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Sometimes it can be, but only in limited circumstances. The tax deductibility of expenditure on clothing is subject to strict ATO guidelines. These cover occupation-specific clothing, compulsory or registered non-compulsory uniforms and protective items. Conventional clothing What you can’t claim is the cost of conventional clothing, even where your employer expects you to observe a particular dress style. You might work in an office environment, and your employer expects you to wear a business suit to work, even though you wouldn’t have even bought the suit but for your employer’s dress requirements. While the cost of the suit might seem like a work related expense, it is not deductible as it is conventional clothing that could also be worn outside of work. This makes it a private expense, even though it relates directly to your employment. Conventional clothing includes business attire, non-monogrammed black trousers and white shirts worn by wait staff, non-protective jeans and drill shirts worn by tradies and athletic clothes and shoes worn by PE teachers. Occupation-specific clothing On the other hand, occupation-specific clothing falls on the deductible side of the line, for example a chef’s distinctive chequered pants or a health worker’s blue uniform, including nurses’ stockings and non-slip shoes. Compulsory uniforms The cost of clothing that forms part of a compulsory uniform is generally deductible. A compulsory uniform is a set of clothing that identifies you as an employee of a particular organisation. Your employer must make it compulsory to wear the uniform and have a strictly enforced workplace policy in place. You can only claim a deduction for shoes, socks and stockings if: They are an essential part of a distinctive compulsory uniform, and The characteristics (the colour, style and type) are an integral and distinctive part of your uniform that your employer specifies in the uniform policy, for example, airline cabin crew members. You can claim for a single item of clothing such as a jumper if it's distinctive and compulsory for you to wear it at work. An item of clothing is unique and distinctive if it: Has been designed and made only for the employer, and Has the employer's logo permanently attached and is not available to the public. Just wearing a jumper of a particular colour is not part of a compulsory uniform, even if your employer requires you to wear it, or you pin a badge to it. Non-compulsory uniforms You can only claim for non-compulsory work uniforms if your employer has registered the design with AusIndustry. This means the uniform has to be on the Register of Approved Occupational Clothing. Your employer will be able to clarify whether your uniform is registered. Protective clothing The cost of protective clothing is deductible, and covers such items as: Fire-resistant clothing Sun protection clothing with a UPF sun protection rating Hi-viz vests Non-slip nurse’s shoes Protective boots, such as steel-capped boots or rubber boots for concreters Gloves and heavy-duty shirts and trousers Occupational heavy duty wet-weather gear Boiler suits, overalls, smocks or aprons you wear to avoid damaging or soiling your ordinary clothes during your work activities. Laundry and dry-cleaning costs and repairs You are entitled to a deduction for the cost of cleaning your deductible clothing. If you launder them at home, the Tax Office will allow you a deduction of $1 per load where the load contains only deductible clothing, or 50 cents per load where deductible clothing is mixed with other items. You are entitled to claim the cost of dry-cleaning deductible clothing, as well as the cost of mending and repairs. Record keeping You should keep receipts or other documentary evidence of your expenditure on buying, laundering or repairing deductible work clothing. Proof of laundering clothing at home can be in the form of diary entries. Allowances If your employer pays you a clothing allowance, this needs to be included in your assessable income, and you can only claim what you have actually spent. Feel free to come and see us for advice as to whether your expenditure on work clothing is deductible.
