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.

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.