• Must be located in Australia
• Must have been owned by you or your spouse for at least 10 years
• Must qualify for a full or partial CGT main residence exemption

You do not need to be living in the property at the time of sale, provided it has qualified as your main residence at some point during ownership.

Benefits of the contribution:

Contribute Outside Normal Caps

Downsizer contributions do not count towards concessional or non-concessional contribution caps.

No Work Test Required

There is no requirement to meet the work test.

Available Even With High Super Balances

Unlike other contribution types, downsizer contributions are not restricted by your total super balance.

Significant Contribution Potential

You can contribute up to $300,000 each (up to $600,000 per couple), limited to the gross sale proceeds.

Retirement Planning Flexibility

This strategy can assist with tax planning, wealth transfer, and the improvement of retirement income streams.

Key Eligibility Requirements

To qualify, you must:

• Be 55 years or older at the time of contribution
• Have owned the property (or your spouse has) for at least 10 years prior to sale
• Sell a property located in Australia
• Ensure the sale qualifies for at least a partial main residence CGT exemption
• Make the contribution within 90 days of receiving the sale proceeds
• Provide your super fund with the approved ATO Downsizer Contribution Form before or at the time of contribution
• Have not previously made a downsizer contribution

Common Misconceptions

Does the property need to be fully CGT exempt?
No. A full exemption is not required. A partial main residence exemption may still qualify.

Do I need to be living in the property at settlement?
No. The property does not need to be your principal residence at the time of sale.

Can only the owner contribute?
Not necessarily. A spouse who is not on title may still be eligible, provided all other conditions are satisfied.

Can I contribute more than the sale proceeds?
No. The contribution is capped at the lesser of $300,000 per person or the gross sale proceeds.

Can I contribute part now and top it up later?
No.
Downsizer contributions can be made only once per person and must generally be made within 90 days of receiving the sale proceeds.

If you choose to contribute less than your maximum eligible amount (for example, $100,000 instead of $300,000), you cannot later return and contribute the remaining amount once the time limit has passed.

You may split the contribution into multiple payments, but they must all be made within the allowed timeframe.

Because this is a once-in-a-lifetime opportunity, it is important to consider the full contribution amount before proceeding.

Important Considerations

• Downsizer contributions are not tax-deductible
• Once contributed, funds remain subject to super preservation rules
• Contributions may impact Age Pension eligibility
• Vacant land generally does not qualify
• Pre-CGT properties have specific eligibility considerations

Professional advice is strongly recommended before proceeding.

We’re Here to Help

Downsizer contributions can be a valuable retirement planning tool when structured correctly.

If you are considering selling your home and would like to explore whether a downsizer contribution suits your circumstances, please contact our team for tailored advice.

Some examples from the Australian Tax Office

(Assuming all other eligibility requirements are met — including age 55+, 10-year ownership and contribution within 90 days of settlement.)

For more information, visit the ATO’s website.

Please get in touch with us if you would like advice concerning the above or if you have any questions.

The ATO has recently signalled a much stronger focus on holiday homes and residential properties that are used partly for private holidays and partly for rental income. This change affects many people who own coastal homes, farm stays, Airbnb-style properties or seasonal rentals.

The ATO’s concern is simple. Many taxpayers claim significant deductions for a property that, in practice, is mainly used by the owner, family or friends for private enjoyment. As a result, the ATO has released new draft guidance to clarify how these properties will be treated from now on.

This includes:

• TR 2025/D1 – a draft taxation ruling setting out the general rules for rental property income and deductions
• PCG 2025/D6 – a practical compliance guideline explaining how owners must apportion expenses for properties with both private and income-producing use
• PCG 2025/D7 – a guideline explaining when a holiday home may be considered a “leisure facility” under section 26-50, which can deny major deductions

These drafts represent the ATO’s modern approach to holiday homes and signal how compliance activity will be targeted.

When Is a Property Treated as a Holiday Home?

A holiday home is generally a residential property that is sometimes rented out commercially, but is also used for private holidays. The ATO is particularly concerned where:

• The property is rarely genuinely available for rent
• it is listed at inflated prices that discourage bookings
• School holidays and peak seasons are blocked out for family use
• Family and friends stay free or at heavily discounted rates

In these situations, the ATO is likely to question whether the property is truly held for income-producing purposes.