Big news for anyone with a large super balance – the government has gone back to the drawing board on the controversial Division 296 tax , and the changes are a big step toward fairness and common sense. A quick recap When the Division 296 tax was first announced in 2023, it caused an uproar. The main problem? It would have taxed unrealised gains, that is, paper profits you haven’t actually made yet and set a $3 million threshold that wasn’t indexed meaning it wouldn’t rise with inflation. After a wave of feedback from the industry, the government has listened. The Treasurer’s new announcement, made in October 2025, fixes some of the biggest issues. The revamped version is designed to be fairer, simpler, and more in line with how tax usually works. The plan is to start the new system from 1 July 2026, with the first tax bills expected in 2027–28. What’s changing Here’s what’s new under the revised Division 296 tax: · Only real earnings will be taxed. No more tax on unrealised gains as you’ll only pay on earnings you’ve actually made. · Super funds will work out members’ real earnings and report this to the ATO. · The $3 million threshold will be indexed to inflation in $150,000 increments, keeping pace with rising costs. · A new $10 million threshold will be introduced. Earnings above that will be taxed at a higher rate of 40%, and that threshold will also rise with inflation. · The start date is pushed back to 1 July 2026, giving everyone more time to prepare. · Defined benefit pensions are included, so all types of super funds are treated the same. So what does this mean in practice? Think of it as a tiered tax system: · Up to $3 million – normal super tax of 15%. · Between $3 million and $10 million – taxed at 30%. · Over $10 million – taxed at 40%. Basically, the more you have in super, the higher the tax rate on your earnings above those thresholds. How it will work Super funds will continue reporting members’ balances to the ATO, which will figure out who’s over the $3 million mark. If you are, your fund will tell the ATO your actual earnings (not paper gains). The ATO will then calculate how much extra tax you owe. We don’t yet have the fine print on what exactly counts as “realised earnings,” but it’s likely to mean profits you’ve actually made, similar to how taxable income is treated now. What’s still up in the air While these updates make the system much fairer, there are still a few unanswered questions: · What exactly counts as “earnings”? Will it only include profits made after 1 July 2026, or could older gains that are sold later be included too? · What happens with capital gains? Super funds usually get a one-third discount on capital gains for assets held over a year, but it’s unclear whether that will still apply. · How will pension-phase income be handled? Some super income is tax-free when you’re in the pension phase, and we don’t yet know how that will interact with the new rules. · Can people with over $10 million move money out? If your earnings above $10 million are taxed at 40%, you might want to shift funds elsewhere but the government hasn’t said if that’ll be allowed. What it means for you If your super balance is over $10 million, the proposed rules mean that a portion of your superannuation earnings could attract a higher tax rate of up to 40%. For people with between $3 million and $10 million, the new system could also change how much tax applies to their super earnings, depending on how the final legislation defines “realised gains.”  But don’t rush. These rules aren’t law yet, and if you take your super out, it’s hard to put it back because of contribution limits. It’s best to wait for the final legislation and get professional advice before making any decision to withdraw benefits from super.
 Let’s say you’ve just sold the house you inherited from your parents 12 years ago for $1.3 million. You’ve been renting it out for most of that time, but the property market has been hotting up, and you were told by several real estate agents that they could get you a good price. But what about the tax consequences? At age 50, you’re still working (salary of $120,000 per annum), having returned to the workforce in July 2023 following a five-year absence for personal reasons. You don’t expect to retire from paid employment until age 65 at the earliest. Your total super balance on 30 June 2025 was $300,000, sitting in a retail fund. Your accountant has calculated the net capital gain on selling Mum’s house as $600,000. After applying the 50% CGT discount, this results in a taxable income of $420,000, and a whopping tax bill of $163,538 to go with it. Can anything be done? Depending on your superannuation history, there may be a legitimate way of taking a big chunk out of that tax bill while topping up your super at the same time. Concessional super contributions are subject to an annual cap, which is set at $30,000 for the 2025-26 income year. That figure is well above the mandatory employer super guarantee amount for most income levels. Many people don’t go close to using up their concessional contribution caps, which can leave them with carry-forward concessional contributions. To help people with modest total super balances (below $500,000 on the previous 30 June), the government gives them the option of using some or all of their previously unused concessional contributions cap on a rolling basis for five years – ie, the five previous income years from 2020-21 to 2024-25, plus the current year (2025-26). Conveniently, the ATO keeps track of your carry-forward concessional contributions balance, which you can look up on myGov. The beauty of this arrangement is that you can use your catch-up concessional contributions to make personal deductible contributions, which can offset part of the CGT gain from the sale of the inherited property. Instead of being taxed at the top marginal rate of 47%, the amount of the catch-up contribution is taxed at the normal rate of 15% in your super fund, which creates a net saving of 32% on the contributed amount. It is not unusual for someone to have carry-forward concessional contributions in excess of $100,000, which would take your taxable income down to $320,000, with tax payable of $116,538, or $47,000 less than what your tax bill would be without making the tax-deductible catch-up contribution. That tax saving has to be reduced by $15,000 in contributions tax payable by your super fund, for a net saving of $32,000. Remember, however, that any super contributions you make at age 50 will not be accessible until you reach preservation age (60 if retired or 65 if you’re still working). If you have other plans for that $100,000 (and you did pocket $1.3 million on the house sale) you will need to weigh up your options. But locking up a small part of the house proceeds seems like a small price to pay for a $32,000 tax saving. On the other hand, if you have an appetite for putting even more money into your super, you might want to consider also making a non-concessional contribution of up to $360,000. This is not tax deductible and there is no 15% contributions tax when paid into your fund. That covers the tax side of things but since you have received a life-changing windfall, you should consider getting advice from a licensed financial adviser. If you find yourself in this situation, come in and see us well before 30 June 2026. If you decide to go ahead with making a catch-up contribution the super fund has to be notified, which we can help you with.
