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Many people spend their own money on attending courses that will hopefully make them more employable and maybe earn a higher income. That’s a good thing – a workforce that is more highly skilled can lead to higher productivity, which is something that’s been in the spotlight of late.

It’s not always clear when self-education expenses are tax-deductible, and there can sometimes be a fine line between what is and isn’t deductible.

Self-education has to have a sufficient connection to earning your employment income. This will be the case if it either:

• maintains or improves the specific skills or knowledge you require for your current employment activities; or
• results in, or is likely to result in, an increase in your income from your current employment activities.

Self-education expenses incurred when a person is not employed (or self-employed) isn’t deductible.

What courses of study are eligible?

• An apprentice hairdresser working at a hair salon four days a week attending TAFE for one day is learning things at TAFE which will improve their hairdressing knowledge and skills.
• A person with a Diploma in Nursing and working as an enrolled nurse under the supervision of Registered Nurses is undertaking a Bachelor of Nursing which, on completion, is likely to increase their income as a nurse.
• A system administrator enrols in and pays for a course on how to use a particular programming language. On completion, their employer gives them a pay rise. The cost of the course is deductible since it resulted in an increase in income from the person’s current employment activities.
• A pilot working for a domestic carrier takes an aircraft conversion course to upgrade his certification to fly his employer’s international aircraft so that he will be paid more. The course qualifies as self-education since it will upgrade his qualifications and is likely to increase in his income.

What courses of study are ineligible?

• If the person studying for a Bachelor of Nursing (above example) had been working as a personal care worker instead of enrolled nurse, the necessary nexus between the course of study and their current employment activities would not be present. Personal care workers assist patients with everyday tasks such as showering, dressing and eating. The skills and knowledge required to carry out those duties are not the same as those required to carry out a nurse’s duties.
• There was a case recently where a person who was qualified as a dentist in Romania but was working as a dental technician and studying to qualify for registration as a dentist in Australia. Despite positive comments from her employer, the Administrative Appeals Tribunal held that the two jobs were very different and the dentistry course of study was not linked closely enough to her current role as a dental technician. This would not be an uncommon situation, with many new arrivals working in roles that are well below their foreign qualifications.
• Courses designed to gain new employment are not eligible. A teacher’s aide undertaking a Bachelor of Education working with a primary school teacher and performing non-teaching duties would not qualify for a deduction since teaching students is very different from working as a teacher’s aide.
• Personal development and self-improvement courses are not generally closely enough related to a person’s current income earning activities to qualify for a tax deduction.

What deductions are allowable?

It is important that any reimbursements received from your employer are offset against any claims, and you will also need to maintain documentary evidence to substantiate your claims. And it wouldn’t hurt to have a positive statement from your employer about how participating in the course will affect the performance of your current employment duties.

Subject to the necessary connection to your existing income earning activities being established, the following deductions may be allowable:

• Tuition, course, conference or seminar fees.
• General course expenses, including text books, journals.
• The decline in value of depreciating assets – apportionment may be needed in some cases.
• Car and other transport expenses – this can range from an Uber to a nearby university to a return airfare to Paris to complete that MBA.
• Accommodation and meal expenses for when you have to be away from home overnight.
• Interest on borrowings to fund any of these outlays.

Self-education can be a tricky area, but that shouldn’t stop you from making legitimate claims. We can help you with that.

When someone passes away without a valid will, this is known as intestacy. In this situation, the law in each state and territory sets out a formula for how your estate is divided. These rules often follow a standard order – spouse first, then children, then other relatives, but they may not align with what you would have wanted.

Who usually inherits the intestate estate?

If you have a spouse and no children, your spouse will ordinarily receive the whole estate. If you have a spouse and children, whether the children receive anything depends on whether they are also the children of your spouse, as well as the laws of your state.

If you do not have a spouse or children, your estate may pass to your parents, then to siblings, and then to the next of kin, but this can vary between states. If there are no surviving and eligible relatives, the state you live in will typically receive the estate.

