If you run a business, you already know the juggling act that comes with managing the payroll process — paying staff on time, managing cash flow, and staying compliant. From 1 July 2026, there’s a major change coming that will reshape how you handle superannuation contributions for staff.

It’s called Payday Super, and it became law on 4 November 2025. The new rules are designed to close Australia’s $6.25 billion unpaid super gap and make sure employees — especially casual and part-time workers — get their retirement savings when they get paid.

What’s Changing?

From 1 July 2026, you’ll need to pay superannuation guarantee (SG) contributions at the same time as wages, rather than weeks or months later. Employers will have seven business days from payday to ensure contributions hit employees’ super funds.

If payments are late, the Superannuation Guarantee Charge (SGC) will apply — that means paying the missed super plus an interest and administration penalty. Once SGC has been assessed, additional interest and penalties may apply if the SGC liability isn’t paid in full.

Unlike the existing system, SGC amounts will normally be deductible to employers, although penalties for late payment of SGC won’t be deductible.

On top of this, the ATO will retire the Small Business Superannuation Clearing House (SBSCH) platform from 1 July 2026 for all users and alternative options should be sought.

The change isn’t just about compliance — it’s about impact. The Government estimates the earlier payments could boost an average worker’s retirement balance by around $7,700.

Why It’s Good for Business

This reform might sound like extra admin, and it might take a bit of getting used to, but it can actually simplify your payroll process and strengthen your reputation as an employer.

• Less admin – Paying super when you run payroll means no more quarterly payment crunches.
• Fewer compliance risks – ATO data-matching will pick up issues faster, helping you avoid penalties before they snowball.
• Stronger employee trust – Staff can see their super growing in real time, which might help with engagement and retention.
• Smoother cash flow management – Paying smaller, regular amounts of super is often easier to manage than large quarterly sums.

The ATO will take a “risk-based” approach for the first year, focusing on education and helping businesses transition smoothly. If you pay on time, you’ll likely be flagged as low risk, meaning fewer compliance checks.

How to Get Ready — Practical Steps to Take Now

You’ve got time before the rules kick in, but the smart move is to prepare early. Here’s how:

1. Check your payroll software.
   Most modern systems (like Xero, MYOB, or QuickBooks) already support payday-aligned super. Confirm your setup and check if any updates or integrations are needed.
2. Map your pay cycles.
   Note how often you pay staff (weekly, fortnightly, monthly) and calculate the seven-day payment window for each.
3. Brief your team.
   Make sure whoever manages payroll understands the changes. The ATO has free online resources and webinars to help.
4. Plan your cash flow.
   Consider shifting from quarterly to more regular payments now to get used to the timing. Smaller, frequent super payments can reduce cash flow shocks.
5. Monitor and review.
   Set up a monthly check to ensure super contributions have cleared correctly. Keep an eye on ATO updates as final guidance is released.

If you outsource payroll, contact your provider soon — many are already updating systems for Payday Super and can help you make a seamless switch.

The Bottom Line

Payday Super isn’t just a compliance change — it’s an opportunity to make your payroll more efficient, your staff happier, and your business more compliant with less effort. With the laws now passed and just over 6 months to prepare, it’s time to get ahead of the curve.

If you’d like help reviewing your payroll setup or planning the transition, get in touch with our team — we can help you make sure your business is ready to go when Payday Super commences

Running, or deciding to set up a self-managed super fund (SMSF) gives you control, but it also brings legal responsibilities. The Superannuation Industry (Supervision) Act 1993 (SISA) contains detailed rules on trustee duties, investments, borrowing, payments and recordkeeping. Simply put, you cannot identify or avoid breaches you don’t know exist. For trustees, this should mean education is not optional but rather, is essential for risk management.

Why understanding SISA matters

• You can’t comply with what you don’t know: Many common breaches arise from misunderstanding basic SISA duties (for example, sole purpose, arm’s length dealings, or in-house asset limits). Awareness of the rules is the first step to spotting a problem early.

• Early identification reduces harm: Knowing what to look for, incorrect benefit payments, related party transactions that aren’t on commercial terms, or records that are incomplete, lets you seek advice before small errors become reportable contraventions.

• Education protects members: The consequences of a breach can include loss of tax concessions, penalties and remediation costs that reduce retirement savings for members.