With the end of the financial year coming up, now’s a great time to get on top of your tax and super. A little planning before 30 June can help you make the most of any opportunities to reduce tax, boost your super, and avoid last-minute surprises. This checklist outlines key things to consider and action before the financial year wraps up. It’s a simple way to stay on track and finish the year with confidence. TAX CHECKLIST Here are some practical things to consider before 30 June to help you tidy up your tax position and potentially reduce your bill. Bad Debts If you're running a business, write off any bad debts that won’t be recovered before 30 June so they can be claimed. Employee Bonuses and Director Fees Planning to pay employee bonuses or director fees? Make sure they're confirmed in writing and communicated to recipients by 30 June, even if payment happens later. Charitable Donations Bring forward any planned donations and have the highest-earning family member make the gift. Remember: Donations must be to registered charities. They can’t create a tax loss. Keep receipts. Prepay Interest on Loans If you have a loan for an income-generating asset (like an investment property), consider prepaying interest before 30 June to bring forward the deduction. Claim Work-Related or Business Costs Bring forward costs such as repairs, stationery, or supplies by 30 June 2025. These small deductions can add up. This applies to all taxpayers, not just businesses. Prepay Expenses You can claim prepaid expenses, such as insurance or subscriptions. Where the expense is: Under $1,000 – all taxpayers can claim the expense Over $1,000 – fully deductible if you're a small business if the expense relates to a period of 12 months or less. Note that this is also available if it's a non-business expense of individuals, such as work related expenses or rental property costs. Write Off Old Stock If you hold stock, write off any damaged, outdated or unsellable items before 30 June 2025. Review Assets & Depreciation Small businesses (turnover under $10m) can immediately deduct assets under $20,000 that were acquired from 1 July 2024 and ready to use by 30 June 2025. Also, remove any old equipment from your depreciation schedule if it’s been sold, thrown out, or is no longer usable. Electric Vehicles If your business provides an electric vehicle to an employee, you may be eligible for depreciation deductions and Fringe Benefits Tax (FBT) concessions. Defer Income If possible, delay receiving income (like issuing invoices) until after 30 June to push tax into next year. Offset Capital Gains Selling an asset this year with a profit? You could crystallise capital losses before 30 June to offset that gain. Watch out: 'Wash sales' (selling and rebuying the same asset just to get a loss) are not allowed. Defer Capital Gains If you're planning to sell an asset for a gain, consider delaying until after 30 June if it makes sense for your broader financial situation. Personal Services Income (PSI) If you’re working in your own name (like a contractor or freelancer), check that your income qualifies as a business under PSI rules. Business Losses If your business runs at a loss, you may not be able to claim that loss if you carry on a “non-commercial business” - unless you pass one of the ATO’s tests (eg, income, asset, or profit test). Company Loans to Shareholders (Division 7A) If you’ve borrowed from your company, the loan needs to be properly documented, put on commercial terms and repaid. If repaying through dividends, make sure the dividends are legally declared and paid prior to 1 July (with appropriate documentation in place). Trust Distributions If you're a trustee, resolutions must be made before 30 June to properly distribute income to beneficiaries. You also need to let your beneficiaries know what they’re entitled to. Beneficiary TFN Reporting If new beneficiaries gave you their TFN between April–June, you must lodge a TFN report by 31 July 2025. Motor Vehicle Logbook Planning to claim car expenses using the logbook method? Start now and track 12 weeks of usage (can span over two tax years). Also record your odometer readings. Private Health Insurance Make sure you have the right level of cover to avoid the Medicare Levy Surcharge, especially if your family situation has changed (eg. new baby, separation, adult children moving off your policy). Check Your Insurance Cover Review your personal and business insurance needs. Not only does this provide peace of mind, some policies may also be tax deductible, especially if prepaid. Review Your Business Structure Is your current setup still the right one? Changes in income, family, or risk levels may mean a trust, company, or restructure could be more effective. We can help you weigh up your options. SUPER CHECKLIST Make the most of your super before 30 June 2025 with these smart, simple tips. Check Your Contribution Limits Before adding more to super, log in to myGov > ATO > Super > Information to check how much you’ve already contributed. Tip: If you're in an SMSF, your info may not be up to date in myGov, but we can help you work this out. Add to Super and Claim a Tax Deduction You may be able to make a personal deductible contribution and claim it at tax time. To be eligible: You must be over 18 If you're 67–74, you must meet the work test or qualify for a work test exemption If you’re over 75, you must contribute within 28 days of your birthday month Don’t forget: To claim a tax deduction, submit a Notice of Intent to Claim a Deduction to your super fund and get their