What’s the difference between the Medicare levy and the Medicare levy surcharge?

Many people getting their tax notice of assessment wonder why they see amounts for the Medicare levy and Medicare levy surcharge. Here’s how it works.

Medicare levy

The Medicare levy’s a compulsory charge that helps fund Australia’s public healthcare system. Almost all Australians pay this levy, which is 2% of your taxable income. The levy’s generally withheld from your pay by your employer throughout the year, so you may not notice it until tax time.

It’s important to note that having private health insurance doesn’t exempt you from paying the Medicare levy; it only affects your liability for the Medicare levy surcharge.

In certain limited cases, such as if you’re a low-income earner, a foreign resident or have a medical exemption, you may qualify for a reduced rate or full exemption.

Medicare levy surcharge

The Medicare levy surcharge (MLS) is an additional charge designed to encourage higher-income earners to take out private hospital insurance, reducing the strain on the public healthcare system. The MLS isn’t automatically withheld from your income, but is calculated when you lodge your tax return.

You may be liable for the MLS if your income exceeds the MLS threshold and you, your spouse and your dependent children don’t all have an appropriate level of private patient hospital cover for the entire income year. The surcharge rates vary based on your income tier, beginning at 1% for singles with 2025–2026 income over $101,000 and families with income over $202,000.

Your income for MLS purposes includes several components beyond your taxable income, like reportable fringe benefits, total net investment losses and reportable super contributions. If you have a spouse, their income’s also considered.

Private health insurance

To avoid the MLS when your income’s over the threshold, you need an appropriate level of private patient hospital cover. Singles need a policy with an excess of $750 or less, and couples or families need a policy with an excess of $1,500 or less. Your policy must cover you, your spouse and all dependants for the full income year to avoid the surcharge.

Keep in mind that extras-only cover (such as for dental or optical) and travel insurance don’t qualify as private patient hospital cover for MLS purposes.

Family Tax Benefit and your tax return: common misunderstandings

Family Tax Benefit (FTB) is a government payment to help families with the cost of raising children. Despite its name, it’s not a tax refund or tax deduction – it’s a social security benefit to help with everyday costs like food, education, clothing and other child-rearing expenses.

FTB has two parts. Part A is the main payment available to most eligible families, and Part B is an extra payment for single parents or certain single-income families (usually where one parent stays home or works part-time). Importantly, FTB is paid by Services Australia (through Centrelink), not the ATO.

To be eligible, you must have at least one dependent child in your care aged 0–15 years, or a full-time secondary student aged 16–19. Your child must be an Australian resident and you must meet certain residency rules.

FTB is means-tested, and there are income tests for both Part A and Part B payments.

FTB isn’t a tax refund

A tax refund is money the ATO gives back if you’ve overpaid tax during the year, but FTB is a government benefit, separate from the tax system. You don’t automatically receive FTB by lodging a tax return, and it’s not calculated in your tax assessment. Think of FTB as a family assistance payment like the Parenting Payment or Child Care Subsidy, rather than a tax refund or rebate.

How do you claim FTB?

To get FTB, you need to claim it through Services Australia. You can do this online via your myGov account, phone the Centrelink Families line or visit a service centre.

You’ll have a choice in how you receive FTB:

• Fortnightly payments: Most families opt to get FTB every two weeks along with any other Centrelink payments. You estimate your family’s income and get payments, and Centrelink balances the payments against your actual income at year-end.
• Annual lump sum: Alternatively, you can get FTB as an end-of-financial-year lump sum by waiting until after 30 June and submitting a claim for the year. This way you use the actual income from your tax return and avoid any overpayment. You must claim within one year after the financial year ends – so for 2024–2025 you have until 30 June 2026.

All communication about FTB will come from Services Australia (in your Centrelink online account or mailed letters), not in your tax return paperwork. For instance, if you get a lump-sum FTB payment, it will be deposited to your bank account by Centrelink after processing, entirely separate from any refund the ATO might send for your income tax.

If your circumstances change (like your income or care arrangements), remember to inform Centrelink, as it could affect your FTB rate. This will help avoid surprises after the end-of-year balancing calculations.

Start your year-end payroll, tax and employee leave planning now

The end-of-year holiday period can be make or break for your business. Whether you’re gearing up for a rush or planning a shutdown, the key is early planning for payroll, tax and super, alongside careful compliance with workplace laws.

Start by checking whether any year-end paydays will fall on public holidays or during your closure. If so, you’ll need to bring the pay run forward so staff are paid before bank cut offs, and tell employees about any temporary date changes in writing. While the ATO generally allows lodgment and payment on the next business day when a due date falls on a weekend or public holiday, that doesn’t extend to paying wages late. Report each pay run through Single Touch Payroll (STP) on or before payday, including any brought forward payments you’re processing before year-end closure.

Keep your PAYG withholding and BAS lodgments on track. If you’ll have difficulty meeting due dates, contact your tax adviser and the ATO early to discuss options.

Don’t overlook super guarantee (SG) contributions on wages and paid leave taken over the break; annual leave and public holiday pay are part of ordinary time earnings for SG purposes. October to December quarter super must be received by employees’ funds by 28 January, so pay early to allow for bank processing times and so you don’t trigger the SG charge, interest, penalties and loss of deductibility.

If you provide year-end bonuses or staff gifts, process bonuses through payroll and withhold tax, and consider whether FBT applies to functions or presents. The minor benefits exemption may cover low cost, infrequent items, but good records are essential.

Remember that full-time and part-time employees who would normally work on a public holiday are entitled to their base rate for ordinary hours if they don’t work. You can ask employees to work public holidays, but requests must be reasonable and employees can refuse on reasonable grounds. If they do work, apply the correct penalty rates or time off in lieu under their award or agreement. Where a public holiday happens during an employee’s annual leave, it counts as a public holiday, not a leave day.