The ATO’s Focus on Education — What Trustees Need to Know

The ATO has recently published a draft Practice Statement (PS LA 2025/D2) explaining when it might issue an education direction under section 160 of SISA. These directions give the ATO power to require trustees (or directors of corporate trustees) to complete specified education, where trustees’ knowledge or behaviour poses a risk to compliance. The draft statement sets out the ATO’s approach and the kinds of circumstances that may lead to an education direction.

However, trustees should not wait for an ATO directive before getting educated – such a directive means the trustees have already breached the rules. The draft Practice Statement is intended to support compliance and public confidence, but it is not a substitute for proactive trustee learning. Acting early and voluntarily is both safer for trustees and viewed more favourably by regulators.

Practical Steps Trustees Can Consider

Use ATO’s official SMSF guidance

Start with the ATO’s SMSF courses on the lifecycle of an SMSF, setting up, running and winding up. These courses are written for trustees and prospective trustees:

• Setting up an SMSF: https://smallbusiness.taxsuperandyou.gov.au/setting-up-a-self-managed-super-fund-smsf
• Running an SMSF: https://smallbusiness.taxsuperandyou.gov.au/running-a-self-managed-super-fund-smsf
• Winding up an SMSF: https://smallbusiness.taxsuperandyou.gov.au/winding-self-managed-super-fund-smsf

Complete the ATO’s ‘knowledge check’

The ATO provides an online “knowledge check” for each course designed to test trustee understanding. It’s a useful starting point, but note a pass mark of 50% should not be taken as a guarantee of safety. Trustees should consider whether aiming for a much higher standard, even 100% comprehension of core duties, is a more appropriate target to reduce risk.

Seek timely professional advice

If a knowledge check or your reading flags uncertainty, contact us early to discuss your concerns. Timely, qualified advice often transforms a potential contravention into a routine fix and may mitigate potential penalties or ATO enforcement action.

Document your learning and decisions

Keep records of training completed, who provided advice, and why investment or payment decisions were made. Good records are persuasive evidence of a trustee’s intent to comply.

Final Word

SMSF trustees hold both opportunity and responsibility. Learning the SISA rules and the ATO’s expectations is the most practical way to prevent costly mistakes. The ATO’s draft Practice Statement shows the regulator is prepared to use education directions where trustees’ knowledge gaps pose risks, but you shouldn’t wait to be told. Build your knowledge, use the ATO’s resources, complete the knowledge check, document what you learn, and seek professional help confidently and early. That approach better protects your fund and retirement outcomes.

A new Bill before Parliament – the Treasury Laws Amendment (Strengthening Financial Systems and Other Measures) Bill 2025 – proposes several key changes that could affect small businesses, listed companies, and the not-for-profit sector. The headline measure is the proposed extension of the $20,000 instant asset write-off for another year, to 30 June 2026.

Small Business Boost: $20,000 Instant Asset Write-Off Extended

If the Bill passes, small businesses with an aggregated annual turnover of less than $10 million will continue to be able to immediately deduct the full cost of eligible assets costing under $20,000 (excluding GST) through to 30 June 2026.

The threshold applies per asset, meaning multiple purchases can qualify if each individual item is under the limit. To claim the deduction, the asset must be first used or installed ready for use by the new deadline.

This measure remains one of the simplest and most practical tax incentives available to small businesses. It provides a direct cash-flow benefit by allowing the full deduction in the year of purchase instead of spreading depreciation over several years, as long as the taxpayer would actually have a tax bill for that year. For example, a tradesperson upgrading tools, or a café purchasing a new fridge or coffee machine, can immediately claim the full deduction – freeing up cash for reinvestment elsewhere in the business.

While the proposal still needs to pass Parliament, now is the time to plan. If you are considering new equipment or technology upgrades, budgeting early ensures assets can be delivered and installed before the cut-off date once the law is enacted.

Strengthened Corporate Disclosure

The Bill also proposes tighter disclosure rules for listed companies. Changes to the Corporations Act 2001 would require the disclosure of equity derivative interests – such as options, swaps, and short positions – under the substantial holding regime. These reforms are designed to improve market transparency and make it harder for significant shareholdings or control interests to remain hidden.