Family provision

Note that even when an estate is distributed under intestacy laws, certain family members or dependants may still be able to apply to the court if they feel they have been left without proper provision. These are called family provision claims. Eligible people – typically a spouse, partner, child, or someone dependent on the deceased, can ask the court to adjust the distribution. This process is separate from intestacy and can apply whether or not there is a will.

Exceptions to intestacy laws

Your super fund may decide which of your eligible beneficiaries receives your super, or it may pay the benefit to your estate. If your super fund allows for binding death benefit nominations, you can direct payment to an eligible beneficiary. Life insurance payouts on policies you personally own can also be directed in accordance with your wishes and may not necessarily form part of your estate. Remember jointly-owned property typically passes to the surviving joint owner.

Estate administrator

Who handles the paperwork if there’s no will? Instead of an executor named by you, the court appoints an administrator. This is often your partner or next of kin, who will collect assets, pay the estate’s debts and expenses, and then distribute the balance under the local intestacy law. Administrators step into a formal legal role and their authority begins once the court makes the grant.

Funeral and burial arrangements

One of the most pressing questions after a death is who decides on funeral arrangements. If there is no will appointing an executor, the right to organise the funeral and burial usually follows the same order as for administering the estate. It lies with the person who has the highest claim to be the administrator, typically the surviving spouse or de facto partner, or if none, the next of kin.

KEY POINT
Dying without a will means giving up control over who manages your estate, who inherits from it, and even who decides on your funeral arrangements. While intestacy laws provide a safety net, they may not reflect your personal wishes or the needs of your loved ones. Making a valid will ensures your estate is handled the way you want and spares your family unnecessary uncertainty and stress.

If you buy a property in an off-the-plan purchase, there are some important CGT issues to be aware of – especially in the context that an off-the-plan purchase may not actually settle until many months or even years after the initial contract is signed.

The first thing to note is that assuming the off-the-plan purchase does proceed to settlement, then the completed property is considered to have been acquired for CGT purposes at the time (and in the income year) in which the original contract was signed – and not in the year of settlement.

And this has some important practical consequences.

The first is that for the purposes of accessing the 50% CGT discount (in the case where the property does not become your CGT-exempt home), you are taken to have acquired the property when the off-the-plan contract was signed.

And this gives you ample time to satisfy the 12-month holding rule – including where you may even sell the property within 12 months after settlement of the contract.

Secondly, and importantly, any capital gain or loss will arise in the income year in which you enter the sale contract (eg, the 2023 income year) and not in the income year that you settle that contract (eg, the 2025 income year). And this is the case even if, as is not uncommon, this contract of sale is entered into before the original off-the-plan purchase is even settled.

In short, as long as the contract is settled, the key date for determining when property is acquired (or disposed of) is the date (ie, the income year) the contract is entered into – regardless of whether settlement takes place in the next income year or in a later income year.

This means that the income year in which any capital gain or loss is returned on the sale of the property is the income year in which you enter the off-the-plan contract – even though the settlement does not take place until another income year.

However, in this case the Commissioner has a generous policy so that the taxpayer does not have to immediately return any gain in that income year – but only once the proceeds on settlement are received. And then they can go make and amend that prior year return accordingly.

Also, in the case where the off-plan purchase is to become your home, the requirement of the “building concession” must be met in order for the property to eventually be considered your CGT-exempt home.

Finally, it is important to understand that the CGT rules that apply in off-the-plan purchases are different from those that apply to an option agreement – which instead is treated a separate legal transaction with separate CGT consequences. It is only if the option is exercised that the transaction is merged into one transaction and the CGT rules then apply in a different way.

Superannuation is a great way to save for retirement, but the government sets strict limits on how much you can contribute each year. These limits are called contribution caps. If you go over them, you could face extra tax. But don’t panic – here’s what you need to know and the steps to take if this happens.