For holiday shutdowns, you can only direct employees to take annual leave if an applicable award or registered agreement allows it, usually with advance written notice. Where staff don’t have enough leave, many awards allow leave in advance or unpaid leave by agreement; make sure to document any agreement in writing. Check whether leave loading applies to annual leave taken over this period, and ensure your payroll system calculates it correctly.

The truth about FBT and your business’s work ute

If your business provides vehicles for employees to use in their work duties, you may have heard that providing a dual cab ute is automatically exempt from fringe benefits tax (FBT). Unfortunately that’s not quite right, and believing the myth could leave you with an unexpected tax bill.

While dual cab utes can be exempt from FBT, they need to meet specific conditions, and employees’ personal use of work vehicles is an important factor.

Fringe benefits tax is what you pay as an employer when you provide benefits to your employees or their families, like allowing them to use a work vehicle for personal trips. It’s separate from income tax and is your responsibility, not your employees’. For a ute to be exempt from FBT, it must satisfy two conditions.

Exemption condition one: must be an eligible vehicle

Your dual cab ute needs to be designed to carry a load of one tonne or more; or more than eight passengers (including the driver); or a load under one tonne, but not be primarily designed for carrying passengers.

Most dual cab utes on Australian roads do meet this first condition, but this alone doesn’t guarantee an exemption.

Exemption condition two: private use must be limited

This is where many businesses trip up. Even if your dual cab ute qualifies as an eligible vehicle, any personal use must be minor, infrequent and irregular (according to ATO definitions of these terms).

What does this mean in practice? Think occasional trips to the tip or helping a mate move house once in a blue moon. Travel between home and work is allowed, as is incidental travel while undertaking work duties.

If your employee uses the work ute as the family car for weekend getaways, school runs or regular shopping trips, FBT applies even where the vehicle is a dual cab ute.

When FBT kicks in

If your employees’ personal use exceeds the limited private use threshold, you’ll need to calculate the taxable value of the fringe benefit, work out your FBT liability, lodge an FBT return and pay what you owe, and report the reportable fringe benefits on your employee’s income statement or payment summary.

The taxable value calculation depends on the type of vehicle and how it’s used. You might use the operating cost method or the cents per kilometre method, depending on your circumstances.

Record keeping

Even if you believe your dual cab ute qualifies for the FBT exemption, you need to keep records that demonstrate the limited private use condition is met. You don’t need to maintain a formal logbook for exempt vehicles, but you should have some way to show that private use remains minor, infrequent and irregular. This could mean regularly checking odometer readings and comparing them with expected work-related travel.

Next step for payday super: legislation introduced to Parliament

The government’s payday super reforms have taken another step towards implementation with the introduction of legislation to Parliament. Requiring employers to pay employee super contributions on payday, the reforms are designed to ensure that employees benefit from more frequent and earlier super contributions that grow and compound over their working life and reduce instances of unpaid super.

The newly introduced legislation includes some changes from the earlier drafts released for consultation in March. Contribution timeframes are now measured in “business days” rather than “calendar days”, and employers will have 20 business days (previously 21 calendar days) to make contributions for new employees. The additional time will also apply to contributions for existing employees who’ve changed to a new fund.

The legislation still needs to pass through both the House of Representatives and the Senate before it becomes law, but you shouldn’t wait to start planning.

Recognising that employers need time to deploy, test and embed changes in their payroll systems and business processes, the ATO has released a new draft Practical Compliance Guideline that outlines its proposed compliance approach for the first year of payday super (starting 1 July 2026). It plans to use a risk-based framework where employers will be categorised as at low risk, medium risk or high risk of not meeting their payday super obligations.

What’s next?

Start preparing now. Review your payroll systems and processes to ensure they’re ready for payday super by 1 July 2026; consider whether more frequent super payments could have cash flow implications for your business that you need to act on; and look for alternatives if you use the SBSCH, as it will be closed from 1 July 2026. Planning ahead will help you be compliant with the law and make a smooth transition.

Keep an eye on developments as the legislation progresses through Parliament and as the ATO finalises its compliance guideline. Changes could still be made before the reforms take effect.

Make managing your tax less intimidating with the ATO’s free tools and services

If you’ve ever felt unsure about doing your tax online – or you’re helping someone who is – there are safe, simple ways to learn how it all works. The ATO offers practical tools to help you explore myTax and ATO online services, understand what information’s needed, and access free support if you’re eligible.

ATO Online Services Simulator

The ATO Online Services Simulator is an online training ground. It lets you explore myTax and other ATO online services without any risk or commitment. You can’t accidentally submit a real tax return or make actual payments – it’s purely for learning.

The simulator features eight different scenarios, each representing common Australian tax situations. You practise by acting as the “client” user and clicking through the same style of screens you’d see in real tax records in your MyGov account – entering details, reviewing typical pre-fill information and stepping through lodgment-style workflows.

Because the simulator uses mock data, you can try things out without affecting any real records. If you’re demonstrating for someone else – such as a student, a relative or a person you care for – taking them through the simulator first helps make the real system feel familiar.

To try the simulator, visit www.ato.gov.au and search for “Online Services Simulator” using the search bar at the top of the page.

Free support when you need it

If you earn $70,000 or less and have straightforward tax affairs, the Tax Help program offers free assistance from July to October each year. Accredited volunteers can help you lodge your tax return online, create a myGov account, lodge amendments or determine if you need to lodge a return at all.

You can access Tax Help support online, by phone, or in person at centres across Australia. The Tax Help volunteers understand that many people feel uncertain about digital tax processes and are specifically trained to provide patient, supportive guidance.

If your income exceeds $70,000 or you have more complex tax affairs – such as running a business, owning rental properties, or dealing with capital gains tax – the National Tax Clinic program might be suitable. This government-funded initiative operates through universities across Australia, where tax students provide free advice under the supervision of qualified professionals.

Deeming rate changes from 20 September: will your pension be affected?

If you’re receiving the Age Pension or other social security payments, you’ve likely heard about changes to “deeming rates” taking effect on 20 September 2025.