Apportioning Deductions: New Expectations from TR 2025/D1 and PCG 2025/D6

Where a property has mixed use, income and expenses must be divided between private days and income-producing days. The draft guidance confirms:

• A time-based method is generally expected. Owners must calculate the number of days the property was genuinely available for commercial rent and the number of days it was actually rented to paying guests.
• If only part of the property is rented, the ATO expects both time and area apportionment.
• Owners can adopt a different approach, but they must demonstrate that their method is fair and reasonable.

This means deductions can no longer be claimed in full. They must accurately reflect the reality of how the property is used.

When a Holiday Home Becomes a “Leisure Facility”

The most significant change appears in PCG 2025/D7, which aligns with sections 26-50 of the tax law. The ATO may treat the property as a leisure facility if it is not mainly held or used to produce assessable income.

If that happens, many major deductions will no longer be allowed, such as:

• interest on loans
• council rates
• land tax
• repairs and maintenance
• insurance
• some utilities

Only expenses that directly relate to earning income, such as cleaning after guests or advertising fees, may still be deductible. This can drastically change the tax outcome for an owner.

The ATO’s Risk Zones: Green, Amber and Red

To help owners understand how their situation might be assessed, the ATO has introduced a traffic-light model.

Common behaviours the ATO is now watching for (red-zone indicators)

• Claiming 100 per cent of interest and holding costs despite long periods of private use
• Blocking out school holidays and peak seasons, but still treating the property as an investment.
• Listing the property at unrealistically high prices so that no one books
• Allowing friends or family to stay free or cheaply while still claiming all expenses
• Not keeping records of private stays and periods of genuine availability
• Setting unreasonable conditions, such as long minimum stays in off-peak periods

Transitional Relief

The ATO has acknowledged that its position on holiday homes has not previously been as clearly expressed. For that reason, it has indicated that it will not devote compliance resources to reviewing expenses incurred before 1 July 2026, provided:

• The property was acquired before 12 November 2025, and
• it is genuinely a rental property, even if privately used at times.

After this transition period, the new guidance will take full effect.

What This Means for Holiday Home Owners

For clients who own, or are thinking of buying, a holiday home, several practical implications arise:

• Actual use now determines the deductions. If the property is mostly for private enjoyment, the tax outcomes can change significantly.
• Record-keeping is more important than ever. Owners should maintain booking calendars, advertising records, market-rate evidence and full details of private stays.
• Occupancy, availability and pricing will be examined closely. Blocking out peak seasons or charging unrealistic rates may place the property in the red zone.
• Loan interest and major holding costs may be denied altogether if the property is treated as a leisure facility.
• Owners need to make deliberate choices about whether they want the property to operate as a genuine income-producing rental or remain primarily a private holiday home.

We are here to help.

If you own a holiday home or are considering investing in one, reach out to us. We can help you to navigate the tax implications.

The Australian Taxation Office (ATO) has a factsheet that explains what this would look like and the upcoming obligations on employers.

The purpose of this is to reduce the unpaid superannuation owed to employees.
A Treasury report on its impact estimates that a 25-year-old median-income earner who is currently paid superannuation quarterly and wages fortnightly could be around 1.5% better off at retirement if they switched to the earlier contribution and payment model.

The estimate is that this initiative could bring in up to $3.4 billion of unpaid super.

Under the proposal:

• Employers will be required to pay SG contributions so they are received by the employee’s superannuation fund within seven business days of payday, aligning contributions with each pay cycle rather than quarterly.
• A “payday” refers to when a qualifying earnings payment is made to an employee (updated wording to match legislative terminology)
• There are two key exceptions:
  1. For new employees and only for their first two weeks of employment
  2. For payments made outside a regular pay cycle (e.g., bonuses, commissions, correction runs), which may follow alternative timing rules defined by the ATO.

They envisage that when employers report via the Single Touch Payroll (STP) system, this will assist with some of the workload.

However, this will impact employers’ cash flow, as instead of paying the superannuation quarterly, they will need to have the funds available at each pay cycle to remit the contributions.

It is important to note that paying super late or submitting late returns can result in penalties.

