Archives: Investax FAQs

From 1 February 2024, the ATO introduced a new method for calculating the electricity cost of charging a fully electric vehicle at home. Under this practical compliance guideline, you can claim 4.20 cents per kilometre travelled to cover the cost of charging your electric car at your residence. This rate is designed to simplify the process by removing the need to calculate the exact amount of electricity drawn from your household power supply.

To use this method, you only need to keep accurate odometer records showing the total kilometres travelled during the financial year. The rate can be applied to business-use kilometres for individuals claiming a deduction in their tax return, or to work-related kilometres for employers calculating benefits and costs associated with employee vehicle use.

If some of your charging is done at home and some at public or commercial charging stations, you can claim a mix of the standard 4.20 cent rate and actual commercial charging costs. This requires a reasonable method of estimating what proportion of travel was supported by home charging versus public charging.

It is important to note that this method only applies to fully electric vehicles. Plug-in hybrids are not currently eligible for the 4.20 cent rate (unless the ATO finalises the draft guideline dealing with hybrids). Until that happens, owners of hybrids must rely on actual electricity and fuel records.

You can also choose not to use the 4.20 cent shortcut and instead claim actual electricity costs. To do this, you must have reliable evidence that clearly separates the electricity used to charge your vehicle from the rest of your household consumption. This usually requires a smart charger, an app-based recording system, or another accurate measurement method.

 

The 45-day rule, often referred to as the holding period rule, is designed to prevent taxpayers from claiming franking credits on shares that they have not held for a sufficient period of time. The Australian Taxation Office (ATO) introduced this integrity measure to ensure that only genuine long-term investors—not short-term traders—benefit from imputation credits attached to dividends.

Under this rule, you must hold shares “at risk” for at least 45 continuous days to be eligible to claim franking credits as a tax offset. For preference shares, the required holding period is 90 days. The ATO requires that when counting the days, you must exclude the day of acquisition and the day of disposal.

The “at-risk” condition means that you must retain the economic exposure to the shares during this period. If you use hedging strategies, options, or other arrangements that effectively eliminate your risk of loss or opportunity for gain, the ATO may consider that you were not holding the shares at risk, and the franking credit claim could be denied.

This rule applies to individuals, companies, and trusts that receive franked dividends. However, there is a small shareholder exemption—if your total franking credit entitlement for the year is $5,000 or less, the 45-day rule does not apply.

Example:
Suppose you purchase 1,000 shares in an Australian company on 1 April and receive a fully franked dividend on 30 April. You sell those shares on 20 May. Because you held the shares for only 49 days, but the day of purchase and sale are excluded, your effective holding period is 47 days. In this case, you meet the 45-day rule, and the franking credits can be claimed. However, if you had sold the shares just a few days earlier, you might not qualify.

Key takeaways:

• Must hold shares “at risk” for at least 45 days (or 90 for preference shares).
• Exclude the day of purchase and the day of sale when counting days.
• Applies to both individuals and entities receiving franked dividends.
• $5,000 exemption applies for small shareholders.
• Designed to prevent dividend trading and short-term manipulation.

 

Reference –  “Franking tax offsets 

 

Many investors begin their investment journey without considering estate planning or asset protection. It is only after they build a substantial asset base or experience major life events such as divorce, a family death, or financial difficulties that they start thinking about how to protect their assets and pass them on to their children. If you hold assets in your personal name and want to ensure that your children and grandchildren are the ones who benefit from those assets, a testamentary trust is one of the most effective ways to keep your property portfolio within the family after your passing.

Established through your Will, it allows your assets to be managed by trusted individuals (trustees) for the benefit of your chosen beneficiaries — typically your children and family members.

Unlike direct inheritance, which transfers ownership immediately, a testamentary trust gives you greater control and protection. It helps safeguard family wealth from potential risks such as divorce settlements, bankruptcy, or financial mismanagement by beneficiaries. You can also specify how and when your children access their inheritance, ensuring financial discipline and long-term benefit.

From a tax perspective, testamentary trusts offer valuable flexibility. Income distributed to minor children can be taxed at ordinary adult rates, not at the penalty rates usually applied to minors, which can lead to significant family tax savings.