Deeming rates are part of how the government calculates your Age Pension and other social security payment entitlements. When you have financial assets like savings accounts, term deposits, shares or managed funds, the government and Services Australia don’t assess your actual investment returns for pension purposes. Instead, they assume (or “deem”) that your investments earn a set rate of return, regardless of what they actually earn.

There are two deeming rates: a lower rate that applies to the first $64,200 of your financial assets if you’re single (the first $106,200 for couples), and an upper rate that applies to amounts above that threshold.

From 20 September 2025, these rates each increase by 0.5%: the lower deeming rate will rise from 0.25% to 0.75%, and the upper rate from 2.25% to 2.75%.This marks the end of a freeze that’s been in place since May 2020, when rates were reduced as an emergency COVID-19 measure.

Not everyone will see changes to their pension payments. You’ll only be affected if you’re currently receiving an income-tested rate of pension (rather than an assets-tested rate) and your total income exceeds the income-free area for your payment type.

And here’s some good news: the deeming rate increases coincide with the regular indexation of pension payments on 20 September. Indexation typically increases payment rates to keep pace with cost-of-living changes.

Most people affected by the deeming rate changes won’t actually see their fortnightly payments decrease when both changes are considered together – many will still see a net increase in their payments due to indexation being larger than the deeming rate impact. For example, a single Age Pension recipient with $200,000 in financial assets and no other income will receive the full indexation increase of $29.70 per fortnight, because the deeming rate change won’t affect their payment rate at this asset level.

If you’re concerned about how these changes might affect you, consider speaking with Services Australia or your financial adviser. Remember, if your investments are earning more than the deeming rates, any excess returns don’t count as income for pension purposes, which is an incentive to seek reasonable returns on your investments.

Vouchers and GST in your business

If your business sells or buys vouchers, it’s essential to understand how to account for and report GST correctly.

A voucher is a document or an electronic record that represents a right to receive goods or services. This includes physical gift cards, digital vouchers and even prepaid phone cards. When your business sells a voucher, you’re essentially providing the recipient with a promise to supply goods or services in the future, and it’s at this future point that the GST implications come into play.

The ATO recognises two distinct types of vouchers.

Face value vouchers

Face value vouchers can be redeemed for a reasonable choice of goods and services – for example, a $50 supermarket gift card that works across all store locations. The voucher sale isn’t considered a GST taxable supply, so you don’t charge GST at the point when you sell the voucher. Instead, you account for GST when the voucher’s redeemed and the goods or services are supplied. For instance, if you sell that $50 gift card, you don’t charge GST on the gift card sale, but when the gift card’s redeemed to purchase goods worth $50, you charge GST on the supply of those goods.

There’s one exception: if you sell a face value voucher for more than its face value, you must account for GST on the excess amount immediately.

Non-face value vouchers

Non-face value vouchers are restricted to specific goods or services – like a voucher specifically for a spa treatment, purchased for $100. With these, you account for GST (eg on the $100 price) at the time of sale, but only if the voucher is redeemable for taxable supplies.

If the voucher is only redeemable for GST-free or input-taxed supplies, there’s no GST to account for.

Note on expired vouchers

Here’s something business owners often overlook: if you’ve sold face value vouchers that expire or remain unredeemed, and you write back the unused amount to your current income for accounting purposes, you need to make an “increasing adjustment” on your Business Activity Statement (BAS). This adjustment is 1/11th of the unredeemed balance.

Buying vouchers for your business

If your business buys vouchers, you may be able to claim a GST credit – but timing matters. For face value vouchers, you claim the credit when you redeem the voucher, not when you buy it. For non-face value vouchers, you claim the credit when you purchase the voucher. Remember, you can only claim credits for GST-inclusive purchases used in your business.

Keep accurate records

To account for GST on vouchers you sell, you need to keep accurate records including dates of sale, redemption and/or expiration, and the amounts of GST payable. Importantly, specific rules and exceptions apply to certain types of vouchers. For example, if you sell vouchers that can be redeemed for a combination of goods and services, you need to apportion the GST accordingly. You may also need to issue a tax invoice to the customer when a voucher’s redeemed, and keep a copy of this invoice for your records. And finally, of course, you need to report GST on vouchers in your BAS in accordance with ATO guidelines.

$20,000 instant asset write-off due for extension to 30 June 2026

Are you a small business owner planning to invest in new equipment or technology? The government is planning to extend the $20,000 instant asset write-off by a further 12 months until 30 June 2026.

This measure was announced by the Treasurer as an election commitment on 4 April 2025 and is contained in a recently introduced Bill, so It’s not yet law.

Once this Bill is passed, the $20,000 threshold will apply until 30 June 2026. Without this amendment, the threshold would have dropped back to the ongoing legislated level of $1,000 from 1 July 2025.

The extension would apply to eligible depreciating assets costing less than $20,000 each; eligible amounts included in the second element of an asset’s cost (cost additions); and general small business pools (enabling full write-off where the pool balance is below $20,000 at year end).

Small businesses that use the simplified depreciation rules and have an aggregated turnover of less than $10 million can continue to immediately deduct the business portion of the cost of eligible assets first used or installed ready for use by 30 June 2026. The write-off can apply to multiple assets, provided each individual asset is under the $20,000 limit.

Unlock the benefits of downsizer super contributions

If you’re nearing retirement and looking for ways to boost your superannuation savings, downsizer super contributions might be the perfect solution for you. These allow eligible Australians aged 55 and over to contribute proceeds from selling their home into their superannuation fund.

In the 2024–2025 financial year alone, 15,800 individuals took advantage of this strategy, contributing a total of $4.165 billion to their superannuation funds.

A downsizer contribution allows an eligible individual to contribute an amount equal to all or part of the sale proceeds (up to $300,000 each) from the sale of their home into their superannuation fund. The contribution must not exceed the sale proceeds of the home.