Understanding the caps

There are two main caps you need to keep in mind:

1. Concessional contributions cap
   • These are contributions made before tax, such as employer super guarantee (SG) payments, salary sacrifice, and personal contributions you claim a tax deduction for.
   • For the 2025/26 financial year, the cap is $30,000 per year.
2. Non-concessional contributions cap
   • These are contributions made from your after-tax income, like personal contributions where you don’t claim a tax deduction.
   • The cap is $120,000 per year, or up to $360,000 if you use the “bring-forward” rule (this allows you to contribute three years’ worth at once if you’re under 75).

What happens if you go over?

If you exceed either cap, the ATO will issue an excess contribution determination notice outlining your options for resolving the excess. This letter will explain what happened and tell you how much tax you’ll need to pay on the excess amount.

Your options if you exceed the concessional cap

If your concessional contributions go over the $30,000 cap, the excess amount is added to your taxable income. This means you’ll pay tax on it at your normal income tax rate, but you’ll get a 15% tax offset because your super fund has already paid tax on that money.

You have two choices:

• Withdraw up to 85% of the extra amount from your super to help cover the extra tax, or
• Leave the money in your super and pay the extra tax from your own pocket. Keep in mind, if you leave it in, the extra amount will also count towards your after-tax (non-concessional) contribution limit.

Either way, the ATO will calculate how much tax you owe, so there’s no guesswork on your part.

Your options if you exceed the non-concessional cap

If you exceed the non-concessional cap, the ATO will give you two choices:

1. Withdraw the extra contributions out
   • You can withdraw the excess contributions plus any earnings they made.
   • The earnings are taxed at your usual income tax rate, but you’ll get a 15% tax offset to reduce the bill.
   • No extra penalty tax applies if you take the money out.
2. Leave the excess contributions in your super fund
   • You’ll pay a 47% tax on the excess amount.
   • This option is rarely beneficial which is why most people choose to withdraw the extra amount to avoid the big tax hit.

Tips to avoid going over the caps

• Track your contributions: Check with your employer and super fund to see how much has been paid in each financial year.
• Consider timing: Contributions count in the year your super fund receives them, not when you make them.
• Watch the bring-forward rule: If you use it, you can’t make more non-concessional contributions for the next two years.
• Use ATO online services: You can link your myGov account to the ATO to see real-time contribution information.

The bottom line
Exceeding your super caps can be stressful, but the ATO has a process to help you manage it. Understanding your options and acting quickly when you receive a letter will help you reduce extra tax and keep your retirement savings on track. Remember, if you’re unsure what to do, come and talk to us – we’re here to guide you through it.

Thanks for all those great ideas – we’ll take it from here.

That’s pretty much how last month’s economics/productivity roundtable wound up, with the government firmly in control of what tax policy measures might or might not be introduced down the track.

Apart from consulting with the States on a model for imposing road user charges on electric vehicles, which was already in the pipeline, there were no breakthrough tax ideas coming out of the roundtable process that are going to be implemented immediately (other than the two tiny personal tax cuts the government took to the May election and, of course, the 15% slug on large superannuation balances).

So far, at least, successive governments have been reluctant to make wealthier older Australians pay more tax, but could this be about to change?

Both the PM and the Treasurer have been somewhat coy about this.

In spite of the slim policy pickings coming out of the roundtable, Treasurer Chalmers may have planted the seeds for perhaps taking some targeted tax changes to the next election, provided such changes are supported by the broader community.

There seemed to be consensus among roundtable participants that the tax system needs to be re-examined through the lens of intergenerational equity. This will mean different things to different people, but without making politically risky changes to the GST or the tax treatment of the family home, younger working Australians can only be helped through the tax system by cutting back some of the concessions enjoyed by wealthier mainly older Australians or plunging the country even further into debt.

We would expect that between now and the next Federal election there will be continuous advocacy by civil society groups to cut back or eliminate certain tax benefits that are enjoyed disproportionately by higher income earners. This group would be the same people who already pay a disproportionate share of income taxes under our highly progressive personal income tax scales.

The wish list of changes you are likely to hear about include:

• negative gearing on rental properties;

• the CGT discount;

• the taxation of trusts;

• superannuation.

There could also be changes aimed at older Australians by way of the social security system, for example the deeming rate applied to financial assets for pension eligibility and the pension treatment of the family home.

