As we step into the first month of winter and approach the end of the financial year, attention is turning to the resilience of the economy and households.
May delivered mixed signals for the Australian economy as inflation eased slightly to 4.2% in April from 4.6% in March, although underlying inflation edged higher from 3.3% to 3.4%. The softer-than-expected inflation data reduced expectations of further rate hikes in the near term.
Australian share markets were volatile. The ASX 200 moved within a relatively narrow range through the month, slipping slightly overall despite periods of strength linked to resources and AI‑related stocks.
Globally, markets continued to be shaped by Middle East tensions and ongoing inflation concerns. US markets made some big gains with the S&P 500 hitting an all-time high in the final days of May.
Oil prices eased from April highs but remained elevated and volatile with renewed US air attacks in Iran risking high prices still.
Consumer sentiment improved modestly although households remain deeply pessimistic because of high interest rates and cost‑of‑living pressures. This pessimism is extending to the property market which is showing signs of a broad-based softening.
Investing for the next generation
For many, the goal of investing is about creating wealth for a comfortable financial future, as well as a legacy that supports your children and grandchildren for decades to come.
But one of the greatest risks to that legacy can be the challenge of dealing with sudden wealth. When adult children inherit large sums or significant assets without preparation, sometimes the result is family tension, poor decisions or erosion of wealth.
While precise figures vary, research and industry experience consistently show that many families struggle to preserve wealth beyond the second and third generations, largely due to behavioural and governance challenges rather than investment performance.
Building financial literacy
Financial capability is developed over years of exposure, education, and experience.
The Australian Securities and Investments Commission (ASIC) MoneySmart program emphasises that financial literacy is a core life skill, not simply a technical ability.
While an inheritance may be some years off, parents who are expecting to pass on some form of an inheritance, should begin involving their children in financial discussions where appropriate. This might include reviewing investment portfolios together, explaining the complexities of how superannuation works or discussing the rationale behind major financial decisions. Understanding how risk is associated with investing, and ongoing tax obligations is also essential to create the whole picture.
Practical experience is just as important as theory. Allowing adult children to manage a portion of investments, under guidance, can build confidence and accountability. This phased approach reduces the risk of overwhelm later, when financial responsibility increases significantly.
Gifting or loaning?
Another important consideration when supporting the next generation is whether to provide financial assistance as a gift or a loan. The decision has both ethical and practical implications.
Gifting can provide immediate support without the burden of repayment, allowing children to purchase a home, invest or establish a business. But unequal gifting among siblings may create perceptions of favouritism, even if the intention is fair. Clear communication and documentation of the reasoning behind decisions is essential.
Loaning, on the other hand, can maintain a sense of responsibility and fairness.
Loans structured with clear terms can encourage financial discipline and avoid creating dependency. Families often formalise the arrangements with written agreements that set expectations for repayments and interest. There are also taxation and legal considerations.
The Australian Taxation Office may assess certain arrangements differently depending on whether funds are genuinely gifted or loaned. Professional advice ensures that intentions are reflected correctly. Ultimately, the choice between gifting and loaning may come down to the financial maturity of the recipient and your estate plan.
Preparing the next generation beyond money
Financial preparation alone is not enough. Inheriting wealth also involves emotional and behavioural readiness.
Open conversations about wealth, values and expectations are important. This includes explaining the purpose of wealth, whether it is to provide security, support philanthropy or create opportunities for future generations.
Governance structures, such as family meetings, investment committees or advisory boards can also help heirs understand their roles and responsibilities and encourage collaboration.
Philanthropy is another powerful tool for preparing heirs. Involving children in charitable giving decisions can instil a sense of social responsibility. It reinforces the idea that wealth is not solely for personal use, but also a resource to benefit the broader community.
Managing the transition
Gradual transition strategies can ease the adjustment for both parents and children.
This might involve progressively transferring control of assets. For example, adult children may first participate in decision-making, then take on increasing responsibility for managing investments over time. Trust structures are often used for staged distributions, allowing flexibility and protection.
Regular reviews are equally important. As family circumstances change, so too should the plan. Marriage, divorce, business ventures or health issues can all affect how wealth should be managed and transferred.
A legacy of capability
Successful intergenerational wealth transfer is not measured by the size of the inheritance but by the preparedness of those who receive it. Financial literacy, decision-making and open communication are the foundations of lasting wealth. By investing time in educating and including the next generation, families can reduce the risks associated with sudden wealth and create a legacy that endures.
If you’d like to discuss how to prepare your family for a successful wealth transition, we’re here to help.
Get prepared for June 30
Tax time is just around the corner, so now is the time to get ahead and find out what strategies may be available to you before 30 June.
Time for a portfolio review
A good first step is to review your investment strategy. With recent market volatility, things may have shifted and your risk tolerance may have changed considerably.
It’s also worthwhile checking your capital gains or losses before 30 June, as this allows you to take action where appropriate.
For example, you may consider realising capital losses to offset gains from assets such as shares, property or crypto.
Super contribution strategies
You should also check your super contributions as early as possible. If you have not reached the Super Guarantee (SG) contributions cap of $30,000, or $120,000 for non-concessional contributions, you may be eligible to make additional contributions to your super.
If you plan to contribute before 30 June, check when your employer will make their contributions. The introduction of Payday Super means some employers are contributing earlier, which may affect your contribution caps.
You will also need to find out the cut-off date from your super fund, which is generally 25-26 June.
Speak to us about the various ways you could boost your super before the EOFY.
