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29th Aug, 2025
Effective 1 July 2025, businesses can no longer claim income tax deductions for interest charges imposed by the ATO on unpaid or underpaid tax liabilities. This change applies to general interest charge (GIC) and shortfall interest charge (SIC) amounts incurred in income years starting on or after 1 July 2025.
Previously, businesses could deduct ATO-imposed interest charges on overdue tax debts, reducing the net cost of these charges. From 1 July 2025, this deduction is no longer available, meaning any GIC or SIC incurred from this date cannot be claimed as a tax deduction, regardless of when the underlying tax debt arose.
For example, if a business incurs GIC on an unpaid income tax liability after 1 July 2025, this interest expense is not deductible in its tax return for the 2025– 2026 income year or subsequent years.
This legislative change is significant for businesses that manage cash flow by deferring tax payments, as the cost of carrying tax debt will effectively increase. Without the tax deduction, the real cost of ATO interest charges rises, making it more expensive to delay tax payments.
The ATO applies GIC on unpaid tax liabilities at a rate that is reviewed quarterly and compounds daily. As of the latest update, the GIC rate is 11.17%.
The removal of tax deductibility for ATO interest charges underscores the importance of timely tax compliance. Businesses should act promptly to adjust their financial strategies, ensuring that they are not adversely affected by increased costs associated with overdue tax payments.
29th Aug, 2025
Each new financial year, many of us take a closer look at our super funds’ performance, and you’re more likely to be targeted by salespeople, cold callers or social media ads offering “free super health checks” or to “find your lost super”. These offers can be the start of a high-pressure campaign to get you to switch super funds or make investments that may be unsuitable for you.
These calls and ads don’t always look like typical scams. Callers may sound genuine, claiming they want to help you find a better deal or locate lost super for free. Sometimes they’ll even refer you to a financial adviser to make the pitch sound more legitimate. But behind the scenes, there may be commission arrangements or other incentives that put their interests ahead of yours.
Here are some warning signs that a caller or an advertiser might not have your best interests at heart:
Remember, if a deal sounds too good to be true, it probably is. Promoters often play on your fears, hopes and your politeness to rush you into a decision.
Your super is too important to risk. Take your time, ask questions and don’t rush into any decisions.
29th Aug, 2025
Since February 2023, the Australian government has been planning to introduce a new tax of 15% on a portion of “earnings” relating to total superannuation balances over $3 million. The idea was to inject some equity in a system with generous tax concessions weighted in favour of the wealthy. The tax change was proposed to kick in on 1 July 2025.
Debate over issues concerning the non-indexed
$3 million threshold and the taxation of unrealised capital gains then put the proposal on ice. The Bill containing the change is expected to be reintroduced now that Parliament has resumed. The Bill proposes to insert a new Division 296 into the Income Tax Assessment Act 1997, which is why you might hear the change called the “Division 296 tax”.
Currently, your entire super balance earnings in accumulation are taxed at 15%.
If your “total superannuation balance” (TSB – meaning all of your super, in all accounts, in accumulation and in pension phase) is under $3 million, the new additional tax would not apply.
The Division 296 measure would apply another 15% tax on a portion of estimated “earnings” relating to your TSB that’s over $3 million. This tax would be charged to you personally, rather than to the super fund. The “earnings” calculation is quite complicated, and doesn’t
reflect the actual earnings in your fund (which is why we’re using quotation marks for “earnings”).
For example, if you start the year with a $3 million property in your super fund, and it’s worth $3.5 million by the end of the year, a portion of the $500,000 unrealised capital gain would be taxed to you personally. If this was the only asset in all of your super, and you made no contributions or withdrawals during the year, and received no actual investment earnings, the Division 296 tax calculation could look something like this:
TSB minus $3 million threshold: $3,500,000 – $3,000,000 = $500,000
Percentage of TSB that the excess represents: $500,000 / $3,500,000 = 14.29%
Proportional calculation to get Division 296 taxable earnings: $500,000 × 14.29% = $71,450
Division 296 tax payable: $71,450 × 15% = $10,717.50
So, $71,450 in earnings would be taxed at the additional 15%, for an additional tax liability of $10,717.50.
Further, if your property didn’t earn any real income in your fund, then you’d need to be able to fund the tax payment from an alternative source if you didn’t want to sell the property. The calculation of “earnings” is complex and adds back any withdrawals and subtracts any contributions, to ensure people don’t make last- minute withdrawals specifically to reduce their “earnings”.