For listed entities, this will increase compliance obligations and may require updates to internal monitoring and reporting systems. Investors with substantial positions in listed companies should also review their current arrangements to ensure future compliance.

Greater Transparency for Charities

For the not-for-profit sector, the ACNC Commissioner would gain the power to publicly disclose “protected information” such as details of investigations, provided it meets a public harm test. This aims to strengthen public confidence in the charity sector by showing that the regulator is taking action where misconduct occurs.

For well-run charities, stronger transparency can enhance community trust – but it also highlights the need for robust governance, record-keeping, and compliance processes.

Financial Regulator Reviews Simplified

Finally, the Bill would reduce the frequency of reviews of ASIC and APRA by the Financial Regulator Assessment Authority from every two years to every five. While largely administrative, this signals a shift toward streamlined oversight to allow regulators to focus on core functions.

What You Should Do Now

Although these measures are still before Parliament, it’s wise to start planning. For small businesses, consider your 2025–26 capital expenditure needs and make sure any planned purchases can be installed and ready for use by 30 June 2026 if you are hoping to rely on the upfront deduction. For charities and listed entities, review governance and reporting frameworks to prepare for greater transparency requirements.

We’ll keep you updated as the Bill progresses. In the meantime, contact us if you’d like to discuss how these proposed changes might fit into your business or investment strategy.

There are 2 ways of contributing to your spouse’s super:

• You may be able to split contributions you have already made to your own super, by rolling them over to your spouse’s super – known as a contributions-splitting super benefit.
• You can make a super contribution directly to your spouse’s super, treated as their non-concessional contribution, which may entitle you to a tax offset.

Some super funds allow you to split your contributions with your spouse.

You can generally apply to split your contributions with your spouse after the end of the income year in which your contributions were made.

You apply to your fund to split your employer contributions and personal concessional contributions made during the previous income year, using the Superannuation contributions splitting application (NAT 15237) or similar form provided by your fund. The fund has the discretion to allow or not allow the request.

There are restrictions on the type and amount of contributions you can split.

If you’re planning to split any part of your contributions with your spouse but you also want to claim a tax deduction for them, you must give your fund the notice of intent to claim a deduction before applying to split the contributions.

How split contributions are treated and reported

A contribution split with your spouse is called a ‘contributions-splitting super benefit’ and is treated as a rollover to your spouse, not a new contribution for them.

Accordingly, splitting your contributions with your spouse does not reduce the total contributions made for you or change their characteristics for the purposes of your contributions caps. For example, if you make a personal contribution and claim a tax deduction for it, that will count towards your concessional contributions cap for the year even if you then split and roll it over to your spouse. It will not count towards your spouse’s cap.

Tax offset for super contributions on behalf of your spouse

You may be able to claim a tax offset of up to $540 per year if you make a super contribution on behalf of your spouse (married or de facto) if their income is below $40,000.

Contributions you make to your spouse’s super are treated as their non-concessional contributions, whether or not you’re eligible for the super tax offset.

General eligibility conditions

To be eligible:

• the contribution must be made to either a complying super fund or an approved retirement savings account (RSA)
• both you and your spouse must be Australian residents when the contribution is made
• the contribution is not deductible by you
• you and your spouse must not be living separately and apart on a permanent basis when making the contribution.

Specific eligibility conditions

You’re eligible for a tax offset for a contribution made on behalf of your spouse if:

• their income is less than $40,000 in the income year in which the contribution is made, calculated as the sum of their:
  • assessable income (disregarding any amount released to your spouse under the first home super saver scheme)
  • total reportable fringe benefits amounts
  • total reportable employer super contributions
• your spouse did not exceed their non-concessional contributions cap in the income year in which the contribution is made
• your spouse had a total super balance less than the general transfer balance cap immediately before the start of the income year in which the contribution is made
• for the 2020–21 and later income years, your spouse was under 75 years old when the contributions are made
• for income years before 2020–21, your spouse was under 70 years old when the contributions were made.

Offset amount

The tax offset amount reduces when your spouse’s income is greater than $37,000 and completely phases out when your spouse’s income reaches $40,000. The tax offset is calculated as 18% of the lesser of:

• $3,000 minus the amount by which your spouse’s income exceeds $37,000
• the sum of your spouse contributions in the income year.

