• 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.

What’s the risk?

• Ignoring your annual statement
  Many people never actually open or review the statement their super fund sends. This means missing errors, unnoticed fees, or underperformance.

• Paying too much in fees across multiple accounts
  It’s surprisingly common to have more than one super account. Each account may charge fees, which cumulatively erode your balance.

• Sticking with a low-performing fund or default investment option
  Even a 1% underperformance over decades can translate to significant differences in final balances. Many are still invested in the default option and don’t revisit their allocation as their needs change.

• Switching to cash after market drops (“locking in losses”)
  It’s a natural instinct when markets are volatile, but shifting funds to cash after a fall can mean missing out on the rebound.

• Delaying extra contributions
  Relying only on employer contributions may not get you to the retirement you hope for. Small voluntary or salary-sacrificed contributions can make a meaningful difference.

• Failing to act promptly on notices or changes
  If your super fund sends notices about your investment options, fees, or insurance, delaying review or action can lead to negative consequences.

• Switching funds carelessly (risking tax or admin issues)
  If you make a personal, tax-deductible contribution, then immediately roll over to another fund before your deduction is confirmed, you may lose eligibility for that tax deduction.

Why this matters

Over a working life, super is often one of your largest financial assets. These kinds of oversights don’t just cost a few dollars — they can mean tens or hundreds of thousands in lost value. Also, super funds and regulators are increasingly scrutinizing fund practices, so more diligence is required than ever.

What you should do now

• Open your most recent super statement.
• Check the fees being charged, investment return performance, and whether all expected contributions have arrived.
• Find out whether you have multiple super accounts; if so, consider consolidating them.
• Review your investment option and see whether it’s still aligned with your goals.
• Make (or continue) voluntary contributions if your budget allows.
• Before rolling over or switching funds, confirm any deduction claims or tax-related issues with your fund first.

If anything seems off, ask questions

How AAG can help you

At AAG, we view this as part of our role to help you protect and grow your wealth for retirement. Here’s what we offer:

• A super review service to audit your current fund: fees, performance, contribution tracking, and suitability
• Help with consolidating multiple super accounts
• Guidance on optimal investment mix based on your stage of life, goals and risk tolerance
• Advice on salary sacrifice strategies, extra contributions, and tax implications
• Assistance with fund switching or rollovers, ensuring you don’t fall into common traps
• Ongoing monitoring and reviews to ensure your super remains on track

If you’d like us to review your super setup or conduct a fund review for you or your team, please don’t hesitate to get in touch with us. We’d be happy to help ensure that your super is working as hard as it can for you.

Further reading relating to optimising your Super:

Article One

Article Two

Governor Bullock emphasised that the decision was unanimous and that larger cuts weren’t considered. She did, however, leave the door open for further action if conditions warrant it. The unanimous decision was made because:

• Headline inflation has eased to 2.1% year on year, and the RBA’s preferred trimmed mean measure sits at just 2.4–2.7%, comfortably within the desired 2–3% range. So, it’s now within target.
• There’s still soft economic growth; quarter 1 saw GDP grow 0.2% and unemployment has gone up slightly to roughly 4.3%.

This is a welcome move for many with flow-on impacts across a broad section of the community.

Borrowing and mortgages:

A borrower with a $600,000 mortgage can expect monthly repayments to fall by around $89, saving over $1,000 annually.

Refinancing:

The latest cut has triggered a wave of refinancing. Canstar estimates monthly savings of around $272 on a $600,000 loan, potentially taking years off the loan term and saving tens of thousands in interest expenses.

Housing and lending:

The cut may revive home-buying sentiment, though the risks of swelling property prices remain. Borrowers and buyers alike are feeling the relief.

Currency and markets:

The Australian dollar did weaken moderately following the decision. On the ASX 200, financial stocks, notably the Commonwealth Bank, took a hit as investors fretted over shrinking interest margins.

Lower interest rates ripple across the investment landscape:

Lower interest rates stimulate the economy by increasing investment and household consumption, which leads to higher domestic output (GDP).

Investors are encouraged to borrow and invest in projects, while households spend more by saving on mortgage payments.