This is a very cautious government (particularly the PM), in spite of the very substantial majority it enjoys in the Parliament. But who knows? With Millennials now slightly exceeding Boomers as a demographic, community sentiment could shift and the government might consider making some cautious moves in some of these contentious policy areas.

There is also a proposal to implement responsible measures (probably meaning tax neutral) to help boost business investment. The two main policy levers in that area are some form of investment allowance or juicing up the Instant Asset Write Off (IAWO) rules. Investment allowances are very expensive in revenue terms as they are available in relation to capital investments businesses would have made anyway. They may act as an incentive at the margin and most businesses wouldn’t knock one back, but they should probably only be resorted to in a recession. A substantial increase in the IAWO turnover and asset cost thresholds would be welcome and, unlike an investment allowance, only creates timing differences.

In the meantime, the Productivity Commission’s (PC) controversial proposal to drop the corporate rate to 20% for entities with a turnover of less than $1 billion might have trouble getting off the ground. It is coupled with a 5% cashflow tax, which means you can only avoid it if you keep investing in capital equipment, and there are only so many utes a business will want to buy.

And the small print shows the PC is proposing to achieve neutrality as between debt and equity financing by not taxing interest income nor allowing interest deductions at the corporate level. This will have huge implications for financing, as most incorporated businesses are net borrowers.

Finally, the PC report fails to consider the flow-on effects on distributions. Under the dividend imputation system most resident shareholders receiving distributions from a 20% company will just pay more top-up tax, with the net result of collecting slightly less company tax but more personal tax.

So, no major surprises, but keep an eye on what happens in the lead up to the next election.

The tax deductibility of clothing is a topic that often confuses taxpayers, as the rules are specific and nuanced.

However, the ATO sets clear guidelines on when clothing expenses can be claimed as tax deductions, and understanding these rules is essential for individuals and businesses seeking to maximise their tax benefits while remaining compliant.

As a broad principle, the ATO allows deductions for expenses that are directly related to earning assessable income, but excludes categories of expenditure which are regarded as being of a private or domestic nature – which clothing prima-facie falls into.

Generally, the ATO takes the view that clothing expenses are deductible if the clothing is:

• Occupation-specific: The clothing must be uniquely associated with a particular profession or occupation and not suitable for everyday wear.

• Protective: The clothing must provide a necessary level of protection against workplace hazards.

• Compulsory: The clothing must be a compulsory uniform with a logo or design that identifies the wearer as an employee of a specific organisation.

• Registered with the ATO’s Industry Clothing Register: Non-compulsory uniforms must be included on this register to qualify for deductions.

Conversely, conventional clothing (eg, business suits, or general workwear) is typically not deductible, even if required by an employer, unless it meets one of the above criteria.

It is also important to note that taxpayers can claim expenses for laundering, dry cleaning, or repairing work-related clothing where the cost of purchasing is deductible. The ATO provides a standard rate of $1 per load for work-related clothing washed separately, or 50 cents per load if mixed with other laundry. Alternatively, taxpayers can claim actual expenses if they keep receipts and can substantiate the costs.

And of course, to claim clothing deductions, taxpayers must maintain proper records, such as receipts or invoices for purchases and evidence of laundry expenses. Additionally, taxpayers must demonstrate that the clothing is used primarily for work purposes. For example, if protective clothing is also worn outside of work, only the work-related portion of the expense may be deductible.

By way of example, consider a construction worker who purchases steel-capped boots for $150. These boots are deductible as protective clothing, and the worker can also claim laundry costs for cleaning them. Conversely, a corporate employee who buys a $500 suit for client meetings cannot claim a deduction, as the suit is conventional clothing. A flight attendant required to wear a branded uniform with the airline’s logo can claim the cost of the uniform and its maintenance, as it is a compulsory uniform.

The tax deductibility of clothing in Australia is governed by strict ATO guidelines, focusing on occupation-specific clothing, protective gear, and compulsory or registered non-compulsory uniforms. Taxpayers must ensure that their claims meet these criteria and are supported by proper documentation.

