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When a person writes a will they usually leave their assets to their children – and usually in equal shares. And when they first write their will their children may be young – and they may also be relatively young when they later update it. However, there is a potential capital gains tax (CGT) issue lurking here.

In this increasingly globalised world, when the children do inherit the assets, they may be living overseas. In this case, if they are considered a foreign resident for tax purposes at the time they become entitled to the assets of the estate (or their share of them), instead of the roll-over applying, it will trigger an immediate CGT liability for the deceased in their final tax return. And this will usually be paid by the executor from estate assets – thereby diminishing the amount of the estate that would otherwise be available to the beneficiaries.

And in this case the amount of the capital gain (or loss) is determined by the asset’s market value at the time of the deceased’s death and the deceased’s cost for CGT purposes.

However, there is a very important carve out from this rule. It does not apply if the bequeathed asset is Australian real estate (or other “taxable Australian property” as defined). This is because such assets always remain subject to CGT – regardless of the residency status of the taxpayer. Moreover, any dealings in them can usually be traced by the ATO (especially in the case of land).

However, the rule would, for example, apply to shares on the ASX and ordinary investment units in unit trusts.

Note that there are special rules that apply to shares in a company or units in unit trust where more than 10% of the shares or units are owned and more than 50% of the value of the assets of the company or unit trust is real property. (But these rules can be very complex.)

The upshot of all this is that when writing your will it is important to get good tax advice so that it can be structured and documented in a tax-effective way – and, broadly speaking, this will entail giving your executor a high degree of flexibility in how estate assets will be distributed among your beneficiaries.

However, if you are already locked into a will and you find yourself in this situation, there are a few things you can do to ameliorate the effect of this rule.

And by the way, in writing a will it is probably not a bad idea to give your executor the power to grant someone a right to occupy your home after your death. This is because it is another potential way to access the CGT exemption for an inherited home.

So, if you are writing your will or looking at updating one, come and have a chat to us about it first so that we can take you through some of the ins-and-outs of writing it tax-effectively. 💼

If you have some extra cash, you might be deciding whether to make a concessional contribution to your super fund or use it to pay down your mortgage, whether on your home or holiday house. Both strategies have advantages, but the right choice depends on your personal situation. Let’s take a closer look at the options.

Option 1: Pay down your mortgage

Putting extra money towards your mortgage helps reduce non-deductible debt ie, debt carrying interest that isn’t tax-deductible. This strategy can be particularly appealing if you value certainty or plan to free up cash flow soon. Key advantages include:

• Guaranteed savings: every extra dollar paid directly reduces your interest costs. For example, on a 5% loan, an additional $10,000 payment saves you $500 a year. This is essentially a risk-free 5% return.
• Increased equity: reducing your loan balance builds equity in your property, which can improve your financial flexibility if you need to borrow against it or decide to sell.
• Improved cash flow and peace of mind: with a smaller loan, your minimum repayments shrink, giving you more breathing room and financial security.

The downside is that unlike super contributions, there are no immediate tax benefits. Over the long term, investment returns from a well-diversified super portfolio often exceed typical mortgage interest rates.

Option 2: Concessional super contributions

Concessional super contributions, like salary sacrifice or personal deductible contributions, boost retirement savings and cut personal tax. They’re especially appealing for people near retirement. Super may be partly or fully accessible after 60 at which time withdrawals are generally tax-free and can be used to repay loans whilst also having enjoyed a tax break on contributions. Key advantages include:

• Tax benefits: contributions are taxed at 15% in super (or 30% for some high-income earners), often below your marginal rate.
• Long-term growth: super investments in growth assets, plus a concessional tax rate of 15% on asset income in super, can significantly grow your retirement savings.

The downside is that funds are locked away until age 60 and are generally unavailable for emergencies. Market fluctuations, such as those seen recently, may also impact your superannuation savings.

Case study

Brian has $10,000 (after tax) of surplus cashflow each year. He is considering using this surplus cashflow to pay down his mortgage on a holiday home or making a personal deductible contribution to super. He is 55, plans to fully retire at 60 and is on the 39% tax bracket (including Medicare Levy). His mortgage is incurring interest at 5.6%.

Option 1: Pay down mortgage

If Brian makes an additional $10,000 one-off mortgage repayment each year for the next five years, he will have about $56,000 less debt than he would otherwise have. This reduction includes the interest that would have been accrued but for the reduction in the loan over the five years.

