Selling shares? Beware of all the CGT rules!

With Trump’s tariffs causing big sell downs on share markets around the world, it is important to understand a few key things about how capital gains (and capital losses) from the sale of shares are treated for CGT purposes in Australia.

For a start, it is crucial to know what the cost – or specifically the “cost base” – of the shares are in order to calculate the assessable capital gain (or loss). This cost base will include relevant brokerage fees. 

And for shares received under a dividend reinvestment scheme (DRIP), the cost base will be the value of the dividend which has been applied to buy shares in the company.

Importantly, where only some of the shares in a parcel of shares are sold it will be necessary to identify exactly which of those shares have been sold – in circumstances where you may have acquired the shares at different times for different costs.

In this regard, usually some form of “identifier” (ASX or company etc) is attached to the shares. 

But where it is not, the ATO allows you to choose which parcel of shares have been sold – provided you keep records of this so that there is no doubling-up or reselling of the same parcel of the same shares again later on down the track. 

And of course, this may allow you to choose which shares you sell in a tax-effective manner.

Of course, the CGT discount is available to reduce the amount of your assessable capital by 50% if you have owned the shares for 12 months – or 365 days to be precise. And in an interesting bit of nitpicking, the ATO takes the view that this does not include the day on which you bought the shares and the day on which you sold them! 

Another important thing to understand is how exactly you calculate your “net” capital gain for the income year that is to be included in your assessable income.

And the key thing to note here is that any capital losses of the taxpayer from either the immediate year or prior years must first be applied to any capital gain/s of the taxpayer before applying the 50% CGT discount – and this will mean that there is a bigger net capital gain (if any) to be assessed (as opposed to if the discount was applied first).

However, where there is more than one capital gain from a particular source, the taxpayer can choose which capital gain it will apply the capital loss against first. And, usually, the best result in this case is to apply the capital loss to a gain that is not eligible for the CGT discount. 

But where there are a number of capital gains and losses to be netted this process can get complicated – and our advice will be invaluable in this case.    

Finally, beware of engaging in “wash sales” in the current volatile market – and this broadly occurs where you sell the shares to, say, realise a capital loss and then buy them back soon after in order to obtain some tax advantage. This ATO treats wash sales as tax avoidance. 

So, if you are selling shares, see us first so we can help you do so in the most tax-effective method relative to all your circumstances.

Is that person really an independent contractor?

Getting the answer to that question right can save you a lot of money. Getting it wrong, however, can end up costing you a packet, especially where multiple income years are involved.

Where it turns out that a person you thought you had engaged as an independent contractor is really your employee, you could be up for:

There could also be ramifications under employment laws, for example in relation to leave entitlements and unfair dismissal claims.

It can be quite tricky in some cases to determine with confidence on which side of the line the person falls. While you and the person you’ve engaged may be in furious agreement that they are an independent contractor, the ATO may take a different view, with all the downsides that come with that.

The best starting point is to have a written contract covering all aspects of the engagement. Having a written contract removes any ambiguities about what the rights and obligations of the respective parties are.

A written contract might be expected to cover such areas as:

Control

In an employment relationship, the business has the legal right to specify how, when and where the work is performed, whereas an independent contractor would make those decisions, subject to the reasonable directions of the business.

Integration

An employee is an integral part of the business. They perform work as a representative of the business. An independent contractor provides services to the business as part of their own business.

Remuneration

Employees are paid for the time worked whereas independent contractors are paid for a result, usually based on a quoted price.

Subcontracting or delegation

An employee must perform the work themselves and cannot pay someone else to do it for them. Their contract will have no powers to subcontract or delegate. An independent contractor would have the right to delegate or subcontract their work to others. Such a clause must not be a sham and should be legally capable of being exercised. Having such a clause has been helpful for the taxpayer in disputes with the ATO, even where the right to delegate is never exercised.

Tools and equipment

The business provides any tools and equipment an employee needs to carry out the work (or reimburses the employee where they provide the tools themselves). An independent contractor supplies any tools and equipment needed to complete the work.