For SMSF members, make sure that:
- All contributions are received by the fund’s bank account by 30 June
- Minimum pension payments are made
- Asset valuations are up to date
- Fund records are current
Division 296 super tax
It’s also important to note that Division 296 tax comes into effect on 1 July 2026 and applies to investment earnings earned during 2026–27 and the following financial years.
For those whose total super balance exceeds $3 million on 30 June 2027 there will be a 15 per cent additional tax on the proportion of earnings corresponding to the Total Super Balance (TSB) between $3 million and $10 million and an additional 25 per cent tax on the proportion of earnings corresponding to TSBs above $10 million.
Tax timing strategies
If you have regular deductible expenses, such as investment loan interest or annual costs, it may be useful for some to prepay them before 30 June to claim a deduction for this financial year.
You may also consider the timing of income expected before 30 June. Deferring income until after the end of the financial year may help reduce your tax liability.
Tax rates are also changing for lower income earners. From 1 July 2026, the rate for income between $18,201 and $45,000 will reduce from 16 per cent to 15 per cent, with a further reduction to 14 per cent the following year.
Tax returns done right
While planning ahead for the EOFY is key, it’s also important to take the time to understand what the ATO is focusing on when it comes to preparing your tax return post June 30.
This year, the ATO will be focusing on work-related deductions and income that’s not declared on tax returns.
If you are claiming work-related expenses, ensure they meet the ATO’s three golden rules:
- The expense must be directly related to earning your income
- You must not have been reimbursed
- You must have records to support your claim, such as receipts or a logbook.
If you work from home for all or part of the week, you can use either the actual cost method or the fixed rate method.
Don’t overlook income
The ATO is also paying close attention to undeclared income. This includes:
- Cash payments
- Interest income
- Rental income
- Earnings from crypto assets.
For those with a side hustle, check whether it may be considered a business. All business income, regardless of amount, is assessable and must be declared.
If you intend to claim deductions for business expenses related to your side hustle, ensure they are directly connected to earning that income and are supported by receipts. Your accountant will be able to determine what should be declared.
If you’d like to talk to us about ways to boost your super before EOFY or questions about your investment strategies, call today to ensure everything is in place before 30 June.
Source: https://www.ato.gov.au
2026-27 Federal Budget: The TAX take away
Jim Chalmers’ fifth Budget included significant tax reforms with the package billed as “the most significant tax reform package in more than a quarter of a century”.
While Australian workers and small businesses are likely to be happy, property investors and those with discretionary (family) trusts face new rules and tax rates that will require careful review.
The package was announced against a backdrop of global uncertainty and demographic change, with the Treasurer emphasising the tax reforms represent a key component in the government’s response to intergenerational inequality and challenges to national resilience.
Tax offset and instant deduction for individuals
Over 13 million workers will benefit from a new annual $250 Working Australians Tax Offset from 1 July 2028. This will increase the effective tax-free threshold for workers to $19,985.
The offset is in addition to announced cuts to the lowest tax rate on 1 July 2026 – when the rate drops to 15 per cent – and on 1 July 2027 (14 per cent).
The Budget included a new $1,000 instant tax deduction for work-related expenses from 2026-27, reducing paperwork requirements for employees claiming these deductions.
Incentives for business
With cash flow a key issue for smaller businesses, the Budget included measures to make the popular $20,000 instant asset write-off permanent from 1 July 2026.
It also permanently reinstated loss carry backs. From 2026-27, eligible companies making a loss in the current income year will be able to use the loss to obtain a refund against tax paid in the prior two income years.
From 2028-29, small start-ups will be able to access cash flow support through a refund for tax losses in their first two years of operation, up to the value of fringe benefits tax (FBT) and withholding tax paid on employee wages.
Businesses will gain flexibility to opt in to monthly PAYG instalments from 1 July 2027 and will receive a 25 per cent FBT discount for eligible electric cars over $75,000 from the same date.
Incentives for venture capital and R&D
From 1 July 2027, tax incentives for venture capital will be expanded through changes to the Early-Stage Venture Capital Limit Partnership and Venture Capital Limit Partnership programs.
The offset for experimental core R&D will also be increased by around 25 to 50 per cent, together with an increased turnover threshold for the refundable offset and a new $200 million maximum expenditure cap.
Negative gearing reforms
Two significant changes to existing tax rules for property investments were announced in the Budget.
Negative gearing will no longer be available for established residential properties from 1 July 2027. For all properties held prior to Budget night, the existing tax arrangements will remain unchanged.
Investors who purchase new builds will still be able to deduct their losses from other income.
Purchasers of established housing after the Budget announcement, however, will only be able to deduct losses against residential property income. Unused losses can be carried forward to future years but will no longer be deductible against other income (such as wages).
CGT discount rule changes
Another major change is replacement of the current 50 per cent capital gains tax discount with cost-based indexation from 1 July 2027.
The government is also introducing a minimum 30 per cent tax rate on capital gains starting on the same date.
The CGT change will only apply to gains arising after 1 July 2027, with investors in new builds given a choice of the 50 per cent CGT discount or the new arrangements.
Minimum tax rate for discretionary trusts
The tax change likely to generate the most criticism is a new minimum taxation rate of 30 per cent for discretionary trust distributions from 1 July 2028.
The new rate will not apply to fixed trusts, super funds, special disability trusts, deceased estates and some types of farming income.
Rollover relief will be available for three years from 1 July 2027 to assist small businesses and others wishing to restructure in light of the new rules.
Information in this article has been sourced from the Budget Speech 2026-27 and Federal Budget Support documents.
It is important to note that the policies outlined in this article are yet to be passed as legislation and therefore may be subject to change.