Archives: Investax FAQs

It’s quite common for investors to use an equity loan to fund the deposit and stamp duty when purchasing an investment property. Often, the property isn’t rented out immediately prompting one of the most frequently asked questions: Can I still claim the interest on my equity loan as a tax deduction?

The short answer is: Yes—provided the borrowed funds were used to acquire the property, and the property was genuinely available for rent after settlement.

Here’s how it breaks down:

• Before Settlement (e.g. for deposit and stamp duty): If the equity loan was used to cover the deposit, stamp duty, legal fees, or other upfront acquisition costs, the interest on those funds is generally deductible. That’s because the purpose of the borrowing was to acquire an income-producing asset—even if the rental income hadn’t started yet.
• After Settlement but Before Tenancy: As long as the property was genuinely available for rent (e.g. advertised at market rent with no unreasonable restrictions), the interest continues to be deductible—even if a tenant hadn’t moved in yet.

📝 Important:  Keep accurate records of when funds were used, what they were used for, and when the property was first made available for lease to support your claim.

You can usually access your super or SMSF tax-free when:

1. You turn 65 – No need to retire. You can access your super or Self-Managed Super Fund as a lump sum or income stream, tax-free.
2. You’re 60 or over and leave a job – You can withdraw all the super you’ve built up in your Self-Managed Superfund (SMSF) to that point tax-free, even if you keep working elsewhere. This is because ceasing an employment arrangement after turning 60 satisfies a “condition of release”, allowing you to withdraw your SMSF benefits without tax implications.Example – Sonya is 61 years old and has been working at Company A for several years. She decides to resign from her position at Company A but plans to start a new job at Company B shortly after. Upon resigning from Company A, Sonya meets a condition of release due to ceasing employment after age 60. This allows her to access the Self-Managed Super Fund benefits she accumulated up to the point of leaving Company A tax-free.However, any SMSF contributions made during her employment at Company B will be preserved and can only be accessed when she meets another condition of release, such as retiring or turning 65.
3. You retire after reaching your preservation age (between 55 and 60, depending on your birth year) – You can access your Self-Managed Super Fund, but some of it may be taxed if you’re under 60. The tax-free portion of your member balance won’t be taxed, but the taxable portion may be, depending on how much you withdraw and whether you take it as a lump sum or income stream.
4. You’re diagnosed with a terminal illness – If two doctors certify you’re likely to pass away within 24 months, your super or member balance in your SMSF can be accessed tax-free.

Yes, you can rent your investment property to your children or other family members and still claim negative gearing—but there are strict conditions you need to meet. The rental arrangement must pass the ATO’s “arms-length” test.

In simple terms, the Australian Taxation Office (ATO) wants to make sure the rental setup is genuine and commercial—not just a personal arrangement disguised as an investment. That means:

You must charge market rent. If you rent the property to your kids or family members at below-market rent—even with good intentions—you won’t be able to claim the full tax deductions. The ATO will require you to proportion your expenses based on the rent you actually receive.

For example: Let’s say the market rent for your property is $600 per week, but you’re only charging your adult child $420 per week. That’s 70% of the market rent. In this case, you’ll only be able to claim 70% of your allowable expenses—such as loan interest, council rates, and maintenance costs.

There should be a formal lease agreement. Just like any standard tenancy, put everything in writing. Include the rent amount, payment schedule, bond details, and tenant obligations.

The property must genuinely be available for rent. Your child or relative can’t live there rent-free or treat it like a holiday home. The ATO expects to see a genuine attempt to generate income.

Keep proper records. You’ll need to document rent payments, expenses, and any communication related to the tenancy. This helps show that the arrangement is being treated just like any other rental.

Also, be aware that renting to close family—especially children—might raise red flags with the ATO. They may take a closer look to confirm that your deductions are based on a real investment strategy, not a personal favour.

A Binding Death Benefit Nomination (BDBN) is a written direction you give to your SMSF trustee that tells them exactly who should receive your superannuation benefits when you pass away. It takes the decision out of the trustee’s hands and ensures your wishes are legally followed—provided the nomination is valid under the trust deed and superannuation law.