So, always consult with us first for personalised advice to ensure compliance with current regulations.

Given past history, not very much, unfortunately.

The Treasurer, Jim Chalmers, has convened a Productivity Roundtable for late August, with three main areas of focus – productivity, economic resilience and budget sustainability. He has sought ideas and proposals from stakeholders, which should be:

• in the national interest;

• fiscally responsible – ie, revenue positive or at least revenue neutral; and

• specific and practical.

Increasing Australia’s productivity, which is the economic output produced by a given set of inputs, is a key factor in improving living standards. Australia’s productivity performance has been lagging behind comparable economies for some years now.

The Treasurer has specifically called for tax reform ideas that are likely to boost our productivity. What sort of tax policy changes are likely to fit the bill, and what are the chances of them being adopted?

One of the many problems in tackling tax reform is that most people’s idea of tax reform is for somebody else to pay more tax. And not everybody even agrees that we should raise more tax, saying we should curb our spending instead. Others think it should be a bit of both.

This turns tax reform into a political exercise and in spite of some people urging the government to use its strong Parliamentary majority to make brave decisions about tax, the government didn’t run on a platform of major tax reform at the recent election and can’t claim to have a mandate for tax reform.

You don’t need to have a long memory to recall the unexpected federal election loss suffered by the ALP in 2019. Many political pundits attributed that loss to some unpopular tax policies in Labor’s platform – restricting negative gearing, the capital gains tax discount and refundable franking credits. A highly effective scare campaign run by opponents of those policies was partly blamed for the election outcome.

Labor would be unlikely to serve up those specific policies again unless there was strong community and bi-partisan support for them, which seems unlikely. Instead, we are likely to see further scare campaigns from those with a vested interest in maintaining our existing policy settings.

Another candidate for major tax reform is already looking like being a non-starter. Some are urging the government to consider reducing direct taxes such as personal and company income tax and increasing the GST (with appropriate compensation for low income families).

All taxes have a negative impact on economic activity. Taxing something means there will be less of it, but the “dead-weight” cost of imposing a consumption tax is less than it is for income tax, resulting in increased economic activity, which boosts the tax base while improving living standards.

While the Treasurer has signaled he is not attracted to increasing the GST’s base or rate, he wants to avoid ruling anything in or out at this early stage. The Prime Minister has no such qualms and has made it clear in recent comments that the GST will not be increased on his watch. The rule in/rule out game is off to an early start.

Major tax reform has always been challenging because it invariably involves winners and losers. The losers tend to be well represented and loud, while the winners tend to be more diffused and quieter. All these things are built up by the media, who love nothing better than public policy controversy around tax.

And the final obstacle to comprehensive tax reform is that, in the context of deficits stretching as far as the eye can see, there is no spare money with which to compensate the losers.

Whether the Roundtable can agree on other tax policy changes that can be fairly labeled as reform remains to be seen. We wish the Treasurer well in his endeavours, but we won’t be expecting any miracles.

Self-Managed Super Funds (SMSFs) are a key part of Australia’s superannuation system, offering control over retirement savings. As of March 2025, about 650,000 SMSFs managed $1 trillion in assets – a quarter of the $4.1 trillion superannuation pool. Let’s take a quick look at who uses SMSFs, why they’re chosen, costs and setup essentials for those considering this option.

Who uses SMSFs?

SMSFs attract people who want to manage their retirement funds. As of March 2025, there were around 1.2 million SMSF members. About 68% of funds have two members (often couples), 25% have one member, and 7% have three to six members. Most members (85%) are over 45, with the average member holding over $800,000 in assets.

Why choose an SMSF?

The main appeal of an SMSF is control. Unlike industry or retail funds, SMSF members act as trustees, tailoring their investment strategies. This allows investments in assets like real estate, cryptocurrencies, or unlisted assets, often unavailable elsewhere.

SMSFs also offer transparency and tax benefits. For example, trustees can time when they sell assets and realise profits. SMSFs also provide flexibility in estate planning with bespoke binding death benefit nominations not ordinarily offered by large super funds.