If your goal is to ensure your wealth supports only your intended family members while providing both protection and flexibility, a testamentary trust can be a crucial component of your estate planning.

The 30 day rule applies to employees who receive shares or rights (such as options) through an Employee Share Scheme (ESS) where tax is deferred until a later time. The rule determines when you are taxed on those shares and helps ensure that the tax outcome matches the real value you receive.

When you receive shares under a tax-deferred ESS, you do not pay tax when the shares are first granted. Instead, you are taxed later at a “deferred taxing point.” This deferred taxing point usually happens at the earliest of:

• When you sell the shares,
• When the shares are no longer subject to any restrictions,
• When you stop working for the employer, or
• 15 years after you received the shares.

However, the 30 day rule changes this timing if you sell the shares or rights within 30 days after the deferred taxing point. In that case, the taxing point moves from the original vesting date to the actual sale date.

This rule is designed to make sure you are taxed on the value you actually received from the sale, rather than on the value of the shares at an earlier date. It keeps the calculation fair and prevents small timing differences from creating unexpected tax results.

Example:
Suppose you receive 2,000 shares in your company through an ESS that qualifies for tax deferral. The shares vest and restrictions are lifted on 1 July 2025, creating a deferred taxing point. If you sell those shares on 20 July 2025—within 30 days—the taxing point will move to the sale date (20 July). You will then be taxed based on the share price on 20 July rather than the price on 1 July.

If you sell the shares after 30 days, the original taxing point (1 July) will apply. In that case, you will first pay tax on the discount at the deferred taxing point, and later, when you sell the shares, any extra profit will be treated as a capital gain.

The 30 day rule helps simplify taxation for employees who sell their shares soon after they become unrestricted. It prevents double taxation and ensures fair treatment between employees who keep their shares and those who sell them soon after vesting.

For official reference, see the ATO guidance under Employee Share Schemes – Employer Reporting Requirements: ato.gov.au.

A testamentary trust is one of the most effective ways to ensure your assets and property portfolio remain within your family after your passing. Established through your Will, it allows your assets to be managed by trusted individuals (trustees) for the benefit of your chosen beneficiaries — typically your children and family members.

Unlike direct inheritance, which transfers ownership immediately, a testamentary trust gives you greater control and protection. It helps safeguard family wealth from potential risks such as divorce settlements, bankruptcy, or financial mismanagement by beneficiaries. You can also specify how and when your children access their inheritance, ensuring financial discipline and long-term benefit.

From a tax perspective, testamentary trusts offer flexibility. Income distributed to minor children can be taxed at ordinary adult rates, not at the penalty rates usually applied to minors, which can lead to significant family tax savings.

If you want your wealth to support only your intended family members and provide both protection and flexibility, a testamentary trust can be an essential part of your estate planning.

When deciding whether to buy a vehicle with finance or cash, the best option depends on your business structure, cash flow, and long-term tax planning goals.

Paying cash means you own the vehicle outright from day one, avoiding interest and loan commitments. It’s simple, cost-effective, and there’s no ongoing liability. However, it also ties up valuable capital that could otherwise be used for business growth or investment. If the vehicle is used for business purposes, you can generally claim tax deductions for depreciation and running costs—but not for interest, since no finance is involved.

Financing the vehicle—through a chattel mortgage or hire purchase—can provide flexibility and potential tax benefits. The interest and depreciation (or instant asset write-off, if eligible) are generally tax-deductible based on the business-use percentage. It also helps preserve cash flow by spreading the cost over time. However, many finance agreements include a balloon payment at the end of the term. While this reduces monthly repayments, it can create significant cash-flow pressure later if you decide to keep the vehicle instead of trading it in or refinancing.

A novated lease is another popular option—especially for employees who use their car for both business and personal use. Under a novated lease, your employer makes the lease payments from your pre-tax income, reducing your taxable income and simplifying running costs such as fuel, insurance, and maintenance. Similar to hire purchase agreements, novated leases often include a residual or balloon payment at the end of the term. While this lowers initial repayments, it can lead to a substantial cash-flow hit when you choose to retain the vehicle.

Ultimately, there’s no universal answer. If your business values liquidity and you want to maximise deductions through financing, a chattel mortgage or novated lease might be ideal. But if you prefer simplicity and full ownership without long-term obligations, paying cash could be the smarter move.

