CGT and off-the-plan purchases

If you buy a property in an off-the-plan purchase, there are some important CGT issues to be aware of – especially in the context that an off-the-plan purchase may not actually settle until many months or even years after the initial contract is signed.

The first thing to note is that assuming the off-the-plan purchase does proceed to settlement, then the completed property is considered to have been acquired for CGT purposes at the time (and in the income year) in which the original contract was signed – and not in the year of settlement.

And this has some important practical consequences.

The first is that for the purposes of accessing the 50% CGT discount (in the case where the property does not become your CGT-exempt home), you are taken to have acquired the property when the off-the-plan contract was signed.

And this gives you ample time to satisfy the 12-month holding rule – including where you may even sell the property within 12 months after settlement of the contract.

Secondly, and importantly, any capital gain or loss will arise in the income year in which you enter the sale contract (eg, the 2023 income year) and not in the income year that you settle that contract (eg, the 2025 income year). And this is the case even if, as is not uncommon, this contract of sale is entered into before the original off-the-plan purchase is even settled.

In short, as long as the contract is settled, the key date for determining when property is acquired (or disposed of) is the date (ie, the income year) the contract is entered into – regardless of whether settlement takes place in the next income year or in a later income year.

This means that the income year in which any capital gain or loss is returned on the sale of the property is the income year in which you enter the off-the-plan contract – even though the settlement does not take place until another income year.

However, in this case the Commissioner has a generous policy so that the taxpayer does not have to immediately return any gain in that income year – but only once the proceeds on settlement are received. And then they can go make and amend that prior year return accordingly.

Also, in the case where the off-plan purchase is to become your home, the requirement of the “building concession” must be met in order for the property to eventually be considered your CGT-exempt home. 

Finally, it is important to understand that the CGT rules that apply in off-the-plan purchases are different from those that apply to an option agreement – which instead is treated a separate legal transaction with separate CGT consequences. It is only if the option is exercised that the transaction is merged into one transaction and the CGT rules then apply in a different way.

How the sandwich generation can cope financially

Many Australians are finding themselves part of the “sandwich generation” – adults who are juggling the demands of raising their own children while also caring for ageing parents. It’s a tough spot to be in, emotionally and financially.

Whether you’re still working and trying to build your own wealth, or you’ve recently retired and expected to finally enjoy some freedom, the reality of being pulled in both directions can stretch your time, energy and finances.

What is the sandwich generation?

The sandwich generation refers to people – often in their 40s, 50s or even 60s – who are “sandwiched” between caring for their children (sometimes adult children still living at home) and their elderly parents who may need help with transport, health care or day-to-day support.

This role often comes without warning. A parent might suddenly fall ill. A child may lose a job or return home after a breakup. Suddenly, you’re responsible for more than just your own needs.

The financial impact

Caring for others takes a toll on your finances. If you’re still working, you might reduce your hours, knock back a promotion, or even leave work altogether to support a parent – especially if they want to stay at home rather than go into aged care.

This can mean:

Even if you’ve already retired, your resources may be stretched. That overseas holiday you dreamed of might be replaced with fuel costs for daily visits to mum or dad, or paying for carers and medication out of your own pocket.

Some adult children even dip into their own retirement savings to cover costs, which can leave them short down the track.

What you can do

While everyone’s situation is different, here are a few tips to help you manage:

  1. Talk about money early – it might feel awkward, but open conversations with your parents (and children) about finances are essential. 

Find out:

The sooner you understand the financial picture, the easier it is to make a plan.

  1. Get help navigating aged care – the aged care system can be complex. If your parent needs more support, it’s worth getting advice to understand what services and payments are available.

You might be surprised by how much help is out there, including subsidised in-home care or respite services to give you a break.

  1. Look after your own future – it’s natural to want to help your family, but don’t forget your own needs. If you’re still working, keep your super contributions going if possible. If you’re retired, review your budget and spending regularly to avoid running out of funds too soon.
  2. Ask for support – don’t try to do it all alone. Speak to siblings about sharing the load, reach out to community organisations, and lean on your GP or counsellor if you’re feeling burnt out. You can’t pour from an empty cup.

Need help?

If you’re feeling the financial squeeze of being in the sandwich generation, we’re here to help. Whether it’s budgeting, retirement planning, or navigating aged care options, contact us for guidance tailored to your situation. A good plan can make a big difference. 

SMSF: A suitable path to retirement control?

Self-Managed Super Funds (SMSFs) are a key part of Australia’s superannuation system, offering control over retirement savings. As of March 2025, about 650,000 SMSFs manage $1 trillion in assets – a quarter of the $4.1 trillion superannuation pool. Let’s take a quick look at who uses SMSFs, why they’re chosen, costs and setup essentials for those considering this option.

Who uses SMSFs?

SMSFs attract people who want to manage their retirement funds. As of March 2025, there are around 1.2 million SMSF members. About 68% of funds have two members (often couples), 25% have one member, and 7% have three to six members. Most members (85%) are over 45, with the average member holding over $800,000 in assets.