This is a very simplified example – transactions like receiving insurance payouts, withdrawing amounts under the First Home Super Saver Scheme and other factors could affect your “earnings” and therefore the calculated tax amount.
The ATO will advise about your liability for 2025–2026 year during the following year. You’ll be able to pay out of pocket or directly from your super fund. If you have more than one fund, you can nominate from which fund you’d prefer to pay.
Before the new policy’s set in stone, if you think you may be affected it would be wise to seek advice before making any hasty decisions.
19th May, 2025
If you’ve thought about upskilling or undertaking professional development this year, you may be able to claim some of your self-education expenses in your 2024–2025 income tax return.
You incur self-education expenses when you:
Your self-education expenses need to have a sufficient connection to your current employment income in order to make a claim. This means that your study must eithermaintain or improve the specific skills or knowledge you use in your current role, or be likely to result in increased income in your current role.
Keep in mind that sometimes only certain subjects or components of your study are sufficiently connected to your work – in these cases, you’ll need to apportion your expenses.
If you meet the eligibility criteria you may be able to claim a deduction for:
19th May, 2025
In today’s sharing economy, platforms like Airbnb have made it easier than ever to earn extra income by renting out a spare room or your entire home – but many Australians are unaware of the tax implications that come with these arrangements.
When you rent out all or part of your residential property through digital platforms, the ATO requires you to declare this income on your tax return. Keeping meticulous records of all rental income earned is essential, as is maintaining documentation of expenses you intend to claim as deductions. Most property rental arrangements don’t constitute a business in the eyes of the ATO, even if you provide additional services like breakfast or cleaning.
One area where many property owners get caught out is capital gains tax (CGT). While your main residence is typically exempt from CGT, this exemption can be partially lost when you rent out portions of your home. The reduction in your exemption is calculated based on the floor area rented and the duration of the rental arrangement. This is a crucial consideration if you’re thinking of selling your property in the future, as it could significantly impact your tax position.
When it comes to deductions, you can claim a portion of expenses related to the rented space, including council rates, loan interest, utilities, property insurance and cleaning costs. The deductible amount depends on both the percentage of the property being rented and the duration of the rental period throughout the financial year. Platform fees or commissions charged by services like Airbnb are often 100% deductible, providing some relief against your rental income.
You’ll need to maintain statements from rental platforms showing your income, along with receipts for any expenses you plan to claim. Without proper documentation, you risk having legitimate deductions disallowed during an ATO review or audit, potentially leading to additional tax liabilities.
The ATO has intensified its focus on all aspects of the sharing economy, particularly short-term rental arrangements, and has sophisticated data-matching capabilities with third-party platforms like Airbnb. This means they can identify discrepancies between what’s reported on your tax return and what the platforms’ records show.
19th May, 2025
You may be starting out in business and trying to decide whether to become a sole trader or to set up a company. Alternatively, you may already be an established sole trader and considering switching to become a company. Tax considerations are vital in deciding which of the two business structures is most suitable for you.
The first practical difference is in relation to your tax return. As a sole trader, you simply add your business income and expenses to a separate Business and professional items schedule in your individual tax return that you lodge each year.
For a company, there’s a separate annual tax return, and tax to pay on the company’s income. Companies are subject to annual reviews by the Australian Securities and Investments Commission (ASIC), so financial records must clearly show transactions and the company’s financial position, and allow clear statements to be created and audited if necessary. A number of strict legal and other obligations need to be met.
Tax returns for a company must clearly list the income, deductions and the liable income tax of the company. Also, directors and any employees of a company must lodge their own individual tax returns.
There’s no tax-free threshold for companies – they simply pay tax on the amount they earn. However, for sole traders, whose tax is assessed as part of the individual’s personal income, $18,200 is the tax-free threshold.
For all companies that are not eligible for the lower company tax rate, the full company tax rate of 30% will apply.
To be eligible for the lower company tax rate of 25%, the company needs to meet strict requirements to be a base rate entity. One of the tests is that your company’s aggregated turnover for the relevant income year must be less than the aggregated threshold for that year – which since 1 July 2018 has been $50 million a year.
Both sole traders and companies can:
Both types of business also need to pay capital gains tax (CGT) if a capital gain has been made, but sole traders may be able to reduce this gain by what are known as the discount and indexation methods. The latter may also be used by some companies.
If your employees in either business structure receive a fringe benefit then you may also need to pay fringe benefits tax (FBT).