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Here are some more detailed tips relating to a couple of common claims that often attract ATO scrutiny.

Working from Home

A lot of people are still regularly working from home for at least part of the week. If you do, you are entitled to a deduction for the additional costs you incur. To be eligible to make a claim it is not necessary to set aside an area exclusively for business or employment related use. A shared dining table is all you need.

Except in very unusual cases, deductions are not available for occupancy costs such as mortgage interest, rent, rates and insurances.

Most people make their claim using the fixed rate method, which is 70 cents per hour for 2024–25. The fixed rate method covers home and mobile internet costs, mobile and home phone costs, power and gas charges and stationery and computer consumables.

Under the fixed rate method, you can also claim depreciation and repairs for assets used such as desks, office chairs and laptops, where those items cost more than $300. This is on top of the 70 cents per hour.

Alternatively, you could use the actual cost method, but that requires more detailed records and receipts.

We can help you to legitimately maximise your claim, but before you can claim anything, you need to have:

• A record of the hours worked from home. This has to be maintained for the entire 2024–25 financial year – you can’t just keep a detailed record for a representative period and apply it for the full year.
• One current sample invoice for each of the costs the fixed rate method is intended to cover – internet costs, phone costs, energy bills. It’s important to take copies of those invoices now and file them with your tax records rather than scramble around looking for them when the ATO comes asking for them in a few years’ time.

Use of Your Own Vehicle for Business or Employment Related Purposes

For starters, any reimbursement you receive from your employer, either on a cents per kilometre basis or a flat amount, is assessable in your hands and will be shown on your payment summary. Not everyone who uses their own car for work is reimbursed in this way, however, and you are still entitled to make a claim, in spite of not receiving any reimbursement.

There are two alternative ways of claiming a deduction for business or employment related car use – the cents per kilometre method or the logbook method.

For those who use the cents per kilometre method (which only applies to claims of up to 5,000 kms) the process is pretty simple – just multiply the kilometre figure by 88 cents. So if your business or employment related use was 4,000 kms, your 2024–25 claim would be $3,520.

Under the cents per kilometre method, you don’t need to keep a full-blown logbook that tracks every journey. However, the ATO may ask you how you came up with the claimed distance, especially where you’re pushing up against the 5,000 km threshold. So you will need to have a diary of some sort that shows how you have estimated the kilometres being claimed – anything to prove you haven’t just plucked the figures out of thin air.

People sometimes get confused about what qualifies as business or employment related car use. You can make a claim where:

• you travel to locations that are not your usual workplace;
• you have no fixed workplace and travel from site to site;
• you carry tools or equipment which are bulky and cannot be securely stored at your workplace;
• you drive to see customers or suppliers;
• you drive to seminars or to a second job.

Car logbooks are available from Officeworks and most stationers, and can also be ordered online.

Non-deductible travel includes situations where:

• you drive to and from your regular workplace;
• your employer pays your car expenses directly.

The logbook method is the alternative to the cents per km method. As the name implies, you need to keep a detailed logbook, but only for a representative period of twelve weeks to work out your business related use. Provided your pattern of car usage remains broadly the same, the resulting business use percentage is good for five years, after which you have to repeat the process.

The logbook method might be more appropriate where your business or employment related car use is well over 5,000 kms.

For each journey, the logbook needs to show:

• the date of the trip,
• the starting and finishing odometer reading,
• the distance travelled,
• and the reasons for the journey.

Where you are completing your logbook for the 2024–25 financial year, you need to complete the logbook entries during that year, after each trip. The logbook should come up with a business percentage, which can then be applied to all the costs associated with running the car, including depreciation. Receipts, invoices or other documentary evidence has to be maintained to verify the actual expenditure being claimed.

We can help you with the record keeping and logbook requirements.

So, you have decided to knock down your home and to build a couple of townhouses instead – and maybe live in one (but will just wait and see how things pan out). Likewise, you may have decided to subdivide your large backyard to do a similar thing.

In another case, you may have bought yourself a large block of land down the coast or in the country on which to build a holiday home (or your dream retirement home), but have now decided to build some houses on it to sell as the market is hot in that region. (And you know how to manage a project; you have been doing it all your working life.)

In all of these scenarios, the ATO may take the view that you are engaging in small scale property development and that, as a result, your profits from this activity should be taxed as ordinary business profit (and possibly at the top rate of tax), and not just merely as a concessionally taxed capital gain.

Furthermore, where you may have “ventured” land into a property development project, the capital gains tax (CGT) laws will apply to capture any capital gain (or loss) made on that land up until that time (but provided the land was not exempt from CGT, such as in the case of a home).

But there is one big advantage in being taxed as a property developer – you can generally claim your deductible costs each year as you incur them, and particularly interest on any money borrowed for the venture.