 

In many retail and industry super funds, BDBNs automatically expire every 3 years under superannuation law (SISR 6.17A). This means members must remember to renew them regularly or risk the nomination becoming non-binding. That expiry rule can lead to unintended outcomes if not kept up to date.

However, SMSFs offer more control. The SMSF deed facilitated by Investax is specifically drafted to remove the 3-year expiry rule, allowing members to make non-lapsing nominations. Investax SMSF deed clearly states: “A Binding Death Benefit Nomination will not lapse by reason only of the passage of time.”

This means your instructions remain valid indefinitely, giving you greater certainty and less paperwork—just another way an SMSF, when set up with the right deed, gives you more flexibility and peace of mind.

Who You Can Nominate – You can nominate:

• A dependant (e.g., your spouse, children, or someone financially dependent on you)
• Your legal personal representative (i.e., your estate)
• A Superannuation Proceeds Trust, if applicable

 

Can It Be Changed or Cancelled?

 

Yes—but you must always refer to your SMSF trust deed to confirm whether and how a binding death benefit nomination can be changed or revoked. For example, the Investax SMSF deed specifically allows members to revoke a nomination at any time or replace it by submitting a new, validly signed and witnessed nomination. The rules can vary between funds, so it’s essential to check what your deed permits.

With the Labor government securing a strong election win, it’s highly likely the Division 296 tax will be reintroduced and passed—especially if the Greens support the bill in the Senate.

Under the current draft legislation, from 1 July 2025, individuals with a Total Superannuation Balance (TSB) exceeding $3 million will face an additional 15% tax on a portion of their superannuation earnings—including unrealised gains.

What’s changing?

If your TSB is over $3 million, a portion of your super earnings will be taxed at a higher effective rate of up to 30%—15% concessional tax (as usual), plus another 15% Division 296 tax on the proportion of earnings tied to the excess amount over $3 million.

This tax applies directly to you as an individual, not to your super fund. It will be calculated annually by the ATO, and you’ll have the option to pay it from your superannuation (even if you haven’t met a condition of release) or from personal funds.

Why is this controversial?

One major issue is that Division 296 tax includes unrealised gains—increases in the market value of your assets that you haven’t sold or received cash for. In simple terms, your super fund could be taxed simply because your investment property or shares increased in value on paper. This poses serious cash flow risks for SMSFs, especially those holding illiquid assets like real estate.

Is this just for the wealthy?

The government argues the tax will only affect the wealthiest 0.5% of super fund members (around 80,000 people in 2025–26). But there’s a catch: the $3 million threshold is not indexed to inflation. Over time, more Australians could be impacted, especially those making long-term contributions to SMSFs or holding appreciating assets.

Key Takeaways:

• Starts from 1 July 2025 if the bill pass.

• Applies only if your TSB exceeds $3 million at financial year-end.

• Taxed on a proportion of total earnings, including unrealised gains.

• The tax is personal—not levied on the fund.

• No indexation means the $3M threshold may impact more people over time.

• Cash flow planning will be critical for affected SMSFs.

 

Yes, you can rent your investment property to your parents or siblings and still claim negative gearing—but there are strict rules you need to follow, and the arrangement must pass the “arms-length” test.

In simple terms, the Australian Taxation Office (ATO) wants to ensure the rental arrangement is genuine and commercial. That means:

You must charge market rent. If you rent your property to your parents or family members at below-market rent—even as a favour—you won’t be able to claim the full tax deductions. The ATO requires you to apportion your expenses based on the rent you actually receive.

For example, if the market rent for your property is $500 per week, but you’re only charging your parents $400, you’re effectively charging 80% of the market rate. In that case, you can only claim 80% of your allowable expenses, including interest, rates, and maintenance costs.

There should be a formal lease agreement. Just like you would with any other tenant, put the agreement in writing. It should outline the rent amount, bond, payment frequency, and responsibilities.