The great advantage is that downsizer contributions aren’t restricted by any other contribution caps or your total superannuation balance; there are no work tests; and there’s no upper age limit. It’s one of the rare ways you can contribute large amounts to your super even after the age of 75.

Downsizer contributions can also be used alongside other strategies. For example, someone under age 75 can potentially combine the following three strategies to contribute up to $690,000 to super in a single year, if eligible and if timed correctly:

• a $300,000 downsizer contribution; and
• up to $360,000 of personal after-tax contributions under the “bring-forward rule”; and
• up to $30,000 of personal deductible contributions.

Eligibility

To make a downsizer contribution, you must:

• be 55 years or older at the time of contribution;
• have owned the home for 10 years or more (the owner can be you or your spouse);
• sell your home that is in Australia and is not a caravan, houseboat or mobile home;
• ensure the sale is exempt or partially exempt from CGT for you under the main residence exemption;
• make the contribution within 90 days of receiving the sale proceeds (usually settlement date);
• not have made a downsizer contribution previously from another home; and
• provide your super fund with the Downsizer contribution into super form (NAT 75073) either before or at the time of making the contribution.

Failure to submit the Downsizer contribution into super form on time may result in your fund rejecting the contribution or treating it as a standard non-concessional contribution, which could have adverse tax implications.

The 90-day deadline from the date of settlement is also strict. If you need more time (eg due to delays in purchasing a new home), you must apply to the ATO for an extension. Extensions are granted only in limited circumstances, such as settlement delays due to council approvals.

Understanding the new 20% student loan reduction

The Australian government’s promise to cut student loan debts by 20% has now become law. If you’re one of more than three million Australians who have a student loan, you’re probably wondering what this means for you and when you’ll see the benefits.

The change applies to all types of student loans, including VET Student Loans, Australian Apprenticeship Support Loans, and even older schemes like the Student Financial Supplement Scheme.

If you had an outstanding student loan debt on 1 June 2025, you’re eligible. The reduction is calculated on your debt balance as at that date, before the annual indexation was applied. Even if you’ve made payments since June or completely paid off your loan after that date, you’ll still receive the full 20% reduction based on what you owed on 1 June.

If you’ve already paid off your loan since 1 June, the reduction might actually put your ATO account into credit, potentially resulting in a refund to your bank account (as long as you don’t have tax debts owing).

If you’d already paid off your student loan completely before 1 June 2025, unfortunately you won’t benefit from the 20% reduction. The relief only applies to debts that existed on that date.

The ATO’s responsible for applying the change, and is currently updating its systems to process these reductions. Most people should see their 20% reduction applied before the end of 2025.

You don’t need to do anything to receive the reduction – it will be applied automatically. The ATO will notify you when it’s been processed, and you’ll be able to see your new lower balance through your myGov account or the ATO app.

Don’t delay lodging your tax return while you wait for your changed loan balance to appear in your MyGov account. There’s no benefit in waiting, and you should continue with your normal tax obligations.

Remember to update your bank details with the ATO if you’re expecting a potential refund, and if your loan gets paid off completely, don’t forget to tell your employer to stop withholding additional amounts from your pay.

Productivity Commission recommends business tax reform

As part of a major review requested by the government to find ways to boost Australia’s productivity and economic resilience, the Productivity Commission has released an interim report that recommends company tax reform aimed at encouraging businesses to invest more and help the economy grow.

The report notes that Australia has a relatively high company tax rate compared to similar countries, and suggests that the current system makes it harder for new and smaller businesses to compete with large established firms. Tax rules on claiming deductions for investments (like equipment or buildings) are complicated, making investment less attractive, and the system tends to favour companies that borrow (use debt) over those that raise money from investors (equity), which can disadvantage smaller businesses.

The Commission’s interim report recommends a new approach to company tax, including:

• lowering the company tax rate for most businesses from the current 25% (for most small to medium businesses) or 30% (for larger companies) to 20% for all companies with annual revenue below $1 billion – only the largest companies (with over $1 billion in revenue) would stay on the 30% rate; and
• introducing a new net cashflow tax (NCT) of 5% on company profits; and
• allowing businesses to immediately deduct the full cost of investments (like equipment, technology or buildings) in the year they buy them, rather than spreading deductions over several years.

Importantly, these are only draft recommendations in an interim report. The Productivity Commission is seeking public feedback until 15 September 2025 and will produce a final report with more refined recommendations by the end of the year.

The government would then need to consider, accept and legislate any changes. If adopted, reform measures could be phased in or introduced at once. So, there’s currently no fixed date for when changes would take effect; at the earliest it could be sometime in 2026, depending on government decisions.

Since the report’s release, the government has responded cautiously. Treasurer Jim Chalmers acknowledged the tax reform proposals as “an important input” into policy discussions that would feed into the Economic Reform Roundtable in late August 2025, but hasn’t endorsed or rejected the specific recommendations.

Your guide to the ATO super clearing house closure

If you’re a small business owner who’s been using the ATO’s Small Business Superannuation Clearing House (SBSCH) to pay your employees’ super, we’ve got some news that might make you reach for another coffee. The free service that’s been making your life easier is closing down, and you’ll need to find an alternative before July 2026.

The government has announced that the SBSCH will be shutting down as part of the new “payday super” reforms. Here are the key dates:

• 1 October 2025: no new businesses can register for the SBSCH;
• 30 June 2026: last day existing users can use the service; and
• 1 July 2026: the SBSCH closes completely.

The closure coincides with new legislation that will require employers to pay super contributions at the same time as wages (payday super), rather than using the current quarterly system. Under these new rules, super contributions must reach your employees’ funds within seven days of each payday.

The ATO is pulling the plug because the SBSCH was designed for the old quarterly super payment system, and it simply doesn’t fit with the new payday super world we’re heading into.