On the other hand, if you are merely subdividing part of your backyard and selling it you will only be subject to CGT in respect of any gain or loss you make – and, what’s more, you can’t claim the CGT exemption for a home in this case.

And in the case of a knockdown-rebuild of a home, where you move back into and make it your home in the required time periods, there will generally be no CGT consequences (albeit, one day the ATO may look more closely at this rule if it considers it to be badly exploited).

In relation to GST, it generally doesn’t apply to small-scale property developments unless you’re operating a business and registered for GST – or to put it another way, for one-off projects, GST is unlikely to apply, but subdividing and selling multiple lots could push you into GST territory.

But the application of GST to small-scale property developments is a complicated area.

In short, the issue of how small-scale property development activities are taxed is complex – and will depend on the exact circumstances of the case.

It’s vital to come and speak to us if you are considering undertaking such activity – or have already done so. 🏗️

When it comes to superannuation, many people assume that their retirement savings will go to their loved ones when they pass away. Sadly, this isn’t always the case. Unlike other assets that are covered by your will, your superannuation is handled separately, and if you want to ensure it goes to who you want, you need a binding death benefit nomination (BDBN).

What is a binding death benefit nomination?

A BDBN is a formal instruction you give to your superannuation fund, telling them who should receive your super when you die. The fund must follow your instructions if your nomination is valid. This gives you certainty that your money will go to who you want.

If you don’t have a binding nomination, your super fund will decide who gets your money. This means your super could be distributed differently from what you intended. Without a valid nomination, your fund will usually follow set rules and laws about dependants.

The three-year expiry rule

A BDBN generally expires every three years. This means you need to renew it regularly to keep it valid. If your nomination expires and you haven’t updated it, your super fund will decide who gets your money when you pass away.

To avoid this, many people set reminders to review their nomination every few years. Major life events such as marriage, divorce, or having children are also opportune times to review your BDBN.

Non-lapsing binding nominations

Some super funds offer non-lapsing binding nominations, which do not expire. Once you make a valid non-lapsing nomination, it remains in place unless you choose to change or cancel it.

However, not all super funds offer this option, and each fund has its own rules about how non-lapsing nominations work. It’s important to check with your fund to see if you can make one and whether any conditions apply.

Binding nominations in SMSFs

If you have a self-managed super fund (SMSF), the rules around BDBNs can be different. Unlike large super funds, where trustee discretion is limited by the rules of the fund and superannuation laws, SMSFs can have more flexibility.

Some key differences include:

• No automatic expiry: In many SMSFs, binding nominations do not expire unless the trust deed specifically states otherwise. This is different from retail and industry super funds, where nominations often expire after three years.
• Customised rules: The rules about binding nominations in an SMSF depend on the trust deed, which is the legal document that governs the fund. Many SMSFs allow non-lapsing nominations, while others may require regular updates. Also, some SMSFs allow cascading nominations, i.e., instructing the fund to pay a death benefit to a secondary beneficiary if the primary beneficiary predeceases the member.
• Trustee control: Since SMSF trustees are usually fund members themselves, there can be potential conflicts of interest when deciding how to distribute super benefits. A well-structured binding nomination can help prevent disputes among family members.

If you have an SMSF, it’s crucial to check your trust deed and ensure your nomination aligns with the fund’s rules.

Who can you nominate?

When making a binding nomination, you can’t just choose anyone – you must nominate one or more ‘eligible beneficiaries’. These include your:

• Spouse (including de facto and same sex partners)
• Children (including adopted or stepchildren)
• Financial dependants (such as someone who relies on you financially)
• Interdependents – someone you share an interdependent relationship with (such as a person you live with, have a close bond with, and where one or both of you provide financial assistance, domestic support, and personal care)
• Legal personal representative (your estate, so your super is distributed according to your will)

If you nominate someone who isn’t eligible, your nomination will be considered invalid, and the super fund trustee will decide who receives your super.

How to make a valid binding nomination

To ensure your nomination is legally binding, follow these steps:

1. Check your fund’s rules: Different funds have different requirements for binding nominations.
2. Complete the required form: Your super fund will have a specific binding nomination form you need to fill out.
3. Nominate a dependant or legal personal representative.
4. Ensure the proportions add up to 100%.
5. Sign and date it in the presence of two independent witnesses (over 18 and not beneficiaries).
6. Submit the completed form to your super fund.

Final thoughts

A BDBN is an essential tool for ensuring your superannuation is distributed according to your wishes. If you don’t have one in place, or if yours has expired, your super fund may decide who gets your money – and it might not be who you intended.

Whether you choose a standard nomination with a three-year expiry, a non-lapsing nomination, or an SMSF-specific arrangement, keeping your nomination up to date is key. Take the time to review your super fund’s rules and ensure your hard-earned super goes to the ones you love. ❤️

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