The tax offset for eligible spouse contributions can’t be claimed for super contributions that you made to your own fund, then split to your spouse. That is a rollover or transfer, not a contribution.

Example: eligibility for the tax offset for super contributions on behalf of your spouse

Robert and Judy are spouses. Robert earns $19,000 in 2018–19 and Judy makes a $3,500 contribution to Robert’s super fund.

Robert and Judy meet the eligibility requirements to claim a tax offset. Judy can claim a tax offset in her 2018–19 tax return for the contributions she makes to Robert’s super fund.

The tax offset is calculated as 18% of the lesser of:

• $3,000 minus the amount over $37,000 that Robert earned (in this case, nil)
• the value of the spouse contributions (in this case, $3,500).

Judy can claim a tax offset of $540, being 18% of $3,000.

Example: eligibility for a part tax offset for super contributions on behalf of your spouse

Carmel and Adam are married and living together. Carmel is 46 years old and her income is $38,000 per year. Carmel has not exceeded her non-concessional contributions cap for the income year, and her total super balance is under $1.6 million.

Adam wishes to make a super contribution of $3,000, on Carmel’s behalf, to her complying super fund.

Carmel’s income is under the threshold. Adam is eligible for a tax offset. As Carmel earns more than $37,000 per year, Adam will not receive the maximum tax offset of $540. Instead, his entitlement is 18% of the lesser of:

• $3,000 reduced by every dollar over $37,000 that Carmel earns
• the value of spouse contributions.

Carmel earns $1,000 over the $37,000 income threshold. Adam’s tax offset is $360. This is calculated as 18% of $2,000 ($3,000 reduced by the $1,000 that Carmel earned over the $37,000 income threshold).

If you have any questions regarding this article, contact us today.

Source: ato.gov.au
Reproduced with the permission of the Australian Tax Office. This article was originally published onhttps://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/super/growing-and-keeping-track-of-your-super/how-to-save-more-in-your-super/spouse-super-contributions
Important:
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Why holding too much cash could burn a hole in your investment returns.

Monthly data just released by the Australian Prudential Regulation Authority (APRA) shows households across the nation are now holding record levels of cash.

APRA’s data shows the amount of cash held in authorised deposit-taking institutions (ADI) such as banks and credit unions rose to $1.65 trillion by the end of August from the $1.57 trillion at the end of 2024 – an increase of $80 billion, or 5.10%, over just eight months.

Although the growth rate has not been quite as pronounced, the amount of cash being held by self managed superannuation funds has also been growing steadily this year, reaching a record $170.6 billion at the end of June from $168.8 billion at the end of 2024, according to Australian Tax Office data.

And, according to separate data from the Reserve Bank of Australia, the weighted average interest rate being paid on all term deposits up to $10,000 was 2.85% per annum at the end of August – which compares with 3.35% at the end of last year.

The same RBA data shows the weighted average rates paid on term deposits has been 1.89% since the start of 2020.

How safe is cash?

In Australia, as in many countries, cash is often viewed as a safe and reliable way to store wealth.

The Financial Claims Scheme (FCS), administered by APRA, is an Australian Government scheme that provides up to $250,000 in protection per deposit account holder with an Australian ADI in the event the financial institution fails.

That protection is important however, when it comes to investing for long-term growth, cash has delivered lower returns than other asset classes over time.

This is illustrated in the recently released 2025 Vanguard Index Chart, which shows cash returned an average of 4.1% per annum over the 30 years from July 1, 1995 to June 30, 2025 – the lowest return among all major asset classes.

This compared with an average annual return of 10.8% from U.S. shares, 9.3% from Australian shares, and 8.3% from international shares. Australian bonds returned an average of 5.5% per annum. Of course, it’s worth keeping in mind that past performance is not a reliable indicator of future results and markets can, and do, change from time to time.

The impact of inflation

One of the primary reasons cash is often considered a poor long-term investment is inflation. Inflation refers to the general increase in prices over time, which erodes the purchasing power of money.

For example, if you keep $10,000 in a savings account earning less than 2% and inflation runs at 3% per year, your money will buy less in the future than it does today. While your account balance remains the same, its real value decreases.

Opportunity cost

Holding cash can mean missing out on potential gains from other investments. This is known as opportunity cost.