If you’re one of the over 200,000 small businesses currently using the SBSCH, this change will impact you in several ways:

• You’ll need to find a new solution before the June 2026 deadline.
• Costs might increase – the SBSCH is free to use, but many alternative solutions charge fees.
• Timeframes will be tighter – under the new rules from 1 July 2026, super contributions must reach funds within seven days of payday.
• Your processes will change because you’ll need to integrate super payments into every pay run.

If you’re already using payroll software for wages, payroll software with built-in super payments might be your easiest transition. Many popular accounting packages now include super payment features that let you pay contributions directly through the same system you use for payroll. The beauty of these integrated solutions is that once you’ve run payroll, paying super can be as simple as clicking a button.

Most super funds also offer free clearing house services to employers. These typically require you to register as an employer with that fund, but then you can manage contributions to multiple funds in one place. The main trade-off is that you’ll need to use a separate web portal and either upload data from your payroll system or enter it manually.

There are also independent commercial providers. These tend to offer more sophisticated features and can handle high volumes of transactions. Commercial providers often charge fees, but they typically offer robust compliance features and reliable processing.

The ATO recommends starting your transition early – don’t wait until 2026. This gives you time to test your new process and iron out any issues before the deadline.

Looking to invest ethically? There’s a lot to think about

If you’re considering investing your money or your super in line with your values, you’re certainly not alone. A growing number of Australians want their investment to reflect what matters to them, and the marketplace is responding with “socially aware”, “responsible”, “sustainable” or “ethical” options. But with so many choices and claims out there, how can you tell if a company or super fund’s strategy genuinely lives up to what they’re promising?

When researching ethical investments, you’ll often come across the abbreviation “ESG”. ESG means “environmental, social and governance”, but different funds and companies may define ESG differently, and the term can cover a wide range of factors:

• “Environmental” may include pollution control, biodiversity protection, carbon emissions reduction, or sustainable agriculture.
• “Social” encompasses gambling exclusions, labour standards, diversity and inclusion, human rights, or military contracting policies.
• “Governance” often covers board diversity, business ethics, whistleblower protection schemes and anti-bribery and corruption measures.

Because ESG can mean different things to different organisations, you’ll need to very carefully examine each fund’s investment strategy and product descriptions to understand the claims they are making and how their business practices align with those claims.

Think hard about what you personally want to achieve with your investments. What ESG factors are most important to you? How much weight do you want to give those factors? This will give you a solid foundation to work from when you’re comparing different products.

Look for clear, specific claims rather than vague, overarching statements. Check company reports, market announcements or their website for information.

Be wary of vague terms like “green”, “eco-friendly”, “zero emissions” or “carbon neutral” without supporting details. Do you understand the ESG or sustainability-related terms the fund or company are using? Are they backed up with evidence?

You may have heard about “greenwashing” in the news. Greenwashing (or greenhushing) describes false or misleading claims made by companies or products to make them seem more environmentally friendly, sustainable or ethical than they are. Sometimes, information about specific investments that don’t align with the expectations of ethically minded investors might be omitted or obscured.

Every fund operates differently. Some funds may exclude products that don’t meet certain ESG criteria (negative screening) or seek products that do meet a set ESG criteria (positive screening). Look for clear and detailed information about revenue thresholds, investment selection methodology, and which sectors or themes the investments are focused on.

Higher fees may be charged for management of ESG investments when compared to traditional options, so make sure you understand the full fee structure.

Timing’s everything: SMSFs and minimum pension payments

As an SMSF trustee, it’s your responsibility to ensure that all members receiving an account-based pension are paid their minimum pension amounts by 30 June each financial year. If you don’t meet the minimum pension payment amounts in full and on time, this could result in adverse tax consequences for the member.

The minimum pension payment amount is calculated using a formula that takes into account the member’s age, their account balance, and the start date of the pension:

Minimum payment amount = account balance × percentage factor

The percentage factor is set according to your age on 1 July in the financial year the pension amount is to be paid. Once an income stream is started, minimum annual payments are calculated using your account balance on 1 July each year, multiplied by a percentage factor that increases as you age.

To ensure the minimum pension standards are met, you must ensure that the minimum payment is received before the financial year ends. You must make payments at least once per financial year, and the first payment must be made no later than the end of the financial year in which the pension commences.

Failing to meet the minimum pension standards means the income stream will be taken to have ceased at the start of the year for income tax purposes; payments made during the year will be considered to be super lump sums for both income tax and super purposes and taxed accordingly; the fund won’t be able to claim exempt current pension income (ECPI) for that year or subsequent years; and there will be transfer balance account consequences for the member.

To restart a member’s payments, a new income stream will need to be recommenced, requiring asset revaluations, recalculations of the minimum pension payment, recalculation of the tax-free and taxable components of the new income stream, and new transfer balance account reporting.

HECS/HELP debt reduction Bill introduced

On 23 July, the Labor government introduced legislation aimed at enacting its election promise to reduce student debt by 20%. The Bill proposes to:

• provide a one-off 20% reduction to Higher Education Loan Program (HELP) debts and certain other student loans that are incurred on or before 1 June 2025;
• increase the minimum repayment threshold from $54,435 in 2024–2025 to $67,000 in 2025–2026; and
• introduce a marginal repayment system where compulsory student loan repayments are calculated only on income above the new $67,000 threshold rather than having it based on a percentage of the repayment income.

This complements measures enacted in the last Parliament which cap the level of indexation of student loans to the lower amount of either the consumer price index (CPI) or the wage price index (WPI). This is designed to ensure that loans will never be indexed by more than wages growth. Accordingly, the new threshold of $67,000 will be indexed for 2026–2027 and following years, but will never be increased by a rate exceeding wages growth.

Small and medium businesses now have more time to get tax returns right

If you run a small or medium business, you know that financial accuracy’s important but sometimes mistakes can happen or information can change. Starting this year, though, you have more time to amend your return and get things right.

Before this change, small and medium businesses generally had a two-year period from the date of their tax assessment to request an amendment. If you discovered an error or omission after this two-year window, correcting it could become a more complex process.