confirmation before lodging your tax return or making withdrawals, rollovers, or starting a pension. Use Up Unused Contribution Limits Haven’t used your full concessional contribution cap in recent years? You may be able to catch up using the carry-forward rule if your total super balance is under $500,000 on 30 June 2024. Tip – Unused limits from 2019–20 expire after 30 June 2025 so don’t miss out. Split Contributions with Your Spouse You can split up to 85% of your 2023–24 concessional (pre-tax) contributions with your spouse before 1 July 2025. This is a great way to even out your balances and plan ahead for retirement. Note – To use this strategy, your spouse must be under their preservation age or aged 64 or younger and not retired when you make the request to your fund. Get a Tax Offset for Spouse Contributions If your spouse earns less than $40,000, consider making an after-tax contribution to their super. By doing so, you could get up to a $540 tax offset while boosting their retirement savings. Grab a Government Co-Contribution If you earn less than $60,400 and at least 10% comes from work or running a business, you could be eligible for a government co-contribution. All you need to do is add up to $1,000 to your super and the government may add up to $500 extra. Avoid the Division 293 Tax Trap If your income (plus employer contributions) is over $250,000, you may pay an extra 15% tax on some of your super contributions. Strategies like bringing forward expenses or deferring income may help keep you below the threshold. Maximise Non-Concessional (After-Tax) Contributions If you're under 75, you may be able to contribute up to $360,000 in one year using the bring-forward rule. New rules from 1 July 2025 may allow you to contribute even more – speak with us about getting the timing right. Take Your Minimum Pension Payment If you're drawing a pension from your super, make sure you take the minimum amount by 30 June. Missing the minimum may affect your fund’s tax benefits for the whole year. Age: Under 65 Minimum Pension: 4% Age: 65-74 Minimum Pension: 5% Age: 75-79 Minimum Pension: 6% Age: 80-84 Minimum Pension: 7% Age: 85-89 Minimum Pension: 9% Age: 90-94 Minimum Pension: 11% Age: 95 or more Minimum Pension: 14% Need Help? We’re here to help you make the most of EOFY tax and super opportunities. Contact us to discuss what options might work best for your situation.
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. 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. Car logbooks are available from Officeworks and most stationers, and can also be ordered online. We can help you with the record keeping and logbook requirements.
A recent decision of the tax tribunal has highlighted the requirement that in order to use the CGT small business concessions for a capital gain made on an asset used in a business, the asset must have been used, or held ready for use , in that business for the required time. And this required time is for half the period that the asset was owned, or if you owned it for 15 years or more then it must have been so used for at least 7 ½ years. And, importantly, this includes the period that it was held ready for use in that business. In that tribunal case, the taxpayer inherited farmland which he never used for farming (but instead left it vacant and then later let his brothers use it in their own farming business). However, he claimed that it was for the relevant period it was held ready for use in his own farming business, but that a dispute with his brothers prevented him from using it as such. In this case, it was clear that the farming land was never really held ready for use in his business – so the large capital gain he made on the asset was fully taxable and not entitled to any CGT small business concessions. However, there are many cases where the period that an asset is held ready for use in a business will count towards the required time that an asset must have been used in a business (ie, half the period that the asset was owned, or 7 ½ years if you owned it for 15 years or more). For instance, in relation to farmland, this would include where farmland is being prepared for grazing activity (eg, while fencing is being built or while waiting for the stock to be trucked in from other sources) or cropping activity (eg, while pastures are being sown). In relation to other businesses, this could include the period that, say, a factory or a shop is being fitted out in preparation for the relevant business activity or where, say, relevant structures are being built on the land for that purpose (eg, greenhouses for a nursery). And this period of being held ready for use may be important in meeting this holding period rule – where otherwise the actual business activity hasn’t been carried out for the requisite period But whether an asset is being held ready for use in a business can be a difficult question to determine – as can the other requirements of this rule. And this includes the crucial issue of whether an asset can qualify for the CGT small business concessions where it has also been used for rental purposes. So, if you run a small business and have this type of issue come and have a talk to us and we can help you.
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 now 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 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. So, it is 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 ie, 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 globalized 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.