Lower rates also support higher asset prices (think share markets and property), which can boost household wealth and spending. These combined effects result in increased demand for goods and services and higher economic activity.

Key takeaways

• Borrowers: Strong relief through lower mortgage repayments, refinancing opportunities, and improved property sentiment.
• Investors: Mixed effects – equities and property benefit, but fixed-income returns (term deposits and bonds) fall; real estate demand may strengthen.
• Retirees: Cash, term deposit, and bond income weaken, super balances may rise, but managing volatility and inflation (to preserve purchasing power) remains critical.
• Economy overall: Stimulates borrowing and spending, though risks of overheating in housing or misallocated capital remain

More on what it means for Borrowers

Now is an ideal time to review your current lending arrangements. Many lenders have already adjusted their rates, creating opportunities to secure a more competitive interest rate and potentially reduce your repayments.

Even a slight decrease can make a meaningful difference over the life of your loan. If it’s been some time since your last review, it may be worthwhile to explore whether refinancing could deliver savings or better align your loan with your current goals.

More on what it means for investors

• Equities: With more disposable income in the economy, there is usually more money to invest in stocks, leading to a shift in money from bonds.
• Bonds and Fixed Income: With yields declining, existing bondholders benefit from higher prices, but reinvestment risk grows for those relying on bond income. Investors may shift toward riskier assets (equities) in search of better returns.
• Property and Alternatives: Lower rates may further boost real estate demand, driving capital appreciation but also increasing affordability concerns. Alternatives such as infrastructure may gain traction as investors diversify away from traditional fixed income.
• Global Investors: Foreign capital flows may adjust in response to a weaker AUD, influencing both valuations and the competitiveness of Australian exports. If the AUD weakens, this makes our market more attractive to investors from overseas.

More on what it means for retirees

• Income Pressure: Those relying on term deposits, annuities, or bonds will see lower returns, potentially forcing a rethink of income strategies.
• Cost of Living: While inflation is now within target, retirees on fixed budgets remain sensitive to rising essentials such as healthcare and housing. But easing rates tends to lessen the cost-of-living pressures across all demographics.
• Superannuation and Pensions: Super fund performance may benefit from rising equity and property values, but volatility and risk remain concerns for those drawing down balances.
• Capital Preservation vs Growth: Many retirees may feel compelled to move further up the risk curve to maintain income, but this raises questions about portfolio resilience in the face of market shocks.

The Bottom Line

While there are always winners and losers, for many Australians, this is a positive change.

Borrowers and home buyers feel immediate relief, while investors and retirees face a more complex landscape—balancing opportunity with caution.

Either way, please reach out if we can help you understand how to best manage your debt, explore refinance options or evaluate investment readiness in light of these changes.

Although the legislation passed the House of Representatives in 2023, it stalled in the Senate in February 2025 and has not progressed since.
While this is a difficult situation, the alternatives to paying the additional 15% tax on super, compared to withdrawing all funds out of super in excess of $3m, and then that is taxed at normal marginal tax rates, is a comparison of a 30% tax rate in super (15% usual tax rate plus the extra 15%), compared to those in marginal tax rates at 45% + Medicare of 2%.

The company tax rate is also at 25% for base rate entities, or 30% for those that are not – which is likely to apply to those wanting a company to hold investments such as shares or property.

Despite the legislative delay, the government remains committed to implementing the tax from July 1, 2025. Treasurer Jim Chalmers has reaffirmed the government’s intention to proceed with the measure, and the Greens have indicated their support, which could potentially facilitate its passage through the Senate. (The Australian)

Key Features of the Proposed Division 296 Tax:

Controversies and Criticisms:

The Greens – Borrowing in Super:

The Greens have further also announced an attack on borrowing in super. Many clients have self-managed superannuation funds (SMSFs) that hold property against which they have borrowed. Those properties are often rented to their business, as the SMSF has enabled the client to secure their own business premises, eliminating the need to worry about landlords.

There is already rigid regulation for borrowing for superannuation funds, and many clients have sought to utilise the flexibility of their own Self-Managed Super Fund (SMSF) to gain more exposure to property, using lower loan-to-value ratios to do so.