The property must genuinely be available for rent. That means your family members are not living there rent-free or using it like a holiday home. The ATO wants to see that you’re actively trying to make a return on the property.

Expenses must be substantiated. Keep solid records of rent received, expenses paid, and communication around the tenancy. If the ATO reviews your return, they’ll want evidence the arrangement isn’t just helping out family under the guise of an investment.

Also, be mindful of perception—renting your investment property to parents or close family might invite closer scrutiny from the ATO. They want to ensure the deductions you’re claiming are for legitimate investment purposes, not personal arrangements.

In most cases, you can claim a tax deduction for prepaid interest on an investment property—but only for up to 12 months in advance, not 2 years.

The Australian Tax Office (ATO) allows property investors to claim a deduction for interest paid in advance, but only for up to 12 months. This is known as the 12-month rule. As long as the investment property continues to be used to earn rental income, and the prepaid interest does not extend beyond 12 months into the future, the full interest amount can generally be claimed in the financial year it is paid.

So, if you prepay 12 months of interest (e.g. from July 2025 to June 2026) in June 2025, and your investment property continues to generate rental income, you can generally claim the full prepaid interest as a deduction in the 2024–25 financial year, which is when the payment was made.

However, if you prepay interest for more than 12 months, such as 2 years, the deduction must be apportioned over the relevant income years. That means you won’t be able to claim the full amount upfront. Instead, the ATO will require you to spread the deduction across the 2 years the interest covers.

Yes, you can generally continue to claim a tax deduction for the interest even after converting a variable loan to a fixed loan—provided the purpose of the loan remains income-producing.

The key factor the ATO looks at is what the loan is used for, not whether it’s fixed or variable. If the loan was originally taken out to acquire an investment property, shares, or any other income-generating asset, the interest on that loan remains deductible—even if you change the loan type.

It’s important to understand that deductibility follows the purpose, not the loan structure.

That said, here are a few considerations:

• Redrawing for personal use: If you redraw from the loan for private expenses (like buying a car or funding a holiday), the interest relating to that portion will no longer be deductible.
• Splitting loans: When refinancing, it’s wise to split loans to clearly separate investment and personal components, which makes recordkeeping and deductibility much simpler.
• Break costs: If you break a fixed loan early (to lock in a new rate or refinance again), you may incur break fees. These are not immediately deductible, but they may be amortised over five years or the remaining term of the loan—whichever is shorter.

So, in short, yes—switching from a variable to a fixed loan doesn’t affect your interest deduction as long as the loan is still for an income-producing purpose. Just make sure it’s structured right and keep good records.

If you’re refinancing or considering loan changes, it’s a good idea to check in with your accountant or tax adviser to ensure you’re not unintentionally affecting your deductions.

This is a common question, especially among individuals who own several rental properties and actively manage them. The key point to understand is that owning multiple properties does not automatically mean you’re carrying on a business of property letting.

In most cases, if you’re an individual who receives rental income—whether from one property or several, including a mix of short-term (like Airbnb) and long-term rentals—you are generally classified as a property investor, not a business owner. Your activities are considered a form of passive investment rather than an active business operation.

The Australian Taxation Office (ATO) is clear on this: you are not in the business of letting rental properties unless your operations are substantial, ongoing, and conducted in a business-like manner. This usually means:

• You have a large-scale operation, possibly involving many properties.
• You have a high level of involvement, systems, and processes similar to a business.
• You may engage employees or a property manager full-time.
• The primary intention is to generate income consistently through business activities.

Because most individual property owners, even those with multiple rental properties, do not meet these criteria, they cannot claim certain deductions such as travel expenses related to managing or inspecting their rental properties. These expenses are only deductible if you are genuinely in the business of property letting—which is rare for individuals.

In summary, having many properties doesn’t necessarily make you a business owner. You’re most likely a property investor, which means travel and similar expenses are not tax deductible under the current tax rules. Always seek professional advice if you’re unsure, as individual circumstances can vary.

ATO – In the business of Letting