Option 2: Make concessional super contribution

If Brian can forgo $10,000 of after tax cashflow he can potentially make a personal deductible contribution of approximately $16,390 and be in the same after-tax cashflow position. As he is paying 39% tax, a $16,390 deductible super contribution will reduce his tax by $6,390 meaning his cashflow only reduces by $10,000 per annum.

Let’s assume a net super contribution of $13,930 ($16,390 less 15% contributions tax) is invested each year into super for the next five years. Let’s also assume his super grows at 5.6% net per annum. In this case Brian will have about $78,000 more in super than what he would otherwise have but for the deductible super contributions. After five years Brian is aged 60 and if he is also retired, he is free to withdraw any amount of super, tax-free, to pay down remaining debt.

The Verdict

Chat with us to find out which option suits you best. There is no one-size-fits-all answer. Paying down your mortgage offers security and peace of mind. Making extra concessional super contributions can deliver powerful tax benefits and long-term growth in retirement savings.

Whether you’re focused on financial flexibility now or building wealth for later, we’re here to help you weigh the pros and cons and make the most of your money. 💰

Congratulations! Your investment has done well, and you’re cashing in. You’re happy, and so too is the ATO. That substantial capital gain has brought wealth and a hefty tax bill. Sharing might be part of the deal but when it comes to your hard-earned profits, you might prefer to keep the ATO’s share to a minimum. Keeping good records will help do this. Here are tips to help you hold onto more of your windfall and avoid that hefty tax bill.

How much did your investment really cost?

Good record-keeping is essential; it helps your accountant ensure that you pay no more tax than you must. You probably already know that what you get paid for your investment isn’t necessarily your gain. Basically your ‘gain’ on an investment is what you get less what it cost you, but do you really know what it cost you?

The most obvious cost to keep a record of is the asset purchase price or ‘acquisition cost’ but there are some lesser-known costs that are often forgotten.

Keep records of anything falling under these four categories as well:

1. Incidental costs of acquisition

These are costs directly associated with acquiring the asset, including such things as:

• Fees paid to brokers, auctioneers, or accountants
• Stamp duty paid on the purchase
• Advertising costs incurred when acquiring the asset
• Conveyancing fees or conveyancing kit costs
• Brokerage fees if buying shares

2. Non-capital ownership costs

You can sometimes add certain ownership costs to your cost base if they weren’t previously claimed as tax deductions. These include:

• Interest on money borrowed to acquire the asset (but again only if it has not already been used as a deduction on income)
• Maintenance, repair, or insurance costs
• Rates or land tax (if the asset is land)

3. Capital expenditure on improvements

Your expenses covering things to increase or preserve the value of the asset are also relevant. Some examples include:

• Costs incurred for zoning changes, whether successful or not
• Capital improvements, such as renovations or structural changes

4. Costs of establishing, preserving, or defending ownership

Hopefully you don’t have too many legal expenses but if you do they too can be taken off the gain. If you have incurred costs related to defending your ownership in court or any legal fees incurred in a dispute over title keep a record of them as they will reduce the gain.

You’ve identified all the costs, but can we further reduce the gain?

That capital loss you made earlier in the year wasn’t nice but there is a silver lining: it can offset that gain. If that’s not enough to wipe out the gain, dig deeper into your records.

Was there any unused loss in a prior year? We can use that too!

Keep note of when you bought it

If you bought that asset prior to 20 September 1985, yippy no CGT! If you bought it over 12 months ago only half the net gain (after costs and losses) is assessable.

So, if you’re thinking of selling an asset but haven’t held it for a year, consider hanging on to it just that little bit longer.

Final Thoughts

By understanding what the costs are and keeping thorough records, you can legally minimise your CGT liability. Speak to us about what things you should keep records of to take full advantage of any applicable deductions and exemptions.

A fantastic way to grow your retirement savings and shrink your tax bill is through concessional contributions (CCs) to super. But more is not always better and like Goldilocks and her porridge, it pays to get things just right.

The basics of concessional contributions

Extra CCs can be made through salary sacrifice or as personal deductible contributions (PDCs). These contributions reduce your taxable income and are taxed at 15% inside super rather than your personal tax rate. That’s a win—especially if you’re on a higher income!