Now, for the 2024–2025 and later income years, small and medium businesses with an annual aggregated turnover of less than $50 million will have up to four years to request amendments to their income tax returns. This gives more time to review records, reconcile figures and address any oversights – but remember, it’s not an excuse to rush your first lodgment.

For earlier income years, the two-year amendment period still applies.

Your review period starts the day after the ATO issues your notice of assessment for the relevant income year. If no notice is issued, it starts from the date you lodged your return.

Here are some common scenarios where you might need to request an amendment:

• you made a simple error when entering figures;
• you forgot to report some income or capital gains, or claim legitimate deductions;
• you incorrectly claimed deductions or credits, or failed to claim ones you were entitled to; or
• circumstances changed after lodging and affected something you’d already reported, like a revised invoice or a business event you hadn’t factored in.

Whatever the reason, it’s important to correct any errors as soon as you identify them. For example, if an amendment leads to an increased tax liability, time-based interest and penalties might apply, so prompt action’s still beneficial.

There are no ATO fees for amendment requests, but processing can take a substantial amount of time.

If you discover an error that increases the tax you owe, you may face interest charges and penalties. However, voluntary disclosure of mistakes is generally viewed more favourably than errors discovered during an audit.

If the ATO’s already notified you of an audit or review, you must tell the assigned tax officer about any errors rather than lodging an amendment request.

Remember, the extended amendment period offers greater peace of mind, but good record-keeping and a proactive approach remain your best tools for managing your tax affairs effectively.

ATO interest charges no longer tax-deductible for businesses

Effective 1 July 2025, businesses can no longer claim income tax deductions for interest charges imposed by the ATO on unpaid or underpaid tax liabilities. This change applies to general interest charge (GIC) and shortfall interest charge (SIC) amounts incurred in income years starting on or after 1 July 2025.

Previously, businesses could deduct ATO-imposed interest charges on overdue tax debts, reducing the net cost of these charges. From 1 July 2025, this deduction is no longer available, meaning any GIC or SIC incurred from this date cannot be claimed as a tax deduction, regardless of when the underlying tax debt arose.

For example, if a business incurs GIC on an unpaid income tax liability after 1 July 2025, this interest expense is not deductible in its tax return for the 2025–2026 income year or subsequent years.

This legislative change is significant for businesses that manage cash flow by deferring tax payments, as the cost of carrying tax debt will effectively increase. Without the tax deduction, the real cost of ATO interest charges rises, making it more expensive to delay tax payments.

The ATO applies GIC on unpaid tax liabilities at a rate that is reviewed quarterly and compounds daily. As of the latest update, the GIC rate is 11.17%.

The removal of tax deductibility for ATO interest charges underscores the importance of timely tax compliance. Businesses should act promptly to adjust their financial strategies, ensuring that they are not adversely affected by increased costs associated with overdue tax payments.

Protect your super from pushy sales tactics: consider the risks and don’t rush to switch

Each new financial year, many of us take a closer look at our super funds’ performance, and you’re more likely to be targeted by salespeople, cold callers or social media ads offering “free super health checks” or to “find your lost super”. These offers can be the start of a high-pressure campaign to get you to switch super funds or make investments that may be unsuitable for you.

These calls and ads don’t always look like typical scams. Callers may sound genuine, claiming they want to help you find a better deal or locate lost super for free. Sometimes they’ll even refer you to a financial adviser to make the pitch sound more legitimate. But behind the scenes, there may be commission arrangements or other incentives that put their interests ahead of yours.

Here are some warning signs that a caller or an advertiser might not have your best interests at heart:

• Cold calls and unsolicited contact: If someone you don’t know contacts you about your super, they may have bought your contact information or obtained it by more questionable means.
• Pressure to act quickly: Remember super decisions are significant and should never be rushed.
• “Free” super health checks or lost super services: These offers are often a hook to draw you in. You can find your own lost super for free directly through the ATO.
• Promises of high or unrealistic returns: If an offer sounds too good to be true, it almost always is.
• Claims your fund is underperforming: Sales agents may exaggerate issues with your current fund to make you want to switch. Always verify negative claims directly with your super fund if you have concerns.
• Limited direct contact with a financial adviser: The caller might act as an intermediary, transferring you to an adviser only briefly. If you’re not having direct, in-depth conversations, they may not be acting in your best interests.
• Involvement of unlicensed people: Ensure anyone discussing your super is properly licensed and qualified to provide advice.

Remember, if a deal sounds too good to be true, it probably is. Promoters often play on your fears, hopes and your politeness to rush you into a decision.

How to protect yourself

• If someone you don’t know contacts you about your super, just hang up – don’t feel guilty or pressured to engage or explain.
• Don’t share personal or financial information with callers or on online forms unless you initiated the contact and are sure who you’re dealing with.
• Report suspicious calls to your super fund and ASIC. If you think your information has been compromised, let your current super fund know so they can help protect your account.
• Contact your super fund directly or seek guidance from a licensed, independent financial adviser before making any changes.
• You can always find lost super for free through the ATO; there’s no need to pay anyone to do it for you.

Your super is too important to risk. Take your time, ask questions and don’t rush into any decisions.

Will your super be affected when the $3 million balance tax hits?

Since February 2023, the Australian government has been planning to introduce a new tax of 15% on a portion of “earnings” relating to total superannuation balances over $3 million. The idea was to inject some equity in a system with generous tax concessions weighted in favour of the wealthy. The tax change was proposed to kick in on 1 July 2025.

Debate over issues concerning the non-indexed $3 million threshold and the taxation of unrealised capital gains then put the proposal on ice. The Bill containing the change is expected to be reintroduced now that Parliament has resumed. The Bill proposes to insert a new Division 296 into the Income Tax Assessment Act 1997, which is why you might hear the change called the “Division 296 tax”.

What will apply and when?

Currently, your entire super balance earnings in accumulation are taxed at 15%.