Why choose an SMSF?

The main appeal of an SMSF is control. Unlike industry or retail funds, SMSF members act as trustees, tailoring their investment strategies. This allows investments in assets like real estate, cryptocurrencies, or unlisted assets, often unavailable elsewhere. 

SMSFs also offer transparency and tax benefits. For example, trustees can time when they sell assets and realise profits. SMSFs also provide flexibility in estate planning with bespoke binding death benefit nominations not ordinarily offered by large super funds.

Setting up and ongoing administration

Creating an SMSF involves some paperwork but is manageable with clear steps. Working with an SMSF professional can make the process smoother and ensure everything is set up correctly.

Here’s how to get started:

Costs involved

SMSFs can involve significant administrative work and be time-consuming to manage. Professional advice and administration can increase expenses but reduce workload. Keep in mind that insurance premiums, such as life or disability cover, are typically higher in SMSFs as they do not benefit from bulk discount arrangements. Trustees can lower costs by handling some administration, requiring time and expertise.

Is an SMSF right for you?

SMSFs offer control and flexibility, ideal for those with financial literacy, time, and larger balances, as lower balances may not justify the associated costs. However, they also come with responsibilities, including the risk of potential investment losses and the need to meet compliance obligations. If you’re considering an SMSF and want to understand more about how they work, feel free to give us a call – we can help you explore whether it might be a suitable structure for your needs. 

The great wealth transfer: Are you ready?

Over the next few decades, Australia is expected to witness one of the biggest intergenerational wealth transfers in history with between $3.5 trillion and $5 trillion changing hands as baby boomers pass on their wealth to children and grandchildren.

If you’re expecting to inherit from your parents or grandparents, or you’re thinking about the legacy you’ll leave to your loved ones, it’s important to understand the tax traps and planning strategies that come with this enormous transfer of wealth. While there’s no inheritance tax in Australia, there are other hidden tax pitfalls that can reduce the value of what’s passed down.

The tax traps you should know

Capital gains tax (CGT)

Receiving cash doesn’t attract tax but inheriting property, shares or other investments can trigger capital gains tax (CGT), depending on how and when those assets are sold. For example, if you inherit a home and it’s sold within two years of the deceased’s passing, the sale may be exempt from CGT – provided the home was the person’s main residence.

If you keep the property for longer or it was being used to produce income, CGT could apply down the track when you sell.

Superannuation

Super is another area full of complexity. When someone inherits super, whether or not they pay tax on it depends on a few things – like who they are and how the money is paid.

If the person receiving the super is a “tax dependent” – for example, a spouse or a child under 18 – they usually won’t have to pay any tax if the super is paid as a lump sum.

However, if the person inheriting the super death benefit isn’t a tax dependent (such as an adult child), your super fund will withhold tax before paying the money out. This can range from 17% to 32% (including Medicare levy), depending on the type of contributions that were made to your account (eg, concessional or non-concessional contributions).

Getting advice about how super is structured and who your beneficiaries are can make a big difference in how much tax is paid.

Gifting assets before death

Some people choose to give assets like property or shares to their children while they’re still alive – either to help them out financially or to reduce the size of their estate. While this can be a thoughtful move, it can also lead to an unexpected tax bill.

That’s because giving away certain assets (like an investment property or shares) is treated like selling them, which means CGT may apply. The tax is worked out based on the difference between what the asset is worth now and what you originally paid for it.

However, if the person giving the gift has made a loss on other investments in the past, they may be able to use those losses to cancel out some or all of the gain, reducing or even eliminating the tax they have to pay. 

This is why it’s important to get advice before making any big gifts – so you know exactly what the tax consequences might be.

Trusts and family structures

Using a family trust or testamentary trust (a trust set up under a will) can offer flexibility and tax savings. These structures allow more control over who receives income and when – which can help manage tax across the family group and avoid disputes. But they need to be set up correctly and in line with your wishes.

Tips to protect your family’s wealth

  1. Get your will and estate plan in order – having a legally binding will is the foundation of a good wealth transfer plan. It’s also wise to appoint a power of attorney and an executor who understands your wishes and has the emotional and practical ability to carry them out.
  2. Talk openly with your family – the emotional side of inheritance is just as important as the financial side. Discuss your intentions early to avoid surprises and prevent family conflict down the line.
  3. Understand the tax implications – don’t assume everything passes tax-free. Ask questions about CGT, super and gifting – especially if you’re likely to inherit property, shares or other non-cash assets.
  4. Review your super nominations – make sure your beneficiaries are up to date and that you’ve completed the right type of nomination form (binding vs non-binding). This helps ensure your super goes where you want it to, without unnecessary tax or delay.
  5. Seek professional help – the rules are complex, and mistakes can be costly. Getting the right advice from a professional who understands estate planning and tax can help you make smarter decisions and keep more money within your family unit.

Need help planning or receiving an inheritance?

Whether you’re planning your legacy or expecting to receive one, we can help you navigate the rules, reduce the tax and protect what matters most. 