When do concessional contributions lose their tax advantage?

CCs typically save you tax but there’s a point where they stop working in your favour. This happens when your taxable income drops to the effective tax-free threshold—the level where you don’t pay any tax anyway.

For the 2024/25 financial year, the effective tax-free threshold for a single person (without the Senior Australian Pensioner Tax Offset or SAPTO) is $22,575. This includes the standard tax-free threshold of $18,200 plus the Low-Income Tax Offset (LITO). If your taxable income falls below this, making CCs won’t save you any tax—because you weren’t paying any in the first place!

What is YOUR effective tax-free threshold?

Knowing your effective tax-free threshold will help you decide how large or small your CC should be. This of course assumes you have your cashflow sorted!

The table following illustrates the effective tax-free thresholds that may apply to you depending upon your circumstance.

* Figures rounded to the nearest $5

If your taxable income is already below your threshold, making CCs won’t reduce your tax further—but they will be taxed at 15% inside super. This means you’re losing 15% for nothing and you might be better off considering making after-tax “non-concessional contributions” which aren’t subject to this “contributions tax.”

Don’t forget your catch-up concessional cap!

Haven’t been maxing out your concessional cap in previous years? No worries! If your total super balance is under $500,000, you can make extra catch-up contributions using your unused cap amounts from the past five years. You might even be eligible for up to $162,500 in catch-up CCs! That can really get your taxable income down—but remember don’t go overboard!

Watch your concessional cap and other tips

Don’t forget your employer will make CCs via super guarantee and these will also count towards your concessional cap. Exceeding your concessional cap can mean extra tax and be an administrative headache. Also, if you are on a higher income your CCs may be subject to an additional 15% tax in the form of “Division 293” tax.

Play it smart and get advice!

Speak to your adviser

Super contributions are a balancing act—too little and you miss tax benefits, too much and you could face extra tax. Chat with your financial adviser to find the right number for you!

The Australian Taxation Office (ATO) has recently revised its guidance on differentiating between employees and independent contractors. This change follows several court rulings that clarified the criteria for determining whether a worker is genuinely an employee or an independent contractor. Whether you’re a worker or a business owner, understanding these differences is crucial, as they have an impact on tax, superannuation, and workplace entitlements.

Why does the difference matter?

How a worker is classified – either as an employee or a contractor – impacts who is responsible for paying taxes, providing benefits like superannuation and leave, and who carries legal responsibilities. Misclassifying a worker can lead to serious financial consequences, including unpaid entitlements and penalties from the ATO.

Key differences between employees and contractors

The primary difference lies in how the worker interacts with the business:

• Employees work in the business and are part of its operations.

• Contractors work for the business but maintain their own separate operation.

The contract between the business and the worker is crucial in determining a worker’s classification. While day-to-day work practices play a role, the legal rights and responsibilities outlined in the contract hold the greatest significance.

The ATO’s most important considerations are laid out in Table 1 on the following page.

Superannuation and contractors

Even if someone is considered a contractor, they might still be entitled to superannuation if:

• They’re paid mainly for their labour.

• They work as a sportsperson, artist, entertainer, or in a similar field.

• They provide services for performances or media production.

• They do domestic work for over 30 hours per week.

Workers who are always employees

Some workers are always considered employees, no matter what. This includes apprentices, trainees, labourers, and trades assistants.

Apprentices and trainees work while completing recognised training to earn a qualification, certificate, or diploma. They might be full-time, part-time, or even school-based and usually have a formal training agreement.

The Australian Taxation Office (ATO) has recently revised its guidance on differentiating between employees and independent contractors. This change follows several court rulings that clarified the criteria for determining whether a worker is genuinely an employee or an independent contractor.

Whether you’re a worker or a business owner, understanding these differences is crucial, as they have an impact on tax, superannuation, and workplace entitlements.

Most of these workers are paid under an award

…meaning they have set pay rates and conditions. Businesses hiring them must follow the same tax and superannuation rules as they do for other employees.

Companies, trusts, and partnerships are always contractors

If a business hires a company, trust, or partnership (rather than a person) it’s always considered a contracting arrangement. However, people working for that entity could still be employees of that entity, rather than the business hiring the services.

Why this matters to you?