Correct super guarantee (SG) payments involve four steps:

1. You must determine if a worker is “for super purposes” an Employer or a Contractor. This is a complex area.
2. You then apply the correct super guarantee percentage.
3. You have the correct earnings base. It has historically been calculated on Ordinary Time Earnings (OTE); however, draft legislation introduces the new concept of Qualifying Earnings (QE) to create consistency and reduce grey areas. This change should be incorporated into payroll systems as final definitions are confirmed.
4. The SG is paid on time within the statutory timeframe.

What happens if SG is paid late?

• Tax will only apply to “realised earnings”—that is, actual income your super fund has received, such as interest, dividends, rent, and realised capital gains from assets that have been sold.
• If your total super balance is above $3 million, the ATO will contact your super fund(s) for your share of these realised earnings.
• The ATO will then apply the new higher tax rates (15% for balances between $3 million and $10 million, and 25% for balances above $10 million) to your share of these earnings.
• The $3m and $10m thresholds will also be indexed in line with the Consumer Price Index.

These tax rates will apply in addition to the fund’s concessional tax rate of 15 per cent on taxable income.

Why is this better?

This approach is considered fairer, as impacted super fund members will only be taxed on income their fund has actually earned—not on paper profits that may never be realised. It also brings these tax rules more in line with how other investment income is taxed, and also addresses the problem of more people becoming subject to the tax over time due to ‘bracket creep’.

What do you need to do?

If your super balance never exceeds $3 million, these changes won’t affect you. If you’re above the threshold or likely to exceed it, we’ll work with you to understand your position and plan for any potential tax impacts from 2026 onwards. If you have questions about how these changes might affect your retirement planning, get in touch with us. We are always here to help.

• Quarter 1 – 1 July to 30 September is due to be received by the employee’s fund by 28 October
• Quarter 2 – 1 October to 31 December is due to be received by the employee’s fund by 28 January
• Quarter 3 – 1 January to 31 March is due to be received by the employee’s fund by 28 April and
• Quarter 4 – 1 April to 30 June is due to be received by the employee’s fund by 28 July.

There is an extra day’s allowance when these dates fall on a public holiday. This does not include weekends, though, so if the due date falls on a weekend, you must take this into account, as you don’t receive the extra day’s allowance.

To comply with these rules, the contribution must be in the employee’s superannuation fund on or before this date, unless the employer is using the ATO small business superannuation clearing house (SBSCH). As we have been advising business clients for some time, we recommend that you arrange to pay your staff super at least 7 days before the due date.

The ATO has been applying considerable compliance resources in this space in recent years, which can have an impact on both employees and employers.

Employers

To be eligible to claim a tax deduction on SG contributions, the quarterly amount must be in the employee’s super account on or before the above quarterly due dates. The only exception to this is where the employer is using the ATO SBSCH. In that case, a contribution is considered made provided the SBSCH has received it on or before the due date.

Employers using commercial clearing houses should be mindful of turnaround times. Commercial clearing houses collect and distribute employee contributions and may be linked to accounting/payroll software or provided by some superannuation platforms. Anecdotally, it seems that turnaround times for some clearing houses could be up to 14 days, so it is recommended that employers allow sufficient time before the quarterly deadlines when processing their employee SG contributions.

If these deadlines are missed (yes, even by a day!), that will trigger a superannuation guarantee charge (SGC) requirement, which will result in a loss of the tax deduction and other penalties.

The SGC requirements are outlined in the ATO link below:

The super guarantee charge | Australian Taxation Office

Employers have the option to make SG payments more frequently than quarterly, and they will need to become accustomed to this if the proposed ‘payday’ superannuation reforms become law. This change is proposed to commence from 1 July 2026 and would require SG to be paid at the same frequency as salary or wages. There is some discussion on the payday super proposal at this link (noting that this is not yet law). The SBSCH will now close. Employers using this service should consider transitioning to a commercial clearing house. Please let us know if you would like assistance with this transition.

We have already been in discussion with several clients to change their frequency to at least monthly, which aligns the PAYG / Instalment Activity Statement requirements, payroll tax and now Super. If you are able to, iron out any issues with paying more frequently now (to monthly), it will start to prepare you for Pay Day Super as set out above.