Unfortunately, the Greens and Labor did not communicate in the recent Federal Election that a vote for Labor is a vote for the Greens, and a vote for the Greens is also a vote for Labor. The Greens also were not forthcoming with many of their policies at the time.

The Liberals — Their take on this:

The opposition is prepared to work with the government on superannuation reforms, but will not back a tax on unrealised capital gains.

The lack of indexation is also a problem that needs to be addressed before the opposition can support any of this proposed legislation. (SMS Magazine)

Current Status:

While the Division 296 tax has not yet been enacted, the government’s determination to implement it by July 1, 2025, suggests that affected individuals should prepare for its potential introduction.

Our concern is the uncertainty, and we are now in a state of limbo. Many clients hold property assets in their superannuation and cannot simply sell the property or other assets, which then forces the sale of assets at potentially lower prices in order to pay this tax.

In our view, the proposal is un-Australian. To be taxed on paper gains or losses, and being forced to sell property or other assets, which may not have ready markets.

We continue to monitor the situation and review superannuation balances for clients, and we are formulating strategies to mitigate potential tax liabilities.

October 2025 — See the proposed update here.

How do they work?

If a $100 good faces a 25% tariff, it now costs $125 before it hits the shelves.

So, the US government collects $25 (the tariff), and the US consumer now pays $125 for the same good that previously cost $100.

Consumers usually pay the extra cost, but sometimes the importer will absorb some of it. So, they may pass $20 onto the consumer & absorb the $5 themselves, which will lower their profit.

But you get the idea….

Most studies of Trump’s tariff increases during his first administration conclude that the tariffs were entirely borne by either U.S. households through increased consumer prices or corporate profits.

Currently, there is an opportunity for companies to pass the full $25 to the consumer and attribute any price increase solely to the tariff.

The point is…. The country exporting to the US does not pay the tariff. The US government collects the tariff & the cost is borne mainly by the US consumer.

Do tariffs work?

1. To protect domestic industries?

Yes, in the short term – they can shield local industries from cheaper imports and temporarily boost local production.
But – without long-term innovation and investment, protected industries can become stagnant and rely solely on tariff protection to be viable.

So, inefficient industries are propped up instead of being improved.

2. Reduce trade deficits

Not reliably – trade often shifts to other countries instead of shrinking overall.

US-China tariffs lead to trade rerouting, not elimination.

3. Create local jobs

Mixed – jobs are supported in protected sectors (e.g. steel), but other industries that rely on those goods (e.g. car manufacturing) may lose jobs due to higher costs.

4. Generate government revenue

Yes – tariffs do raise billions in revenue. However, this cost is ultimately borne by local businesses and consumers.

5. Leverage in trade deals

Sometimes – tariffs can push other countries to negotiate. However, retaliation and global instability are common side effects.

6. Support long-term economic growth

Rarely – tariffs usually reduce trade, slow growth & increase costs. Historically, prolonged use has harmed economies more than benefited them.

Conclusion

Tariffs may achieve short-term policy goals or provide leverage, but they carry long-term risks & unintended consequences.

They work best as a temporary measure, not a permanent economic solution.

Further Reading: The expected impact of Trump’s tariffs

Important information & disclaimer

This publication has been prepared by AustAsia Group, including AustAsia Financial Planning Pty Ltd (AFSL License No 229454).

In writing this report, we have sourced information from:
Antipodes, ABC News, AMP Capital Markets (including Dr Shane Oliver, Chief Economist & Head of Investment Strategy), AP Reuters, Australian Bureau of Statistics, BetaShares, Bloomberg, Business Insider, Carl Richards, Central Banks, CitiGroup, Commonwealth Bank, CoreLogic, First Sentier, Global X, IMF, Investopedia, IRESS, JP Morgan Asset Management, K2 Asset Management, Livewire, Macquarie, Macroeconomics, MarketWatch, Mercer, Morgan Stanley, Morningstar, Refinitiv, Reserve Bank of Australia, Russell Investments, Stockhead, The Wall Street Journal, TradingEconomics, VanEck, Vanguard, & Zurich.

