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. 

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.