CGT consequences of divorce and relationship breakdown

If you are getting divorced or separated from your spouse, this may involve the transfer of real estate or other assets as part of the settlement of things.  Technically, that transfer will trigger capital gains tax (CGT) because there will be a change in ownership of the property.

However, in this case the CGT rules will provide roll-over relief so that there will be no CGT to the person who transfers the property (the transferor) to the other party.  And that other party will “step into the shoes” of the transferor – so that they will be deemed to have acquired the property at the same time and for the same cost as the transferor. 

But this roll-over rule is subject to a number of important conditions and provisos. 

Firstly, the transfer of the property must take place by way of a relevant court order or a court-sanctioned agreement – or even a pre-nuptial agreement or the like. But the rollover does not apply to transfers under any private arrangement. 

Secondly, the transfer can only be made to the former spouse or partner – it can’t be made to their family company or family trust; nor to their estate if they die in the meantime (subject to an apparent exception if the property is transferred to a child maintenance trust).

Thirdly, if an investment property is transferred to a spouse and it becomes their home, then on its sale by that spouse there is a partial CGT liability to take into account the fact that it wasn’t always a CGT-exempt home. And this rule also applies in reverse.

Fourthly, if an asset (eg, shares or real estate owned by the company) is transferred out of a family company to a spouse, then there must be a corresponding reduction in the value of the shares held in the company to reflect the market value of that property transferred. 

Fifthly, the roll-over is available to the divorce or separation of any type of spouse, including de facto and same sex spouses – provided the divorce or separation is “bona-fide”! And note that the Commissioner has in the past successfully challenged the bona-fides of a divorce (albeit, that was done in connection with a taxpayer trying to move assets out of reach of his creditors). 

Now, such matters require careful consideration to take into account the particular circumstances of both parties. For example, the transfer of an investment property which will then be used as a home by the other spouse will require negotiation between the parties for adjustment to the settlement amounts to reflect the CGT liability that that spouse will be responsible for in the future. 

And this can be difficult – even if the separating parties are actually talking to each other!

And where, say, one of the parties owns an asset on which they will make a capital loss, they can perhaps agree to transfer that property to the other party to realise the loss – but only if they transfer it under a private agreement independent of any court-approved transfer, etc. 

In summary, there are lots of important tax issues associated with transferring assets between former spouses under a divorce or a relationship breakdown that require good advice. 

So come and speak to us if you find yourself in this situation.

New super facts and figures from July 2025

If you’ve been keeping an eye on your super, you might be wondering whether the contribution limits are increasing this year. The answer is – not yet. 

Two key caps that determine how much you can put into super each year will stay the same from 1 July 2025. 

Concessional contributions

These are contributions made before tax – like employer contributions, salary sacrifice, or personal contributions that you claim as a tax deduction. They’re taxed at 15% when they go into your super fund (unless you’re a high-income earner, in which case extra tax may apply).

And here’s a bonus – if you haven’t used your full concessional caps in recent years and your total super balance is under $500,000 as at 30 June 2025, you may be able to use the catch-up (carry-forward) rule to contribute more.

Non-concessional contributions

These are contributions made from your after-tax money. You don’t get a tax deduction for these contributions, but they’re a great way to boost your super savings over time.

Plus, if you’re under 75, you might be able to use the bring-forward rule to contribute up to $360,000 in one go by using three years’ worth of caps. Just remember – eligibility rules apply, like your total super balance and whether you’ve used this rule before.

For now, these caps are staying at $30,000 for concessional contributions and $120,000 for non-concessional contributions per financial year. If you were hoping to contribute even more, you’ll need to wait for a future increase.

So what is changing? The transfer balance cap

Starting 1 July 2025, the limit on how much super you can move into a tax-free retirement pension account will go up from $1.9 million to $2 million. This limit is called the transfer balance cap. This change means you can transfer more of your super into a tax-free pension when you retire.

The money you withdraw from your super pension (also called an account-based pension) is not taxed if you are 60 or over and the pension’s investment earnings are not taxed either. This can make a big difference to your savings in retirement.

If you haven’t started a pension before, the new cap of $2 million applies to you in full. However, if you’ve already started one, your personal cap may be somewhere between $1.6 million and $2 million, depending on your past pension history.

In the end, this increase is great news for anyone thinking about retirement, giving you more room to grow your super in a tax-free environment.

Why does this matter?

Even though the contribution caps aren’t going up, the increase to the transfer balance cap is a good reminder to check in on your super strategy, especially if retirement is on the horizon.

If you’re still working, now’s a great time to make sure you’re making the most of the current concessional and non-concessional contribution limits to build your super while you can.

And if you’re approaching retirement, consider how the higher transfer balance cap could open up more tax-free opportunities for your pension savings. It might be worth thinking about whether you should contribute more to your super now to make the most of it later.

Need help?

Super can be complex, but you don’t have to work it all out on your own. If you’d like help understanding these changes or planning your next steps, get in touch with us. We’re here to help.