For workers, knowing your status helps ensure you receive the correct pay and benefits. For businesses, classifying workers correctly helps avoid fines and ensures compliance with tax and employment laws.

If you need more details or want to check your situation, reach out to us for more information. Proper classification today can prevent costly mistakes in the future.

Table 1: ATO’s most important considerations – key differences between employees and contractors

Thinking about easing into retirement but still need a steady income? Want to trim your tax bill while growing your super? Or maybe you’d love to knock down some debt before you stop working? If you are 60 or over, you can do just that.

Who can start a super pension?

Using your super to start a pension can help give you the cashflow needed to reach your financial goals. Not everyone is allowed to start a pension but if you are 60 or over, you can. Once you retire or turn age 65 you can unlock the flexibility an account-based pension has to offer. This includes no maximum limit on how much you can take out—so long as you draw a minimum pension.

If you’re between 60 and 65 and still working, you may not qualify for a fully flexible account-based pension. However, you can start a Transition to Retirement (TTR) pension instead. While a TTR pension has some limits—like a maximum annual withdrawal of 10% of your starting balance—it can still be a powerful tool to help you achieve your financial goals. If you’re looking to supplement your income, reduce tax, or boost your super, a TTR pension could be the solution you need!

Let’s look at three typical goals.

1. Replace income while cutting back on work

Want to work less but keep the same income? A TTR pension can help!

As retirement approaches, many people start reducing their work hours—but that can mean a drop in income. By using a TTR pension, you can replace lost wages with tax-free withdrawals from your super.

Meet Theodore

Theodore (age 63) is a town planner. As Theodore nears retirement, he decides to cut back his work hours by one day a week. That means earning less—but thanks to a TTR pension, not taking home less. His taxable income drops by $25,000, but since his pension withdrawals are tax-free, he only needs to draw $17,000 to maintain the same after-tax cashflow. Less work, lower tax, and the same income—sounds like a win, right?

2. Reduce tax and boost your super

Theodore works less and pays less tax. He is a winner but his super balance isn’t. Perhaps you would prefer more super and less tax. A TTR pension can free up extra cash so you can salary sacrifice more into super. This means swapping taxable salary (which could be taxed at up to 47%) for concessional super contributions, which are taxed at just 15%.

Meet Matilda

Matilda (age 62) is a marine biologist and earns $160,000 per year. She starts a TTR pension with $100,000 in super and withdraws $7,075 tax-free from her pension. To receive the same amount after tax Matilda would need to earn $11,600. The extra tax-free cash from her TTR allows her to salary sacrifice $11,600 into super. The result? She saves $4,525 in personal tax and her super grows by an extra $2,785 (after super tax). That’s a win-win!

3. Pay your debt off sooner

Have some unwanted debt? A TTR pension can help you clear that debt sooner—so you can enter retirement stress-free.

Meet Simon

Simon (age 60) is a self-employed shopfitter and has $300,000 in super and a $300,000 mortgage on a holiday home (6% interest). He makes monthly repayments of $3,330 and the loan will be extinguished in 10 years (age 70).
He wants to be debt-free at retirement (age 65) so commences a TTR pension and draws down $2,470 per month ($29,640 annually). He uses the extra cashflow to make additional monthly repayments of $5,800 ($69,600 annually). The result? Simon pays off his loan in 5 years age 65 – saving him interest and giving him peace of mind in retirement.

Is a TTR Pension right for you?

Commencing a TTR pension to reach your financial goals can be a great strategy, but it’s not for everyone. It’s important to weigh the benefits against the long-term impact on your super savings.

To make sure you’re making the right move, speak to your financial adviser. Your adviser can help you with your financial goals, be it to lower your tax, build your super, pay down debt or retire sooner!

If you’re selling property in Australia and you’re a foreign resident, there are important tax rules you need to know.

Recent changes mean that buyers must withhold 15% of the property’s market value and pay it to the ATO, unless the seller provides a residency clearance certificate.

What’s changed?

From 1 January 2025, all property sellers must prove their residency status by obtaining a clearance certificate from the ATO. If they don’t, the buyer is legally required to withhold 15% of the sale price and remit it to the ATO. This rule is designed to ensure foreign residents don’t avoid capital gains tax (CGT) withholding obligations. The government now assumes all property sellers are foreign residents unless they provide an ATO-issued clearance certificate proving otherwise.