Money kept in cash could be invested elsewhere, potentially earning higher returns. Over time the difference in growth can be significant, especially when compounding is taken into account.

Not suitable for long-term goals

While cash is useful for short-term needs and emergencies, it is not ideal for long-term financial goals such as retirement or saving to buy a home.

Investments that offer growth may be better suited for these objectives because they have the potential to outpace inflation and increase in value over time.

When cash makes sense

Despite its drawbacks, cash can play an important role in a diversified portfolio. It can provide liquidity for living costs and unexpected expenses, act as a buffer during market downturns, and help manage risk.

While it’s important to keep some cash on hand, investors should also consider other asset classes to achieve their financial goals and protect their purchasing power.

The income road ahead for many people needing to generate income from their savings may become increasingly challenging as interest rates continue to fall.

Source: October 2025

This article has been reprinted with the permission of Vanguard Investments Australia Ltd. Copyright Smart Investing™

*General advice warning

 

Superannuation tax rules are changing again and there are implications for those with very large balances as well as those on lower incomes.

In a nutshell, the new plans include:

• more targeted tax rules for people with very large super balances
• extra support for low-income earners who contribute to super
• indexation (automatic increases) to make sure the tax thresholds keep up with inflation
• the removal of the proposed tax on unrealised gains

The new super tax rules will begin on 1 July 2026 and will be based on your total super balance as at 30 June 2027.

The changes follow feedback from industry groups, financial experts, and the public. Treasurer Jim Chalmers said the updates are designed to make the system fairer while still meeting the government’s goals.ⁱ

New rules for higher balances

If your total super balance (TSB) is more than $3 million, you’ll be affected by new tax rates on earnings.

Here’s how it works:

• for balances between $3 million and $10 million, earnings will be taxed at 30 per cent instead of the usual 15 per cent for the proportion of earnings between the thresholds
• for balances over $10 million, a tax of 40 per cent will apply on the proportion of earnings over the threshold

These are still concessional rates, meaning they’re lower than the top personal income tax rate, but they’re higher than the standard super tax rate.

The thresholds will be indexed over time. The $3 million threshold will increase in steps of $150,000 while the $10 million threshold will increase by $500,000 each time.

This means fewer people will be affected in the future as the thresholds rise with inflation.

Only a small number of Australians will be affected by the new rules. Less than 0.5 per cent of super account holders are expected to have balances exceeding $3 million in the 2026-27 financial year. The $10 million rule is expected to apply to fewer than 8,000 accounts, less than 0.1 per cent of all super accounts.ⁱⁱ

If you’re affected, you can choose to pay the tax from your super account or from funds outside of super.

No tax on unrealised gains

One of the most controversial parts of the original proposal was a tax on unrealised gains, meaning increases in the value of assets that haven’t been sold yet (such as property or shares).

This idea has now been dropped.

Instead, the new tax will only apply to realised gains (actual earnings such as interest, dividends or profits from selling assets).

Extra top-up for low income earners

The government is increasing support for low-income earners through the Low Income Superannuation Tax Offset (LISTO).ⁱⁱⁱ

LISTO is a 15 per cent tax offset paid by the government into the super accounts of people earning up to $37,000 a year and is worth up to a maximum of $500.

From 1 July 2027, the current LISTO income threshold will increase to $45,000 to match the top of the second income tax bracket. Around 3.1 million Australians will then be eligible for LISTO.

The maximum government top-up payment will also be increased from $500 to $810 to account for the recent increase in the Superannuation Guarantee (SG) rate to 12 per cent.

Special rules for defined benefits funds

Some judges and politicians are members of defined benefit super funds, which work differently from regular super accounts.^iv

Because it’s harder to calculate earnings in these funds, the government will develop equivalent arrangements to apply the new tax fairly.

We’re here to help you understand how the changes may affect your super and your long-term financial goals, so please give us a call.

 

i Reforms to support low-income workers and build a stronger super system | Treasury Ministers

ii https://www.superannuation.asn.au/media-release/proposed-super-tax-changes-will-make-system-fairer-for-low-income-workers-asfa/

iii Low Income Superannuation Tax Offset | Treasury.gov.au

iv Super contributions to defined benefit and constitutionally protected funds | Australian Taxation Office

Sweeping reforms to aged care are set to begin on 1 November to help improve the quality, transparency and flexibility of care.