Employees

It is recommended that you regularly check your superannuation fund statements and reconcile employer contributions to the amounts listed on your pay slips.

Where SG contributions are not received on time (or at all!), employees are encouraged to discuss this first with their employer. Should this not result in a satisfactory conclusion, employees can consider bringing this to the attention of the ATO.

There is some helpful discussion on this process at the following link.

If you have any queries or concerns, please get in touch with our Client Care team, and we will be happy to assist.

• General Interest Charge (GIC): This applies when you pay your tax liability late. The ATO applies GIC to encourage tax liabilities to be paid on time and ensure taxpayers who pay late don’t have an unfair advantage over taxpayers who pay on time. GIC is calculated on a daily compounding basis on the overdue amount. The GIC annual rate for the July–September 2025 quarter is 10.78%.
• Shortfall Interest Charge (SIC): This is applied when there is a shortfall in tax paid because of an amendment or correction to your tax assessment. SIC is also calculated on a daily compounding basis. The SIC annual rate for the July–September 2025 quarter is 6.78%. The ATO applies SIC to the tax shortfall amount for the period between when it would have been due and when the assessment is corrected.

What’s changing?

Historically, both GIC and SIC amounts could be claimed as a deduction. This has meant that the net after-tax cost of the interest charges has been reduced for taxpayers who have a positive income tax liability for the relevant income year.

However, the Government has passed legislation to ensure that GIC and SIC amounts incurred on or after 1 July 2025 are no longer deductible, even if the interest relates to a tax debt that arose before this date.

As these interest charges are no longer deductible, the after-tax impact of the charges is higher for many taxpayers. The effect becomes greater as your tax rate increases.

For example, let’s take a look at two individuals who have the same level of tax debt owed to the ATO and the same GIC liability of $1,000 for a particular income year:

• Sally is a high-income earner and subject to a 45% marginal tax rate (ignoring the Medicare levy). Under the old rules, the net cost of the interest charge was only $550 because she could claim a deduction for the GIC amount, and this reduced her income tax liability by $450. Under the new rules, no deduction is available, and Sally will incur the full cost of $1,000.
• Adam is subject to a 30% marginal tax rate (again, ignoring the Medicare levy). Under the old rules, the net cost of the interest charge was $700 because he could reduce his income tax liability by $300 by claiming a deduction for the GIC amount. As with Sally, under the new rules, no deduction is available for the GIC, and Adam’s full cost is $1,000.

What can I do to minimise the impact of this change?

The simple answer is to pay down ATO debt as quickly as possible. As you can see, the GIC rate is relatively high and continues to accrue daily until the debt is paid off. The faster you can pay off that debt, the lower the interest charges that will accrue.

If you can’t afford to pay off your ATO debt in the short term, then you might want to explore other options, including whether you would be better off borrowing money from another source at a lower interest rate to pay off the ATO debt. In some cases, it is possible to claim a deduction for interest accrued on a loan used to pay tax debts, provided that the debt arose from business activities. It isn’t normally possible to claim a deduction for interest accruing on a loan that is used to pay a tax debt that arose from investment or employment activities.

While the ATO may sometimes allow taxpayers to enter into a payment plan, allowing tax debts to be paid through instalments, tax debts subject to a payment plan still accrue interest.

On a more proactive basis, it is better to plan ahead to ensure that upcoming tax payments can be made on time. This may sometimes require setting aside funds regularly for tax instalments, GST, PAYG withholding, and other amounts that need to be paid to the ATO. Keeping these amounts separate will help to ensure you’re ready when the ATO bill arrives.

If you’re currently carrying tax debt or need help staying ahead of your obligations, we’re here to help. Contact us, and we will work together on a strategy that keeps you compliant and protects your bottom line.

With so many compliance dates to remember in the next quarter, we have prepared a summary for businesses to keep you on track of your business obligations in the lead up to the end of the financial year.

Click on these tabs to see the details of each entry.

If you have any questions or concerns on how these could impact you, please contact our Consulting Team on (08) 9227 6300 or via our Contact Us Page for more information.

Annual NFP self-review return

From the 2023–24 income year, non-charitable NFPs with an active Australian Business Number (ABN) are required to lodge an annual NFP self-review return with the ATO. This return notifies the ATO of the organisation’s eligibility to self-assess as income tax exempt.