How does the withholding rule work?

If you’re buying property from a foreign resident, you must:

• Withhold 15% of the purchase price (for contracts from 1 January 2025).

• Register as a withholder with the ATO before settlement.

• Pay the withheld amount to the ATO before the sale is finalised.

For contracts entered before 1 January 2025, the withholding rate is 12.5%, but only applies to properties worth over $750,000.

If you’re a foreign resident selling property in Australia, you’ll receive a tax credit for the withheld amount when you lodge your Australian tax return.

What if the property is your former home?

Even if the property was your main residence, foreign residents can’t claim the main residence CGT exemption when selling Australian real estate. This means that any capital gain from the sale is fully taxable in Australia.

In fact, foreign residents are always subject to CGT on property they own in Australia – whether or not they live here.

How do you know if the seller is a foreign resident?

As a buyer, you don’t have to investigate the seller’s residency status yourself. Under standard property contracts, the seller must declare whether they are a foreign resident and provide an ATO clearance certificate if required.

If the seller doesn’t obtain a clearance certificate, the buyer must withhold 15% of the purchase price and pay it to the ATO. Your solicitor or conveyancer will typically handle this process.

Are there any exceptions?

Yes. In some cases, the ATO may allow a reduced withholding amount – or even none at all. This happens when:

• The foreign resident seller obtains a variation certificate from the ATO.

• The seller is exempt from Australian tax (e.g. a foreign charity).

• A CGT rollover applies, such as in a property transfer due to a marriage breakdown.

• The property is jointly owned by an Australian and a foreign resident – a situation becoming more common in today’s global world.

Other assets affected by these rules

It’s not just real estate – the foreign resident CGT withholding rules also apply to other assets that are closely connected to Australia such as “significant interests” in private unit trusts and companies.

Whether you’re a buyer or seller, understanding these rules is crucial to avoid unexpected tax obligations. If you’re unsure how these changes affect you, get in touch with us for expert advice

You may have read about a recent court decision affecting some family trusts. In a case called Bendel, published on 19 February 2025, the Full Federal Court unanimously held that the private company beneficiary of a discretionary trust has not made a “loan” or “financial accommodation” to the trust merely by not calling for the payment of its trust distribution.

This item only applies to clients with business structures involving trusts that have private corporate beneficiaries where the private company has not called for payment of a trust distribution, thereby creating an unpaid present entitlement (UPE).

It’s a fine distinction, but Full Court said that in order for there to be a loan there has to be an obligation to repay an amount, which does not apply to a UPE as there is no legal obligation to repay anything.

Since 2010 the ATO has been operating on the basis that a UPE owing by a trust to a corporate beneficiary is a loan for the purposes of the Division 7A rules. These rules catch disguised distributions made by private companies to their shareholders or associates.

If the “loan” remains unpaid at the time of lodgement of the company’s tax return, the UPE amount is treated as an unfranked dividend in the hands of the trust unless the company and the trust enter into a complying loan agreement involving both capital and interest payments. This avoids the deemed dividend outcome but usually involves some tax costs and can also create funding and compliance issues for the trust.

The ATO has responded to the Full Court’s decision by seeking special leave to appeal to the High Court. The outcome of the special leave application may not be known for some months, and if special leave is granted there is unlikely to be a decision much earlier than Christmas.

In the meantime, the ATO has revised its earlier Decision Impact Statement (DIS) by announcing that it will continue to apply its existing practice of treating UPEs as loans, in defiance of the Full Court’s decision. This is not the first time the ATO has felt entitled to ignore the law of the land, and it is not something taxpayers could hope to get away with.

Even if its High Court challenge is unsuccessful, the ATO could approach the government for a law change. The previous Coalition government announced in the 2018–19 Budget that it would legislate to make it clear that corporate UPEs are caught under Division 7A. To date, nothing has been done by either side of politics to follow through on that announcement but, depending on what happens in the High Court, a legislative response cannot be ruled out.

If the Full Court’s decision stands (a big if) there will be major implications for discretionary trusts with corporate beneficiaries. In the longer term, it would make the funding of discretionary trusts a lot easier, while also reducing compliance costs.