If your “total superannuation balance” (TSB – meaning all of your super, in all accounts, in accumulation and in pension phase) is under $3 million, the new additional tax would not apply.

The Division 296 measure would apply another 15% tax on a portion of estimated “earnings” relating to your TSB that’s over $3 million. This tax would be charged to you personally, rather than to the super fund. The “earnings” calculation is quite complicated, and doesn’t
reflect the actual earnings in your fund (which is why we’re using quotation marks for “earnings”).

For example, if you start the year with a $3 million property in your super fund, and it’s worth $3.5 million by the end of the year, a portion of the $500,000 unrealised capital gain would be taxed to you personally. If this was the only asset in all of your super, and you made no contributions or withdrawals during the year, and received no actual investment earnings, the Division 296 tax calculation could look something like this:

TSB minus $3 million threshold: $3,500,000 – $3,000,000 = $500,000

Percentage of TSB that the excess represents: $500,000 / $3,500,000 = 14.29%

Proportional calculation to get Division 296 taxable earnings: $500,000 × 14.29% = $71,450

Division 296 tax payable: $71,450 × 15% = $10,717.50

So, $71,450 in earnings would be taxed at the additional 15%, for an additional tax liability of $10,717.50.

Further, if your property didn’t earn any real income in your fund, then you’d need to be able to fund the tax payment from an alternative source if you didn’t want to sell the property. The calculation of “earnings” is complex and adds back any withdrawals and subtracts any contributions, to ensure people don’t make last-minute withdrawals specifically to reduce their “earnings”.

This is a very simplified example – transactions like receiving insurance payouts, withdrawing amounts under the First Home Super Saver Scheme and other factors could affect your “earnings” and therefore the calculated tax amount.

How do you pay?

The ATO will advise about your liability for 2025–2026 year during the following year. You’ll be able to pay out of pocket or directly from your super fund. If you have more than one fund, you can nominate from which fund you’d prefer to pay.

Before the new policy’s set in stone, if you think you may be affected it would be wise to seek advice before making any hasty decisions.

Get it right this tax time: don’t lodge your return too early

It might seem like a good idea to lodge your tax return as soon as the financial year ends – with costs of living rising you might be hoping for a refund, or you might just want to tick it off your to-do list for another 12 months. But the ATO has warned that early July lodgers are twice as likely to make mistakes on their returns, and recommends that tax returns be submitted later in July.

In 2024, over 140,000 people who lodged in the first two weeks of July had to lodge amendments, or had the ATO investigate and amend their returns to fix inaccuracies like income that hadn’t been declared properly.

Lodging towards the end of July allows time for information from employers, banks, health funds and government agencies to be automatically pre-filled in your tax return if you lodge your own return via myTax or use a registered tax agent. While some pre-filled data’s available from 1 July, most usually finalised by the end of the month. The ATO notes that early lodgers often make mistakes like not including interest from banks, dividend income, government agency income and health insurance details.

Take your time to properly prepare for lodging your returns while you wait for the relevant information to pre-fill, by:

• checking contact and bank details are correct, as updating these after lodging a return can cause delays;
• gathering all necessary records, including receipts, diaries and private health insurance details; and
• reviewing the ATO’s occupation guides to make sure you claim what you’re entitled to.

You should also check that your income statement from your employer/s (covering your year-to-date salary and wages, PAYG withholding tax and employer super contributions) has been marked “tax ready”.

Once it’s available, check that all the pre-filled information is complete and correct. Note that you can’t delete or remove pre-filled government benefit data for Allowance or Pension payments (eg Jobseeker, Age Pension, Disability Support Pension). If you find errors in that information, contact the information provider so they can send corrections to the ATO.

Whether you lodge early in July or wait until later to ensure that you have all of your pre-filled data, the ATO understands that mistakes can sometimes happen. If you realise you’ve made a mistake after lodging your tax return, you can fix errors or omissions once the initial lodgement has been processed by going through the ATO online amendment process (accessible through myGov) or by speaking with your registered tax agent.

Regulations have changed for buy now pay later services

If you’re one of the millions of Australians who use buy now pay later (BNPL) services, important changes are now in effect that will give you stronger consumer protections. Here’s what you need to know about the new law and regulations that apply from 10 June 2025.

BNPL services are now being regulated more like traditional credit products such as credit cards. Previously, BNPL services weren’t regulated under the National Consumer Credit Act, leaving a gap in consumer protection. But now, all BNPL providers need to hold an Australian credit licence and comply with consumer protection requirements.

This means your BNPL provider needs to:

• hold a credit licence (or have applied for one by 10 June 2025);
• be a member of the Australian Financial Complaints Authority (AFCA);
• follow responsible lending practices; and
• meet other consumer protection requirements.

These changes are designed to protect you while maintaining the benefits of BNPL services.

The new framework recognises that BNPL services are generally lower-risk than traditional credit products. Most BNPL arrangements will be regulated as “low cost credit contracts”, with modified requirements that balance consumer protection with the unique features of BNPL services.

Providers must meet responsible lending obligations when agreeing to a BNPL contract or credit limit increase for you, which generally includes seeking and verifying certain information about your financial situation and assessing whether their offering’s unsuitable based on that information. You can ask to see the assessment your provider makes about your credit contract or limit increase; they must provide you with a free, written copy on request.

You can verify if your BNPL provider is properly licensed using the Australian Securities and Investments Commission’s (ASIC’s) Professional Registers Search.

While BNPL services offer convenient payment options and support thousands of local jobs, these new regulations are designed to help prevent debt spirals and ensure you have proper protections when using these popular payment methods.

When someone dies: the tax to-do list

If someone close to you dies and you’re the one responsible for taking over their tax affairs, there are a number of steps you need to take to advise the ATO of their passing.

This starts with establishing your identity with the ATO as the deceased’s representative, and formally notifying the ATO of the death, with a death certificate of the deceased or a grant of probate or letters of administration.