Risk

An employee bears little or no commercial risk from any defects in their work. An independent contractor bears the commercial risk of any defects in their work. They are required to rectify mistakes at their own expense.

Exclusivity

While not determinative in itself, someone is more likely to be an independent contractor if they also perform work for others.

Leave entitlements

Independent contractors are not entitled to leave payments in the same way that employees are.

Taking someone on as an independent contractor can save huge oncosts which is obviously attractive for the business. But if you bring someone in who works on your premises according to your instructions, gets paid on the basis of timesheets, uses your tools and equipment, is not at risk for losses or damages that arise from their mistakes, has no ability to delegate and works for you exclusively, the chances are you are on the wrong side of the line.

If you have engaged someone through a company, trust or a partnership, your contract is with the entity and employees have to be natural persons. The person doing the work for the entity may have to work through the complex Personal Services Income rules, but that will be a matter for them.

If the shoe is on the other foot, and you have been taken on by somebody as an independent contractor in circumstances where the relevant factors point more strongly to an employment relationship, you could point out the risk the business is running and ask to be put on an employment basis, although that could raise issues around where the power lies in the relationship.

Please feel free to come in for a discussion about the employee/contractor divide.

Can you leave your super to your grandchildren?

Many grandparents wonder if they can leave their superannuation to their grandchildren. Superannuation, or “super,” is a key part of retirement savings in Australia, and its rules can be tricky. So, can a grandparent pass their super to a grandchild? The short answer is – rarely. But there is a solution. A binding super death benefit nomination in favour of your estate can allow you to bequeath your super to whomever you please. Just ensure your will clearly states who you want to inherit your super.

Who can receive super death benefits?

Super death benefits are the funds paid out from a person’s super account after they pass away. These benefits can only go to certain people, being dependents under superannuation law. Dependents include a spouse, children under 18, and anyone who was either in an interdependency relationship with the deceased or financially dependent on them. For a grandchild to directly receive their grandparent’s super upon their passing, they need to be in an interdependent relationship or financially dependent on the grandparent.

What is an interdependency relationship?

An interdependency relationship happens when two people have a close personal relationship and rely on each other in specific ways. 

An interdependency relationship exists between two people if:

What does financial dependency mean?

If the grandchild doesn’t meet the interdependency rules, they could still qualify as a financial dependent. This means they relied on the grandparent for necessary financial support, especially for basics like food, housing, or clothing. It’s not just about getting money – it’s about needing that money to get by. A grandparent paying school fees won’t be enough to satisfy this requirement.

The third option: Super paid to your estate

Even if a grandchild doesn’t qualify as a dependent, there’s still a way for super benefits to be passed to them – through the estate. When you pass away, you can arrange for your super death benefit to be paid to your estate via a binding death benefit nomination. A binding nomination is like an instruction to your super fund to pay the death benefit to a particular dependent or your estate. You can use your will to ensure your grandchild inherits part of your estate, including your super funds. So always make sure that your will is up to date. This approach bypasses the strict rules for direct payments to super dependents. 

Leaving super to grandchildren is tricky since they rarely qualify as dependents meaning a super fund may not be able to pay them directly. Instead you may use a binding nomination to direct super to your estate, then allocate it to your grandchild via your will. Professional advice is key so give us a call if you need help navigating super death benefits.

30 June 2025 Tax and Super Checklist

With the end of the financial year coming up, now’s a great time to get on top of your tax and super. A little planning before 30 June can help you make the most of any opportunities to reduce tax, boost your super, and avoid last-minute surprises.

This checklist outlines key things to consider and action before the financial year wraps up. It’s a simple way to stay on track and finish the year with confidence.

TAX CHECKLIST

Here are some practical things to consider before 30 June to help you tidy up your tax position and potentially reduce your bill.

Bad Debts

If you’re running a business, write off any bad debts that won’t be recovered before 30 June so they can be claimed.

Employee Bonuses and Director Fees

Planning to pay employee bonuses or director fees? Make sure they’re confirmed in writing and communicated to recipients by 30 June, even if payment happens later.

Charitable Donations

Bring forward any planned donations and have the highest-earning family member make the gift. Remember:

Prepay Interest on Loan

If you have a loan for an income-generating asset (like an investment property), consider prepaying interest before 30 June to bring forward the deduction.