Any advice in this publication is general only & has not been tailored to your circumstances. Accordingly, reliance should not be placed on the information contained in this document as the basis for making any financial investment, insurance, or other decision. Please seek personal advice before acting on this information.

Information in this publication is accurate as of the date of writing. Some of the information may have been provided to us by third parties. While it is believed the information is correct & reliable, the accuracy of that information is not guaranteed in any way.

Opinions constitute our judgment at the time of issue & are subject to change. Neither the Licensee nor any member of AustAsia Group, nor their employees or directors, give any warranty of accuracy, nor accepts any responsibility, for any errors or omissions in this document.

Any general tax information provided in this publication is intended as a guide only & is based on our general understanding of taxation laws. It is not intended to be a substitute for specialised taxation advice or an assessment of your liabilities, obligations or claim entitlements that arise, or could arise, under taxation law, & we recommend you consult with a registered tax agent.

Need More Clarity on the Ban on Foreign Property Purchases?

Contact our team today if you’re unsure how the ban on foreign property purchases affects you. We can guide you through exemptions and ensure you comply with the new regulations.

Key Points

• The return of Donald Trump to the US presidency brings the prospect of more US tax cuts & deregulation but also more tariff hikes, trade wars & policy uncertainty.
• His win was not the surprise it was in 2016, & markets have moved to adjust – but it means higher US bond yields (as interest rates won’t fall as quickly), a higher $US & a knee-jerk rise in shares.
• Shares could be threatened, though, by the higher bond yields & tariffs.
• Australia is vulnerable to an intensification of trade wars.
• While the US election is important, investors should bear in mind that many other things influence investment markets.

Trump’s key policies

US Federal Budget Deficit & Debt

Source: Bloomberg, AMP

Key implications, risks & uncertainties

Source: ASX, AMP

Likely market implications

Trump’s policies point to:

• Upward pressure on US bond yields – via a bigger budget deficit & higher inflation & less rate cuts from the Fed.
• Upward pressure on the $US – via higher tariffs, higher than otherwise Fed interest rates & increased global uncertainty.
• Upward pressure on Bitcoin & other cryptos as Trump is seen as more favourable towards crypto.
  It’s likely that crypto markets have further to go in the short term, but this win for Trump is very different to 2016, where his win surprised markets, resulting in big market moves.
• Ambiguity for the US share market with tax cuts & deregulation being positive (driving a short-term boost), but trade wars & higher bond yields being negative (on a cyclical view).
  At the time of Trump’s victory in 2016, shares were relatively undervalued & soared 38% into January 2018 as the focus in his first year was on business-friendly tax cuts & deregulation, but they fell in 2018 as the focus shifted to trade wars.
  This time around, shares are already expensive, so the upside may be more limited.
  That said, shares may still see further post-election gains on relief that it’s out of the way & hope that he focuses more on tax cuts & deregulation, but this could be reversed if he starts focussing on tariffs & as higher bond yields are bad news for shares.
• Upward pressure on US financial & energy shares (less regulation) relative to clean energy shares (as climate measures are reversed).

Source: Bloomberg, AMP

How will it effect Australia?

Australians have reason to be concerned as we are vulnerable to a new Trump trade war!

Exports to the US are only 4% of Australia’s total exports & may be spared from Trump’s tariffs as Australia has a trade deficit with the US.

But, as an open economy with high trade exposure to China, Australia is vulnerable to global trade wars, particularly as it weighs on demand for Chinese exports.

An OECD study showed that Australia could suffer a 1.2% reduction in GDP as a result of a 10% reduction in global trade between major countries.

Resources shares would be most at risk & the $A would likely fall (and we have already seen a bit of that). More on the energy sector later.

Of course, similar fears existed during the last Trump trade war, & it didn’t turn out so bad (although the $A fell 10% in 2018 with US tariff hikes & Fed rate hikes).

And there would still be demand for iron ore somewhere – it just may switch from China to elsewhere.

Much will depend on how other countries respond & how hard Trump goes.

There is also the risk that if Trump’s policies boost US inflation there could be a global flow on, including to Australia, resulting in higher than otherwise RBA interest rates.