The return has three sections:

• Organisation details: standard information on the NFP.
• Income tax self-assessment: confirmation of the organisation’s income tax exempt status.
• Summary and declaration: Acknowledgement of the information provided.

When the return is being completed, the NFP must answer ‘yes’ or ‘no’ to the question: ‘Does the organisation have and follow clauses in its governing documents that prohibit the distribution of income or assets to members while it is operating and winding up?’ This requirement must be met for the NFP to self-assess its position as a tax-exempt entity.

If a NFP’s governing documents don’t include these clauses, it can still self-assess as income tax-exempt for the 2024 income year, as long as no income or assets have been distributed to its members. As a transitional arrangement, the ATO is allowing NFPs until 30 June 2025 to update their governing documents. Failing to do this will mean that the organisation cannot self-assess as income tax exempt from 1 July 2024 for the 2025 income year, which would result in the organisation being treated as a taxable entity and potentially requiring it to lodge a tax return.

Mandatory clauses in governing documents

Governing documents are the formal documents that outline the purpose of the organisation, its character and the rules and requirements for how decisions are made, how it operates and how long it operates for.

As noted above, NFPs must include specific clauses in their governing documents to self-assess as income tax-exempt. These clauses must:

• Prohibit the distribution of income or assets to members during the organisation’s operation and on winding up.
• Ensure that any surplus assets are transferred to another nonprofit organisation (NFP) with similar purposes upon dissolution.

NFPs should also ensure that there are sufficient controls in place to prevent members from receiving income, property, or assets that belong to the organisation, except where they are receiving remuneration for work performed on behalf of the entity or reimbursement of expenses incurred on behalf of the organisation.

The advice is that NFP governing documents should be reviewed at least annually, or whenever there is a significant change to the organisation’s structure or activities. An annual general meeting is an ideal opportunity to review governing documents.

Taking a proactive approach helps identify any issues and reinforces your organisation’s commitment to good governance.

If you have any concerns or questions regarding this matter, please do not hesitate to contact us. We are here to help.

What Is a Revenue Account?

A revenue account pertains to the income and expenses arising from a business’s ordinary operations. This includes:

• Trading Income: Sales of goods or services.
• Interest and Dividends: Income from investments held as part of business operations.
• Short-term Asset Sales: Profits from assets held primarily for resale. (Australian Taxation Office)

Tax Treatment:

• Income: Included in assessable income and taxed at the applicable marginal or corporate tax rate.
• Expenses: Generally deductible under Section 8-1 of the Income Tax Assessment Act 1997. (Australian Taxation Office)

What Is a Capital Account?

A capital account relates to transactions involving long-term assets not part of day-to-day operations. Examples include:

• Sale of Capital Assets: Such as property, shares, or equipment not held as trading stock.
• Structural Improvements: Expenditures that enhance the value of an asset.
  (Australian Taxation Office, Australian Taxation Office)

Tax Treatment:

• Gains: Subject to Capital Gains Tax (CGT).
• Losses: Can offset capital gains; unused losses may be carried forward.
• Expenses: Not immediately deductible; may be included in the asset’s cost base. (Australian Taxation Office)

Key Differences

.

Practical Examples

• Share Trading vs. Investing: A person actively buying and selling shares as a business is taxed on revenue account; profits are ordinary income. An investor holding shares for the long term is taxed on the capital account; profits are subject to capital gains tax (CGT). (Australian Taxation Office)
• Property Development: A developer building and selling properties operates on a revenue account. An individual selling a long-held investment property is dealing with a capital account transaction.

Importance of Classification

Correctly classifying transactions ensures compliance and optimal tax treatment. Misclassification can lead to:

• Incorrect Tax Payments: Overpaying or underpaying tax.
• Penalties: For non-compliance with tax laws.
• Audit Risks: Increased scrutiny from the ATO.

Further Information

For more detailed guidance, refer to the ATO’s resources:

• Share Investing vs. Share Trading
• Capital Expenses

Note:
This page provides general information and should not be considered tax advice.
For personalised assistance, seek professional advice by contacting us today.

Prepared by AAG Technical Knowledge Base