Tip: Before deciding, consult your Investax tax advisor to assess how each option affects your cash flow, Fringe Benefits Tax (FBT) exposure, and your broader business tax position.

From 1 July 2025, interest charged by the ATO on outstanding tax debts will no longer be tax deductible. This includes both the General Interest Charge (GIC) and Shortfall Interest Charge (SIC) that the Australian Taxation Office applies when tax is paid late or underpaid.

Until 30 June 2025, you can still claim these ATO interest charges as part of your cost of managing tax affairs. But from the 2025–26 financial year onwards, that deduction will be removed. This means any ATO interest incurred after 1 July 2025 will become a non-deductible expense, increasing the after-tax cost of carrying ATO debt.

For business owners, one potential strategy is to refinance the ATO debt using a business or equity loan. The interest on a genuine business loan remains tax deductible if the borrowed funds are used for an income-producing purpose, such as paying down ATO liabilities. In addition, commercial loan interest rates are usually much lower than ATO interest rates, which makes refinancing both tax-effective and cost-efficient.

If you’re unsure how this change affects your business or whether refinancing makes sense in your case, speak with the tax specialists at Investax Group. Our accountants can help you assess your options and implement the most effective tax strategy for your outstanding ATO tax debts. 

Yes, a foreign resident can contribute to their Australian superannuation fund and, in many cases, claim a tax deduction for it—provided specific conditions are met. Even if you’re living overseas, as long as you have assessable income in Australia and contribute to a complying Australian super fund, the contribution can generally be treated as tax deductible.

Here’s a simple example. Let’s say you’re a foreign resident who owns a rental property in Australia and earns $50,000 in annual rental income. Because you’re a non-resident, you’ll pay Australian tax on that $50,000 at the foreign resident tax rate. However, if you decide to contribute, for example, $10,000 of that income into your Australian super fund, and you submit a Notice of Intent to Claim a Deduction to your fund before lodging your tax return, this contribution can become tax deductible. In that case, your taxable income would reduce from $50,000 to $40,000—helping you save on tax while growing your retirement savings in a tax-effective way.

To be eligible, your super fund must be a complying fund and must accept personal contributions from non-residents. You’ll also need to submit a Notice of Intent to Claim a Deduction and receive acknowledgment from the fund confirming your notice before you lodge your tax return. It’s equally important to remember that deductions can only be claimed against your Australian-sourced income. If you have no income taxable in Australia—for example, if all your earnings are from overseas—then the deduction won’t provide any practical tax benefit, even though the contribution itself may still be allowed.

So, in summary, yes—you can contribute to your Australian super fund as a foreign resident, and if you have Australian income, those contributions can reduce your tax payable while helping you build long-term wealth for retirement. It’s a great way to turn Australian rental or investment income into future savings, provided you follow the correct process and meet the ATO’s requirements.

You can continue making super contributions after retirement, but the rules depend on your age, your total super balance (TSB), and whether concessional or non-concessional contributions are being made.

The work test only applies if you’re aged 67 to 74 and you want to claim a tax deduction for personal super contributions. If you’re under 67, or making non-concessional contributions, no work test is required.

1. Personal Contributions (Tax Deduction): Yes, you can claim a tax deduction on a personal contribution as long as it doesn’t push you into a tax loss position. Generally tax accountants do not recommend claiming deductions when your taxable income is below the tax-free threshold of $22,575 for FY26, as there is usually no benefit in doing so.
2. Catch-Up Contributions: Yes, catch-up concessional contributions are available if your total super balance (TSB) is under $500,000 on 30 June 2025, and you have unused concessional cap amounts from the past five years.
3. Non-Concessional and Bring-Forward Contributions: Yes, you can make non-concessional contributions and use the bring-forward rule if your super balance is below the ATO thresholds. For FY26, the rules are:

• • TSB less than $1.76 million → up to $360,000 (3-year bring-forward)
  • TSB $1.76m – under $1.88m → up to $240,000 (2-year bring-forward)
  • TSB $1.88m – under $2m → up to $120,000 (standard annual cap)
  • TSB $2m or more → no non-concessional contributions allowed