This is a risk, but we suspect it would be offset by the growth dampening impact of an intensified global trade war.

From a policy point of view, if Trump cuts the US corporate tax rate to 15% on domestic profits it could renew pressure on Australia to cut its corporate tax rate.

Trump’s reversal of US climate policies will again add to confusion & may increase pressure for Australia to slow its net zero commitment.

Anecdotally, a recent survey found that 30% of Australians would have voted for Trump.

Final thought before we delve deeper

So far, equity markets have focused on the positives, helped by the fact the Fed is still talking rate cuts despite the potential upward pressure on inflation from Trump’s trade & tax policies.

Here comes the detail

Donald Trump delivered a resounding victory, sweeping the battleground states & winning the popular vote in a stunning political comeback that promises to reshape the US economy for decades to come.

What is the Red Wave?

The Republicans control both the upper & lower houses of government, which is called the Red Wave.
He only has four years, so we expect an aggressive & decisive presidency, with swift & sweeping changes to the way the US does business.

US citizens may not have known what they would get in his first term, but they certainly knew what they would get in a second term & that’s the way they voted.

The breadth of Executive Orders has never been fully tested.

He will try to push through his agenda, so we expect many curve balls.

While immediate inflation risks seem manageable, Trump’s likely extension of tax cuts, coupled with the prospect of tariff measures, raises a clear risk of resurgent domestic inflationary pressures.

Wave of deregulation

US policy changes will unlock a global wave of deregulation.

Deregulation in one market eventually will bleed into the rest of the world.

Banking could be the first industry to benefit.

Let’s hope we’ve learned our lessons from the Global Financial Crisis, though….

US energy independence

Another important shift will be the new US intention to achieve “oil independence” which has the potential to provide a competitive advantage to American industry & allow for a re-industrialisation of the US economy.

The US holds major reserves of oil & gas.

They’re going for a system of energy which is self-dependent & low cost, which allows them to invest in other industrial assets & petrochemicals.

Lowering the cost of energy could offset inflationary pressures from tariffs.

But it’s not as simple as drill baby drill (the slogan that his campaign borrowed from former Alaskan governor Sarah Palin).

Flooding the global economy with cheap energy offers an inflation-busting strategy (greater supply of oil & gas).

But new supply can’t be turned on with the flick of a switch.

Whether it’s a new mine or an O&G field, finding, developing, & activating a new operation takes years. Often more than a decade.

Even if you know where it is & have commenced developing it, it still takes years before oil or gas flow through the pipe to industry & consumers.

And new sources are becoming harder to find.

They’re also getting deeper, more difficult, & more expensive to develop!

Add to this that there has been years of underinvestment in exploration.

The shift to energy independence will also likely lead to a recalibration of the previous administration’s emphasis on climate change & environmental issues & dampen enthusiasm for electric vehicles.

This means there could be less demand for the minerals associated with clean energy technologies which will have implications for Australia.

But we still think the best energy investment out there is Woodside. Gas remains a solid investment theme, here’s why.

The Political Masterclass

Share of voters saying each issue was the most important

Source: SP VoteCast survey

Policies that require Congressional approval

• Fiscal policy requires congressional approval, i.e. government spending & tax
  However, with a Republican sweep, Trump will largely have an unfiltered ability to enact fiscal policy as he sees fit.
  Expectations are that the tax cuts passed in 2017, due to expire at the end of 2025, will be extended.
  Broad tax cuts, including corporate tax, are likely to increase the budget deficit; however, this will be partially offset by the revenue raised from increased tariffs.
  Elon Musk will co-lead a new agency to bring efficiencies in government & has proposed cutting spending materially, but this is going to be tough as cutting spending can be kryptonite.
  Fiscal deficits, which are already wide, are likely to get wider over the next few years.
  So, tax cuts are likely to be modest, although there is a potential upside to tax revenue if AI boosts GDP materially.
• Trump has also expressed a desire to repeal parts of Biden’s Inflation Reduction Act (IRA).
  However, Republican states have been big beneficiaries of the spending from the IRA, so policy changes around it are expected to be marginal.
• Trump has also promised to slash regulation, which is likely with the Republicans controlling the House & the Senate.

