22 financial year You might be looking at your super balance right now, feeling either satisfied or a little worried about how it measures up to these averages. Remember, averages don’t tell the whole story. Your balance can be impacted by various factors like career breaks, part-time work, salary levels, or investment decisions. If you’ve made additional contributions or opted for higher-growth investment options, your balance may be above average. If it’s not quite where you’d like it to be, don’t worry – there’s still plenty of opportunity to take steps and get back on track. How much super do you need in retirement? Understanding what you’ll need in retirement can help you gauge whether your super balance is on track. The Association of Superannuation Funds of Australia (ASFA) provides clear benchmarks to define what a “comfortable” or “modest” retirement might look like. A modest retirement covers basic living expenses, with most of the income coming from the age pension. On the other hand, a comfortable retirement allows for a higher standard of living, including private health insurance, a reliable car, household upgrades, and leisure activities like holidays. Here’s what ASFA estimates you’ll need if you retire at 65, own your home outright, and are in good health: Comfortable retirement Modest retirement Singles About $595,000 in super for an annual income of $52,085 At least $100,000 in super, combined with the Age Pension, could provide an income of $33,134 for singles or $47,731 for couples Couples Around $690,000 in super to generate a combined annual income of $73,337 Source: ASFA retirement standard budget for retirees aged 65 to 84 (June quarter 2024) Knowing these benchmarks can help you assess your progress and plan for the future you want. Are you on track? Now that you know what the average super balance look like, and you have a better idea of how much you may need, it’s time to check where your super stands. If your balance is lower than the targets set by ASFA, don’t panic – it’s never too late to take action. You can still take steps to boost your super and make it work harder for your retirement. Consider making extra contributions, whether through salary sacrificing or personal after-tax payments. Reviewing your investment strategy to ensure it aligns with your goals and risk tolerance is also important. If you’re unsure about what changes to make, it could be helpful to speak to a financial adviser who can offer tailored advice for your situation. Super is an essential part of your retirement planning, and understanding where you stand can help you make smarter choices today. Whether you’re feeling confident about your balance or realising there’s more work to be done, it’s always worth taking the time to review and plan ahead. The sooner you act, the more time your super will have to grow – putting you in a better position to enjoy your golden years.