To have full authority to manage the tax issues of someone who has died, you’ll need to be their authorised legal personal representative (LPR). A person’s LPR is usually the executor named in their will, or if no executor has been named, a court-appointed administrator (this can be the person’s next of kin).

To be recognised as an LPR for tax purposes, you’ll need a supreme court (in your state) to recognise that the deceased’s will is legal, allowing you as the executor to represent the deceased’s estate and distribute their assets according to the will.

Where there’s no will, a grant of letters of administration are issued to the person (this is often the next of kin) to manage the estate, and they are appointed as the administrator of the estate.

You will need to be aware of whether the deceased person carried on a business and, if they did, you’ll need to seek specialised legal or tax advice.

You also may need to lodge the deceased’s final tax return, known as the “date of death” tax return, and check if any other years’ tax returns are outstanding and arrange payment for those, with help from the ATO to access the deceased’s person’s tax information.

If the estate of the deceased receives any income from assets such as rental property or shares, and/or is due to claim any tax refund or franking credits that are owed, the estate is treated as a trust for tax purposes, and you will need to lodge a trust tax return.

You need to ensure that all tax liabilities have been paid, that credits owing to the deceased person and their estate have been received, and that all tax registrations (such as ABNs and registration for GST) have been cancelled.

After all of these requirements are met, you will then be able to distribute the assets of the estate to the beneficiaries following probate.

It’s important to be aware that finalising the administration of an estate can take six to 12 months, or sometimes longer.

Accrued leave: take a holiday or take the payment?

If retirement is on the horizon and you have a large amount of accrued leave, you may well be contemplating whether to take a big holiday now, or just take the lump sum payment when you retire. There are some tax, super and possibly social security implications you should consider.

Superannuation

You receive superannuation guarantee contributions from your employer on the pay you receive while you’re on holidays. However, no super guarantee is payable on payments of lump sum leave entitlements upon your retirement. You could increase your retirement savings by a nice little bonus by taking those holidays before you retire!

Taking a holiday now could also extend the time you can contribute to super.

If you’re aged 67 to 75 and are looking to contribute one last chunk of money to super after you retire, be aware of the “work test” that applies to claim a tax deduction for those super contributions. If you haven’t worked for 40 hours in a 30-day consecutive period in the financial year when you make the contribution, you don’t meet the work test that is required to claim a tax deduction for your personal super contributions.

However, there’s a once-off exception for people with less than $300,000 in super, which allows them to use the “work test exemption”. You can still claim tax deductions for your personal super contributions if you worked for 40 hours in a 30-day consecutive period in the financial year before the financial year of your contribution. This is designed for newly retired people to extend their eligibility for one more year.

By taking your holidays now (instead of taking your accrued leave as a lump sum payment), and clocking up 40 work hours in a month in the next financial year, you may be able to extend the time you have to contribute to super.

A lump sum payment of accrued leave is taxed in the year you receive it. When deferring retirement into a new financial year by taking leave, you may increase the cap for concessional tax treatment of employment termination payments like golden handshakes.

Additionally, you may have a lower marginal tax bracket in the new financial year, if you don’t have other taxable income after retiring.

If you’re looking to claim the Age Pension when you retire, a lump sum received on retirement won’t count towards the Centrelink income test, but it will be an assessable asset, depending on how you invest it. So taking that accrued leave as a lump sum could push some people over the assets limit to receive the Age Pension.

On the other hand, your pay while on holidays won’t be counted in determining whether you qualify for Age Pension after you retire.

In summary, taking leave can provide more super contributions, tax flexibility and additional leave accrual, while taking the entitlement as a lump sum at retirement may allow earlier access to social security and, in some cases, favourable tax treatment.

Speaking with your tax adviser about your personal situation, well in advance of retirement, can pay off in so many ways.

What happens when SMSF trustees breach super laws?

Setting up your own self managed super fund (SMSF) can have its benefits, but it also comes with significant obligations.

These include appointing trust members, trustees and a registered super fund auditor; valuing assets each year; paying levies and taxes; ensuring audits are conducted and minimum payments are made annually; and making lawful investments.

There’s a lot to keep on top of. If you’re a trustee and fail to comply with certain requirements under the super laws, your auditor will report the breach to the ATO within 28 days. This type of breach is known as a contravention.

Once you become aware of your contravention, you’re required to correct it as soon as possible, with the help of your auditor or your SMSF adviser if needed.

If the contravention continues to be unrectified, you can use the ATO’s “SMSF voluntary disclosure service”, and the regulator will take this into account in their final deliberations. Voluntary disclosure is a formal process involving completion of a detailed form and providing supporting documentation.

As the penalties can be quite serious, you may decide to try to mitigate the outcome by initiating an undertaking to remedy the contravention. You’ll need to document a timeframe and a breakdown of your proposed remedial action, and include strategies to ensure the contravention doesn’t recur.

There is a range of penalties the ATO can apply to a contravention depending on its severity, including:

• issuing a trustee or a director of a corporate trustee with a direction to rectify – this can lead to disqualification and/or the removal of the fund’s complying status;
• applying administrative penalties – fines of thousands of dollars can be imposed on trustees, which can’t be paid from the fund;
• where a trustee illegally accesses their super, including this accessed amount in their assessable income;
• issuing the SMSF with a notice of non-compliance, with severe tax consequences;
• disqualifying an individual from acting as a trustee or director of a corporate trustee, preventing them from becoming a trustee again;
• freezing the SMSF’s assets; and
• imposing civil and criminal penalties through the courts.

Winding up your SMSF in the event of a contravention will not stop the ATO’s compliance action.

When the ATO considers your SMSF contravention and the applicable penalties, it will take into account whether you intended to breach the law, how you communicated the contravention to the ATO and if you tried to repair it.

If it’s likely you have contravened a super law in your SMSF, the first step is to seek professional advice to ensure you keep your integrity as a trustee and the integrity of your fund intact.