No Congressional approval required

• Trump has broad authority to impose tariffs, although this needs to go through a lengthy process, which means the time between decision & implementation can be prolonged.
  He has already announced some tariffs (that are far greater than his first presidency) & negotiate a “better deal”.
  The “better deal” may result in some of the tariffs not being applied depending on what he can negotiate. He certainly has started the negotiation process with some rather brutal tariffs, especially on China.
  But the $US will strengthen further on tariffs, especially against the Chinese Renminbi, which may be devalued by 20-30% vs the $US if 60% tariffs are applied.
  For China, a Trump administration is bearish for exports to the US & inbound investment.

US average tariff rate on total imports

Source: Barclays, Mercer

• Trump has promised to slash immigration, including deporting millions of illegal migrants.
  Immigration surged over 2022 & 2023 but has already fallen notably this year.
• Separately, Trump has expressed that he wants to be involved in monetary policy (i.e. setting interest rates), which would impact the Fed’s ability to act independently.
  It’s not clear what this means in practice & Trump’s room for manoeuvre is likely to be small.
  Further, the Fed Head Jerome Powell has said that he will not resign if Trump asks him to.
• Trump has also said he wants a weaker $US. With tariffs having the opposite effect, it is unclear what this goal will mean in practice.

What does this mean for US growth & financial markets

For GDP growth there is a big increase in uncertainty.

Government spending & less regulation are broadly good for growth, although bigger deficits & possibly higher yields may crowd out the private sector investment, thus offsetting the boost from extra spending.

Tariffs are negative for growth & hugely disruptive for businesses.

Many believe this will hit growth not only in the US but elsewhere.

Also, we cannot be certain that all the mooted tariffs will actually be implemented or whether they will be postured & then withdrawn.

Tariffs are unlikely to cause an improvement in US competitiveness as the $US will rise to offset what on the face of it seems to be a competitive boost.

Higher tariffs & wider deficits are inflationary in the year the changes are made, but not necessarily thereafter. If
expectations remain anchored & monetary policy steers the economy well, then inflation could fall back to target.

In the near term, the Fed is likely to continue to cut interest rates & will not want to be seen as overly political. Many FOMC members will have the view that the neutral point of Fed Funds Rate is well below where it currently is, so further cuts remain a sensible course of action.

The Fed will also not want to front-run policies which may not actually happen (i.e. tariffs).

Let wrap this up

The consensus view is that there will be a return to normal.

Normal in terms of economic growth, inflation, wage growth, & monetary policy.

There are upside risks to growth from tax cuts & deregulation & downside risks from tariffs & trade wars.

There are a number of consequential actions (especially tariffs) that are very difficult to forecast regarding what impact they may have, & the response of China & other countries is largely unknown at this stage.

With this in mind & equities at all-time highs, markets are likely to stay neutral.

It is possible that China may loosen fiscal policy notably & provide a floor under the housing market.

Stronger housing & consumption along with weaker exports (to the US, but not to the rest of the world) may be a positive change for China overall.

Bond yields may face some upward pressure, but this is not certain as yields have already moved higher.

Sources: AMP, Mercer, Livewire

Beyond the difficult task of dividing up your assets and determining who should get what, it’s essential to look at the tax consequences of how your assets will flow through to your beneficiaries.

When assets pass from a deceased individual to a beneficiary of the estate, the tax impact will generally depend on the asset’s nature and the beneficiary’s tax characteristics, such as their residency status.

Inheriting cash

When cash passes from a deceased individual to their estate and then to a beneficiary, generally, there should not be any direct tax issues to deal with, assuming that the cash is denominated in AUD.

Inheriting assets

Death is a taxing event. When an asset’s ownership change occurs, a capital gains tax event (CGT) is generally triggered. However, the tax rules provide some relief from CGT when someone dies. The basic rule is that a capital gain or loss triggered by a death is disregarded unless the asset is transferred to one of the following:

• An exempt entity (although there are some exceptions to this where the entity is a charity with deductible gift recipient status);
• The trustee of a complying superannuation fund or
• A foreign entity and the asset is not classified as taxable Australian property.