In view of all this uncertainty, there is the question of what to do about 2023–24 UPEs. While taxpayers would be within their rights to rely on the Full Court’s decision by not converting those UPEs into complying loan agreements, there are risks associated with that course of action which we need to discuss with you. A safer approach might be to follow the Commissioner’s approach for now and lodge objections to protect your rights.

A decision needs to be made one way or the other by the time the relevant company returns are due for lodgement, which isn’t far off.

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 (eg, 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:

• The car is actually used for private purposes by the employee, or
• 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:

• The car is not at the employer’s premises, and the employee is allowed to use it for private purposes, or
• 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. (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 7:00 AM and 7:00 PM 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.
• 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 Business Exemption 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 an 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, 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 of a corporate credit card, or
    • An airport lounge membership
  • Newspapers and periodicals to employees for business purposes
  • 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.
  • The meal is not provided at a social function (e.g., 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 their usual place of residence in Australia to perform employment duties during the FBT year?
  • If yes, the LAFHA rules may apply.

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, including for employees who fly-in, fly-out or drive-in, drive-out, employee-related expenses, and employees who maintain a home in Australia.
• Has documentary evidence been obtained from the employee to substantiate accommodation 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 (e.g., water, electricity)
  • 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.

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 is 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, planes, or “other premises or facilities” for providing entertainment.

Exclusions

Expenses, or parts of expenses, that are not entertainment facility leasing expenses for these purposes include:

• Expenses attributable to providing food or beverages.
• 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 (“tax-exempt body entertainment fringe benefit”).
  • It is only non-deductible entertainment that falls within this category of benefit (e.g., a meal at a party).

Further Guidance

• Refer to TR 97/17 for more details on the treatment of entertainment fringe benefits.

Definition of a Tax-Exempt Body

A tax-exempt body is an entity that is either:

• Wholly exempt from income tax (e.g., a club that earns income from members only), or
• Partially exempt from income tax (e.g., a club that earns income from both members and non-members).

Calculation of Taxable Value

• The taxable value is 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?
  • If yes, 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 that is used primarily in the employee’s employment?
  • Examples: A portable electronic device (including mobile phones, laptops, and tablet PCs), briefcase, tool of trade, 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
  • 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 that 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 that is used primarily in the employee’s employment?
  • Examples: A portable electronic device (including mobile phones, laptops, tablet PCs), briefcase, tool of trade, computer software, or protective clothing.
  • Small Business Benefit: Employers who are eligible small businesses (i.e., 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
• Organisations established to promote the development of agricultural, fishing, manufacturing, or industrial resources

Endorsement Requirement

• Endorsement for FBT rebatable status is required from the ATO for charities.

FBT Rebate Calculation

• 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.

Did you know that if you own an asset (e.g., land or a factory or even a trademark) that someone else uses in carrying on a small business, then you might be entitled to the CGT small business concessions when you sell the asset?

And these concessions can either entirely or partially eliminate any capital gain you make on selling it (or at least defer it).

How It Works

This can occur, for example, when your asset is used by:

• Your spouse or a child under 18 in their own business (or one that you may be involved in also), such as where that small commercial property you own (or own jointly with your spouse) is used by your spouse in, say, that art frame, photography, or accounting business.
• A business carried on by a family company or family trust in which you have a relevant interest – although the rules can get a bit complicated where you are only a beneficiary in that family trust.
• The reverse situation – where an asset owned by a family company or family trust is used in a business carried on by a relevant shareholder or beneficiary (e.g., farmland).

Eligibility and Ownership

Importantly, these rules apply whether or not you lease the asset to the other person (or entity) that carries on the business.

These rules can also apply in appropriate circumstances where a testamentary trust continues to carry on the business that was carried on by the deceased – although in that case, it may be easier to access the concessions by having the executor or beneficiary (or surviving spouse) sell the relevant business asset within two years of the deceased’s death.

However, the rules only allow an asset owned by one person to qualify for the CGT small business concessions where it is used by another person (or entity) in their business if the parties are either “affiliates” or “connected entities” of each other, as defined under tax law.

Are You an Affiliate or Connected Entity?

Determining whether individuals or entities are affiliates or connected entities for the purposes of the CGT small business concessions can be complex and depends on the exact circumstances of the relevant parties.

Need Advice?

So, if you think you are in this situation – or propose to start a small business and intend to use assets owned by someone else in that business – speak to us first so that we can help you get the optimal CGT outcome.