With more care levels, clearer pricing, and greater control over how your funding is used, the new system aims to better match services to individual needs. Providers will be required to offer detailed cost breakdowns, empowering you to make informed decisions about your care.

While the reforms are a step forward in care quality, they also come with changes in how services are funded and that may mean higher out-of-pocket costs for some.

What you pay depends on your financial situation – whether you receive a full or part pension or are self-funded – and the services you access.

As the aged care landscape evolves, staying informed is key to making confident choices. Whether you’re planning for yourself or supporting a loved one, understanding the new system will help you access the right care at the right time.

Help at home

From 1 November the current Home Care Packages will be replaced by a new program called Support at Home.

The key changes include:

• Eight levels of care (up from four) to better match individual needs
• Extra funding for assistive technology, home modifications and palliative care

Services are expected to remain the same but the way you pay for them may change.

• For example, clinical care (such as nursing or physiotherapy) will be fully funded by the Government.
• You may pay more for everyday living services (such as meal preparation or cleaning) than you do for independence supports (like personal care or transport).
• The out-of-pocket costs for everyday living will range from 17.5 per cent for full pensioners to 80 per cent for self-funded retirees.
• Non-clinical support, like showering, will cost five per cent for full pensioners to 50 per cent for self-funded retirees.

If you were approved for a Home Care Package on or before 12 September 2024, you will be eligible for fee concessions to ensure you are not worse off under the new rules.

The package level you are assigned sets the total funding available to pay for care, with 10 per cent allocated to the care provider to cover the cost of care management.

You then work with your provider to decide how you want to spend the rest of the budget. The provider will set their fees for services and you will make a contribution based on your income.

Residential aged care

Room prices in aged care facilities have been steadily rising following an increase in the Refundable Accommodation Deposit (RAD) threshold from $550,000 to $750,000.

Higher RADs mean you may need to use more of your savings or income to cover aged care costs.

From 1 November 2025, anyone who moves into care after this date and pays a RAD, will have two per cent of that amount deducted each year, for up to five years.

You can still opt to pay a Daily Accommodation Payment (DAP), but this will increase every six months in line with inflation.

Other fees include:

• the basic daily fee (set at 85 per cent of the single age pension)
• a means-tested fee or non-clinical care contribution
• potentially a higher everyday living fee (previously known as extra or additional services)

Fee caps and planning ahead

The lifetime cap on aged care contributions continues. You won’t pay more than $130,000 (indexed) over your lifetime towards home care and residential care combined.

Understanding how the changes affect your financial future is vital. You’ll need to consider:

• whether someone will remain in the family home
• your current income and assets
• potential age pension entitlements
• estate planning strategies

Use the government’s fee estimator at MyAgedCare to get a clearer picture of your potential costs.

Get advice early

Navigating aged care can be complex and the upcoming changes add new layers of decision-making.

We can help explain your options, structure your assets, minimise fees and plan for your future care needs.

If you would like to discuss your aged care options, please give us a call.

The government has announced some key changes to the proposed Division 296 super tax following industry feedback.

The tax will now only apply to realised investment earnings — that is, actual profits when an asset is sold — rather than unrealised gains on paper.

It will still apply to super balances over $3 million, with those earnings taxed at 30%, but there will now be a second tier for balances over $10 million, where earnings will be taxed at 40%.

Both thresholds will be indexed to keep pace with inflation, and the new rules are set to start from 1 July 2026, with the first tax assessments expected in 2028.

Treasurer Jim Chalmers said the changes are designed to make the system fairer while maintaining generous tax concessions for the vast majority of super fund members.

In a world of constant financial noise, from market updates and interest rate speculation to economic forecasts, it’s easy to feel overwhelmed and choose to do nothing.

But inaction can be costly when it comes to building long-term wealth. Whether it’s leaving money in cash, delaying investment decisions or ignoring the power of regular contributions, the financial consequences of sitting still can quietly erode your future goals.

Inflation is a wealth killer

One of the most overlooked risks of doing nothing is inflation. While your money might feel ‘safe’ sitting in a savings account or term deposit, its purchasing power is shrinking every year.