The exemption applies if the asset passes to the deceased’s legal personal representative (i.e., executor) or to a beneficiary of the estate that is not one of the entities listed above.

Once the asset has been transferred to the beneficiary, the beneficiary will need to manage the tax impact when they sell the asset.

Inheriting shares

LLet’sassume you inherit an ASX-listed share portfolio under your mmother’swill. The tax outcome will depend on whether your mother was an Australian resident for tax purposes when she died and whether the shares were acquired by your mother before or after 20 September 1985 (i.e., pre-CGT or post-CGT).

If your mother was an Australian resident for tax purposes when she died, and the shares were acquired post-CGT, then the cost base of the shares is typically based on the original purchase price. That is, the tax rules treat the inherited shares as if you purchased them. For example, if your mother purchased BHP shares for $17.82 on 2 January 1997, when you sell the shares, the gain is calculated based on your mmother’spurchase price of $17.82.

If your mother was a resident of Australia when she died, and the shares were acquired pre-CGT, then the cost base of the shares is typically reset to their market value at the date of death. That is, if your mother passed away on 1 October 2024, the share price at the close was $45.96. If you subsequently sold the shares in three years, the gain or loss is calculated using this value.

If your mother was a non-resident when she died, then the cost base of the shares is typically based on their market value at the date of death.

But iit’snot all about the tax. Managing shares in your will can be difficult as prices and allocations change over time and the companies you are invested in evolve. A portfolio that was once worth a small amount 20 years ago might be worth significantly more when you die.

Inheriting property

LLet’sassume you inherit an Australian residential property from your father under his will. For specific tax purposes, you are taken to have acquired the property at the date of his death.

The general rule is that the executor and/or beneficiaries of the estate inherit the cost base and reduced cost base of the CGT assets (the house) owned by the deceased just before their death, but this iisn’talways the case, especially when it comes to pre-CGT properties and a property that was the primary residence of the deceased individual just before they died.

Special rules enable some beneficiaries or estates to access a full or partial principal residence exemption on the inherited property. If the house was your ffather’sprimary residence before he died, he did not use the home to produce income (he did not rent it out or use it as a place of business). He was a resident of Australia for tax purposes. A full CGT exemption might be available to the executor or beneficiary if either (or both) of the following conditions are met:

• The house is disposed of within two years of the date of death; or
• The dwelling was the primary residence of one or more of the following people from the date of death until the dwelling has been disposed of:
  • The spouse of the deceased (unless they were separated);
  • An individual who had a right to occupy the dwelling under the ddeceased’swill; or
  • The beneficiary who is disposing of the dwelling.

For example, suppose the house was your ffather’sprimary residence and was eligible for the full principal residence exemption when he died. In that case, no CGT will apply if you sell the house within the 2-year period. However, if you sell the house 10 years later, the CGT impact will depend on how the property has been used since the date of your ffather’sdeath.

An extension to the two-year period can apply in limited circumstances, for example, when the will is contested or is complex.

If your father did not live in the property just before he died, applying for the full exemption might still be possible if he continued treating the home as his primary residence under the ‘‘bsence rule’’ For example, if he lived in a retirement village for a few years but maintained the property as his primary residence for CGT purposes (even if it was rented out).

If your father was not an Australian resident for tax purposes when he died, the cost base for CGT purposes would generally be based on the purchase price paid by your father if he acquired it post-CGT.

Inheriting foreign property

Suppose you are an Australian resident who has inherited a foreign property or asset from an individual who was a non-resident just before they died. In that case, the cost base is typically the market value at the time of death. For example, if you inherited a house from your uncle in the UK, the cost base is likely to be the hhouse’svalue at the date of his death.

If a taxable gain arises on sale, then it is necessary to consider whether the CGT discount can apply, but the discount will sometimes be less than 50%. If the gain is also taxed overseas, then a tax offset can sometimes apply to reduce the amount of tax payable in Australia.

Managing an inheritance can become complex. For assistance with estate planning or understanding an iinheritance’stax implications, please get in touch with us.