Setting up and ongoing administration

Creating an SMSF involves some paperwork but is manageable with clear steps. Working with an SMSF professional can make the process smoother and ensure everything is set up correctly.

Here’s how to get started:

• Choose Your Trustee Structure: Opt for individual trustees (up to six, with all members as trustees) or a corporate trustee (members as company directors, each needing a Director Identification Number from the Australian Business Registry Service). For single-member funds, individual trustees require a second trustee, and members can’t be employees of each other unless related.

• Verify Trustee Eligibility: Ensure no trustee is bankrupt or has a dishonesty conviction.

• Create a Trust Deed: Work with a professional to draft a trust deed outlining your fund’s rules, ensuring compliance with superannuation laws.

• Establish an Australian Fund: Set up the SMSF in Australia, with management and assets based locally, to meet Australian super fund requirements.

• Register with the ATO: Within 60 days, apply for an Australian Business Number (ABN) and Tax File Number (TFN) through the Australian Taxation Office (ATO).

• Open a Bank Account: Set up a dedicated SMSF bank account to manage contributions and investments, kept separate from personal finances.

• Set Up SuperStream and Investment Strategy: Obtain an Electronic Service Address (ESA) for SuperStream compliance and develop an investment strategy tailored to your retirement goals.

SMSFs require ongoing management which includes maintaining records, filing annual tax returns and conducting audits. An SMSF professional can help you stay compliant and make the most of your fund.

Costs involved

SMSFs can involve significant administrative work and be time-consuming to manage. Professional advice and administration can increase expenses but reduce workload. Keep in mind that insurance premiums, such as life or disability cover, are typically higher in SMSFs as they do not benefit from bulk discount arrangements. Trustees can lower costs by handling some administration, requiring time and expertise.

Is an SMSF right for you?

SMSFs offer control and flexibility, ideal for those with financial literacy, time, and larger balances, as lower balances may not justify the associated costs. However, they also come with responsibilities, including the risk of potential investment losses and the need to meet compliance obligations. If you’re considering an SMSF and want to understand more about how they work, feel free to give us a call – we can help you explore whether it might be a suitable structure for your needs. $

Over the next few decades, Australia is expected to witness one of the biggest intergenerational wealth transfers in history with between $3.5 trillion and $5 trillion changing hands as baby boomers pass on their wealth to children and grandchildren.

If you’re expecting to inherit from your parents or grandparents, or you’re thinking about the legacy you’ll leave to your loved ones, it’s important to understand the tax traps and planning strategies that come with this enormous transfer of wealth. While there’s no inheritance tax in Australia, there are other hidden tax pitfalls that can reduce the value of what’s passed down.

The tax traps you should know

Capital gains tax (CGT)
Receiving cash doesn’t attract tax but inheriting property, shares or other investments can trigger capital gains tax (CGT), depending on how and when those assets are sold. For example, if you inherit a home and it’s sold within two years of the deceased’s passing, the sale may be exempt from CGT – provided the home was the person’s main residence.

If you keep the property for longer or it was being used to produce income, CGT could apply down the track when you sell.

Superannuation
Super is another area full of complexity. When someone inherits super, whether or not they pay tax on it depends on a few things – like who they are and how the money is paid.

If the person receiving the super is a “tax dependent” – for example, a spouse or a child under 18 – they usually won’t have to pay any tax if the super is paid as a lump sum. However, if the person inheriting the super death benefit isn’t a tax dependent (such as an adult child), your super fund will withhold tax before paying the money out. This can range from 17% to 32% (including Medicare levy), depending on the type of contributions that were made to your account (eg, concessional or non-concessional contributions).

Getting advice about how super is structured and who your beneficiaries are can make a big difference in how much tax is paid.

Gifting assets before death

Some people choose to give assets like property or shares to their children while they’re still alive – either to help them out financially or to reduce the size of their estate. While this can be a thoughtful move, it can also lead to an unexpected tax bill.