Claim Work-Related or Business Costs

Bring forward costs such as repairs, stationery, or supplies by 30 June 2025. These small deductions can add up. This applies to all taxpayers, not just businesses.

Prepay Expenses

You can claim prepaid expenses, such as insurance or subscriptions. 

Where the expense is:

Write Off Old Stock

If you hold stock, write off any damaged, outdated or unsellable items before 30 June 2025.

Review Assets & Depreciation

Small businesses (turnover under $10m) can immediately deduct assets under $20,000 that were acquired from 1 July 2024 and ready to use by 30 June 2025.

Also, remove any old equipment from your depreciation schedule if it’s been sold, thrown out, or is no longer usable.

Electric Vehicles

If your business provides an electric vehicle to an employee, you may be eligible for depreciation deductions and Fringe Benefits Tax (FBT) concessions.

Defer Income

If possible, delay receiving income (like issuing invoices) until after 30 June to push tax into next year. 

Offset Capital Gain

Selling an asset this year with a profit? You could crystallise capital losses before 30 June to offset that gain.

Watch out: ‘Wash sales’ (selling and rebuying the same asset just to get a loss) are not allowed.

Defer Capital Gains 

If you’re planning to sell an asset for a gain, consider delaying until after 30 June if it makes sense for your broader financial situation.

Personal Services Income (PSI)

If you’re working in your own name (like a contractor or freelancer), check that your income qualifies as a business under PSI rules.

Business Losses

If your business runs at a loss, you may not be able to claim that loss if you carry on a “non-commercial business” – unless you pass one of the ATO’s tests (eg, income, asset, or profit test).

Company Loans to Shareholders (Division 7A)

If you’ve borrowed from your company, the loan needs to be properly documented, put on commercial terms and repaid.

If repaying through dividends, make sure the dividends are legally declared and paid prior to 1 July (with appropriate documentation in place). 

Trust Distributions

If you’re a trustee, resolutions must be made before 30 June to properly distribute income to beneficiaries. You also need to let your beneficiaries know what they’re entitled to.

Beneficiary TFN Reporting

If new beneficiaries gave you their TFN between April–June, you must lodge a TFN report by 31 July 2025.

Motor Vehicle Logbook

Planning to claim car expenses using the logbook method?

Start now and track 12 weeks of usage (can span over two tax years). Also record your odometer readings. 

Private Health Insurance

Make sure you have the right level of cover to avoid the Medicare Levy Surcharge, especially if your family situation has changed (eg. new baby, separation, adult children moving off your policy).

Check Your Insurance Cover

Review your personal and business insurance needs. Not only does this provide peace of mind, some policies may also be tax deductible, especially if prepaid.

Review Your Business Structure

Is your current setup still the right one? Changes in income, family, or risk levels may mean a trust, company, or restructure could be more effective. We can help you weigh up your options.

Super Checklist

Make the most of your super before 30 June 2025 with these smart, simple tips.

Check Your Contribution Limits

Before adding more to super, log in to myGov > ATO > Super > Information to check how much you’ve already contributed.

Tip: If you’re in an SMSF, your info may not be up to date in myGov, but we can help you work this out.

Add to Super and Claim a Tax Deduction

You may be able to make a personal deductible contribution and claim it at tax time.

To be eligible:

Don’t forget: To claim a tax deduction, submit a Notice of Intent to Claim a Deduction to your super fund and get their confirmation before lodging your tax return or making withdrawals, rollovers, or starting a pension.

Use Up Unused Contribution Limits

Haven’t used your full concessional contribution cap in recent years? You may be able to catch up using the carry-forward rule if your total super balance is under $500,000 on 30 June 2024.

Tip – Unused limits from 2019–20 expire after 30 June 2025 so don’t miss out.

Split Contributions with Your Spouse

You can split up to 85% of your 2023–24 concessional (pre-tax) contributions with your spouse before 1 July 2025. 

This is a great way to even out your balances and plan ahead for retirement.

