Workers, investors, business owners and super fund members are being urged to take a look at their finances now as a busy year on the tax front gets under way.
Changes to personal tax rates and superannuation taxes, plus new guidance for investors from the Australian Taxation Office, will keep taxpayers on their toes, accountants and advisers say.
Now is the time to start tax planning, and potentially pocket a bigger refund, rather than wait for the mid-year rush.
Everyone gets a tax cut
MLC senior technical services manager Jennifer Brookhouse said from July 1 every taxpayer would receive a modest tax cut as the 16 per cent marginal tax rate – for people earning between $18,201 and $45,000 – would drop to 15 per cent.
The rate is scheduled to fall again to 14 per cent from July 2027.
“There are no changes to the other marginal tax rates and thresholds,” Ms Brookhouse said.
“Even a few hundred dollars in tax savings can make a real difference over time.”
Ms Brookhouse said the annual tax saving for someone earning $45,000 or more would be $268, rising to $536 from July 2027.
“Bringing forward certain expenses or contributions before July 1, 2026, could help you maximise your benefits,” she said. “A quick review now can put you in a stronger position for the year ahead.”
People who made personal tax-deductible superannuation contributions should also consider their timing, Ms Brookhouse said.
“The reduced personal tax rate means tax deductible super contributions for those with income below $45,000 may not be tax effective,” she said.
Small business tax write-off
Ms Brookhouse said last year the small business instant asset write-off threshold of $20,000 was extended until June 30 this year, and there was no indication that it would continue beyond that.
“Small businesses with aggregated annual turnover below $10m can immediately deduct the full cost of eligible assets costing less than $20,000 that are first used or installed ready for use by 30 June, 2026,” she said.
“The threshold applies on a per asset basis. Small business owners may wish to consider opportunities to take advantage of the upfront deduction.”
Superannuation tax rise
Treasurer Jim Chalmers dramatically watered down his tax hit on people with $3m or more in super, by eliminating the tax on unrealised capital gains and introducing indexing, but it still means people with high balances will be slugged an extra 15 per cent tax – up from 15 to 30 per cent.
Ms Brookhouse said the super tax increase – known as Division 296 – was set to start on July 1.
“The tax will apply only to the portion of earnings above the relevant total super balance,” she said.
“However, legislation still needs to be introduced into parliament and passed to allow the measure to be enacted. It is important to speak to your financial adviser to understand your own situation.”
Chartered accountant and Mr Taxman founder Adrian Raftery said it was a sensible move for the government to scrap the widely criticised unrealised capital gains tax.
“While that was certainly commonsense, it still doesn’t eliminate Division 296 altogether and a bit of tax planning will help there,” he said.
“The tax advantages of the vehicle of superannuation diminish once you’re over those levels.
“With the new Division 296 tax there’s definitely an opportunity in these next six months to do some significant tax planning if you’re affected. It would be really advantageous to sit down with a financial planner to determine strategies around how to minimise the impact.”
New superannuation tax
Shadforth Financial Group private wealth adviser Finn Dorney said the latest proposal included an extra 10 per cent on super balances above $10m, taking potential total tax to 40 per cent for wealthy super savers.
“Importantly, the revised proposal intends to calculate earnings based on realised income, excluding unrealised capital gains,” he said.
“Both the $3m and $10m thresholds are proposed to be indexed to CPI.”
Super contribution strategies
Mr Dorney said the personal tax cuts this year and next year meant some people might find other super contribution types – such as non-concessional contributions – more beneficial, “especially if they qualify for a government co-contribution”.
He said catch-up contributions, where people could make extra tax-deductible contributions if they had not used previous years’ concessional contributions caps, also should be considered.
“The 2025-26 financial year is a critical one for those with unused concessional contribution caps.
“Unused amounts from 2020-21 will expire after 30 June 2026. Also, if your total super balance is likely to exceed $500,000 on 30 June 2026, this could be your last chance to use these catch-up rules.”
Do it now
Dr Raftery said tax planning was a 365-day strategy, and lower-income earners who qualified for the federal government $500 co-contribution should consider putting money into super now.
“If you haven’t put in anything yet, try and put in $40 a week for the next 26 weeks,” he said.
“It’s a lot easier to find $40 a week than it is to find $1000 in June.”
People with work-related tax deductions could also make moves now rather than wait, Dr Raftery said.
Those who use their car for work purposes could get their logbook done well before June 30, while buying work-related items now might also pay off.
“If it’s anything that can be depreciated, you get six months’ worth of depreciation in the first year versus only a few days if you buy on June 27,” Dr Raftery said.
Mr Dorney said tax planning from January helped spread cash flow for people making catch-up contributions, rather than scrambling to find a lump sum in June.
“Waiting until June to talk to your adviser is like trying to book a flight while the plane is taxiing,” he said.
KPMG tax partner Ursula Dyer Lepporoli said taxpayers could improve their cashflow in the coming six months by applying for a PAYG withholding variation now if they were likely to get a large refund later in the year.
This was “the best tax flex around”, she said.
“It allows you to change the amount of tax your employer withholds from your pay during the year so that it better matches your expected tax liability.
“Instead of waiting until the end of the financial year to receive a refund, or be hit with a tax bill, the variation lets the ATO adjust how much tax comes out of your pay throughout the year. These applications only last one year and need to be reviewed.”
Fresh ATO guidance
The ATO recently released new guidance for property investors, and Ms Dyer Lepporoli said it could impact deductions.
“Deductions for holiday homes and short-term rentals are only allowed if the property is genuinely used to earn income for most of the year,” she said.
“Ownership costs like interest and council rates are restricted if there’s significant private use.
“Running costs directly linked to rental income can still be claimed proportionally. Review your usage and adjust claims to avoid disallowed deductions.”
Original article published here in The Australian.