That’s because giving away certain assets (like an investment property or shares) is treated like selling them, which means CGT may apply. The tax is worked out based on the difference between what the asset is worth now and what you originally paid for it.

However, if the person giving the gift has made a loss on other investments in the past, they may be able to use those losses to cancel out some or all of the gain, reducing or even eliminating the tax they have to pay.

This is why it’s important to get advice before making any big gifts – so you know exactly what the tax consequences might be.

Trusts and family structures

Using a family trust or testamentary trust (a trust set up under a will) can offer flexibility and tax savings. These structures allow more control over who receives income and when – which can help manage tax across the family group and avoid disputes. But they need to be set up correctly and in line with your wishes.

Tips to protect your family’s wealth

1. Get your will and estate plan in order – having a legally binding will is the foundation of a good wealth transfer plan. It’s also wise to appoint a power of attorney and an executor who understands your wishes and has the emotional and practical ability to carry them out.

2. Talk openly with your family – the emotional side of inheritance is just as important as the financial side. Discuss your intentions early to avoid surprises and prevent family conflict down the line.

3. Understand the tax implications – don’t assume everything passes tax-free. Ask questions about CGT, super and gifting – especially if you’re likely to inherit property, shares or other non-cash assets.

4. Review your super nominations – make sure your beneficiaries are up to date and that you’ve completed the right type of nomination form (binding vs non-binding). This helps ensure your super goes where you want it to, without unnecessary tax or delay.

5. Seek professional help – the rules are complex, and mistakes can be costly. Getting the right advice from a professional who understands estate planning and tax can help you make smarter decisions and keep more money within your family unit.

Need help planning or receiving an inheritance?
Whether you’re planning your legacy or expecting to receive one, we can help you navigate the rules, reduce the tax and protect what matters most.

If you are getting divorced or separated from your spouse, this may involve the transfer of real estate or other assets as part of the settlement of things. Technically, that transfer will trigger capital gains tax (CGT) because there will be a change in ownership of the property.

However, in this case the CGT rules will provide rollover relief so that there will be no CGT to the person who transfers the property (the transferor) to the other party. And that other party will “step into the shoes” of the transferor – so that they will be deemed to have acquired the property at the same time and for the same cost as the transferor.

But this rollover rule is subject to a number of important conditions and provisos.

Firstly, the transfer of the property must take place by way of a relevant court order or a court-sanctioned agreement – or even a pre-nuptial agreement or the like. But the rollover does not apply to transfers under any private arrangement.

Secondly, the transfer can only be made to the former spouse or partner – it can’t be made to their family company or family trust; nor to their estate if they die in the meantime (subject to an apparent exception if the property is transferred to a child maintenance trust).

Thirdly, if an investment property is transferred to a spouse and it becomes their home, then on its sale by that spouse there is a partial CGT liability to take into account the fact that it wasn’t always a CGT-exempt home. And this rule also applies in reverse.

Fourthly, if an asset (eg, shares or real estate owned by the company) is transferred out of a family company to a spouse, then there must be a corresponding reduction in the value of the shares held in the company to reflect the market value of that property transferred.

Fifthly, the rollover is available to the divorce or separation of any type of spouse, including de facto and same sex spouses – provided the divorce or separation is “bona-fide”! And note that the Commissioner has in the past successfully challenged the bona-fides of a divorce (albeit, that was done in connection with a taxpayer trying to move assets out of reach of his creditors).

Now, such matters require careful consideration to take into account the particular circumstances of both parties. For example, the transfer of an investment property which will then be used as a home by the other spouse will require negotiation between the parties for adjustment to the settlement amounts to reflect the CGT liability that that spouse will be responsible for in the future. And this can be difficult – even if the separating parties are actually talking to each other!

And where, say, one of the parties owns an asset on which they will make a capital loss, they can perhaps agree to transfer that property to the other party to realise the loss – but only if they transfer it under a private agreement independent of any court-approved transfer, etc.

In summary, there are lots of important tax issues associated with transferring assets between former spouses under a divorce or a relationship breakdown that require good advice.

So come and speak to us if you find yourself in this situation.