Note – To use this strategy, your spouse must be under their preservation age or aged 64 or younger and not retired when you make the request to your fund.

Get a Tax Offset for Spouse Contributions

If your spouse earns less than $40,000, consider making an after-tax contribution to their super.

By doing so, you could get up to a $540 tax offset while boosting their retirement savings.

Grab a Government Co-Contribution

If you earn less than $60,400 and at least 10% comes from work or running a business, you could be eligible for a government co-contribution. All you need to do is add up to $1,000 to your super and the government may add up to $500 extra.

Avoid the Division 293 Tax Trap

If your income (plus employer contributions) is over $250,000, you may pay an extra 15% tax on some of your super contributions.

Strategies like bringing forward expenses or deferring income may help keep you below the threshold.

Maximise Non-Concessional (After-Tax) Contributions

If you’re under 75, you may be able to contribute up to $360,000 in one year using the bring-forward rule.

New rules from 1 July 2025 may allow you to contribute even more – speak with us about getting the timing right.

Need Help?
We’re here to help you make the most of EOFY tax and super opportunities. Contact us to discuss what options might work best for your situation.

Getting on the front foot for your 2024-25 tax return

Here are some more detailed tips relating to a couple of common claims that often attract ATO scrutiny.

Working from home

A lot of people are still regularly working from home for at least part of the week. If you do, you are entitled to a deduction for the additional costs you incur. To be eligible to make a claim it is not necessary to set aside an area exclusively for business or employment related use. A shared dining table is all you need. Except in very unusual cases, deductions are not available for occupancy costs such as mortgage interest, rent, rates and insurances.

Most people make their claim using the fixed rate method, which is 70 cents per hour for 2024-25. The fixed rate method covers home and mobile internet costs, mobile and home phone costs, power and gas charges and stationery and computer consumables. Under the fixed rate method, you can also claim depreciation and repairs for assets used such as desks, office chairs and laptops, where those items cost more than $300. This is on top of the 70 cents per hour.

Alternatively, you could use the actual cost method, but that requires more detailed records and receipts.

We can help you to legitimately maximise your claim, but before you can claim anything, you need to have:

Use of your own vehicle for business or employment related purposes

For starters, any reimbursement you receive from your employer, either on a cents per kilometre basis or a flat amount, is assessable in your hands and will be shown on your payment summary. Not everyone who uses their own car for work is reimbursed in this way, however, and you are still entitled to make a claim, in spite of not receiving any reimbursement.

There are two alternative ways of claiming a deduction for business or employment related car use – the cents per kilometre method or the logbook method. For those who use the cents per kilometre method (which only applies to claims of up to 5,000 kms) the process is pretty simple – just multiply the kilometre figure by 88 cents. So if your business or employment related use was 4,000 kms, your 2024-25 claim would be $3,520.

Under the cents per kilometre method, you don’t need to keep a full-blown logbook that tracks every journey. However, the ATO may ask you how you came up with the claimed distance, especially where you’re pushing up against the 5,000 km threshold. So you will need to have a diary of some sort that shows how you have estimated the kilometres being claimed – anything to prove you haven’t just plucked the figures out of thin air.

People sometimes get confused about what qualifies as business or employment related car use. You can make a claim where:

Non-deductible travel includes situations where:

The logbook method is the alternative to the cents per km method. As the name implies, you need to keep a detailed logbook, but only for a representative period of twelve weeks to work out your business related use. Provided your pattern of car usage remains broadly the same, the resulting business use percentage is good for five years, after which you have to repeat the process. The logbook method might be more appropriate where your business or employment related car use is well over 5,000 kms.

For each journey, the logbook needs to show the date of the trip, the starting and finishing odometer reading, the distance travelled and the reasons for the journey. Where you are completing your logbook for the 2024-25 financial year, you need to complete the logbook entries during that year, after each trip. The logbook should come up with a business percentage, which can then be applied to all the costs associated with running the car, including depreciation. Receipts, invoices or other documentary evidence has to be maintained to verify the actual expenditure being claimed.

Car logbooks are available from Officeworks and most stationers, and can also be ordered online.

We can help you with the record keeping and logbook requirements.