For example, if you’d tucked $10,000 under the mattress in 2014, ten years later in 2024 it was worth just $6926.70 in real terms, thanks to the average annual inflation rate of 2.7 per cent. That’s a 30.7 per cent loss in value without spending a cent.ⁱ

Even in low-inflation environments, the real return on cash is often negative once you factor in tax and inflation.

The ‘cost’ of cash

Holding too much cash for too long can be a drag on your portfolio’s performance. While cash plays an important role, it’s not designed for long-term growth.

Consider this:

• Over the past 30 years, Australian shares have returned an average of 9.3 per cent per year, while cash has returned 4.1 per cent annually.ⁱⁱ
• That difference compounds significantly over time. Based on those rates, $100,000 invested in shares could grow to approximately $1.4 million in 30 years, while the same amount in cash might only reach around $330,000.

By staying in cash, investors miss out on the growth potential of other asset classes.

The perils of ‘set and forget’

Many investors start out with good intentions. They set up a portfolio, make an initial contribution and then leave it untouched for years.

While long-term investing is a sound strategy, neglecting your portfolio entirely can lead to missed opportunities.

Here’s what you need to be aware of:

• Asset allocation changes – Market movements over time can affect your portfolio’s intended risk profile.
• Dividends – If dividends are paid out and not reinvested, you lose the benefit of the compounding effect.
• Changing goals – Your financial needs are likely to change as you age, but your portfolio won’t reflect that unless it’s reviewed.

Annual check-ups can help ensure your investments are still working for you.

Missed opportunities

Compound interest is one of the most powerful tools in wealth creation. But compounding works best if you’re consistently contributing and reinvesting.

Consider two hypothetical investors who both invest $10,000 earning an average 7 per cent per annum:

• Investor A contributes an extra $5,000 each year
• Investor B contributes nothing after the initial $10,000 investment

After 30 years (and not accounting for fees and other costs):

• Investor A may end up with more than $500,000
• Investor B may end up with around $76,000

The difference? Regular contributions and the magic of compounding.

You can do your own calculations with ASIC’s MoneySmart calculator.

From passive wealth to active growth

The cost of doing nothing can be even more pronounced for high-net-worth investors. With larger sums at play, the opportunity cost of holding excess cash or delaying strategic investment decisions can translate into millions of dollars in missed growth over time.

While capital preservation is important, so is capital productivity. Allocating funds across diversified asset classes can help balance risk while enhancing long-term returns.

Inaction, especially in times of market uncertainty, may feel prudent, but it often results in underutilised capital that fails to keep pace with inflation or evolving financial goals.

After all, your financial plan should evolve with you. A portfolio designed five years ago may no longer suit your goals, risk tolerance or tax situation. Life changes – marriage, children, career shifts, retirement planning – and your investments should reflect those changes.

The bottom line

Doing nothing might feel safe but it’s often the riskiest choice of all. Inflation erodes your savings; cash underperforms over time and missed opportunities can delay or derail your financial goals.

By taking small, consistent steps such as contributing regularly, reinvesting earnings and reviewing your plan regularly, you can build a strong foundation for long-term financial success.

We’re here to help you take control and make your money work harder for your future.

i Inflation Calculator | RBA

ii Vanguard index chart 2025

What You Can Do!

Leaving debts outstanding with the ATO is now more expensive for many taxpayers.

General interest charge (GIC) and shortfall interest charge (SIC) imposed by the ATO is no longer tax-deductible from 1 July 2025. This applies regardless of whether the underlying tax debt relates to past or future income years.

With GIC currently at 11.17%, this is now one of the most expensive forms of finance in the market — and unlike in the past, you won’t get a deduction to offset the cost. For many taxpayers, this makes relying on an ATO payment plan a costly strategy.

Refinancing ATO debt

Businesses can sometimes refinance tax debts with a bank or other lender. Unlike GIC and SIC amounts, interest on these loans might be deductible for tax purposes, provided the borrowing is connected to business activities.

While tax debts will sometimes relate to income tax or CGT liabilities, remember that interest could also be deductible where money is borrowed to pay other tax debts relating to a business, such as:

• GST
• PAYG instalments
• PAYG withholding for employees
• FBT

However, before taking any action to refinance ATO debt it is important to carefully consider whether you will be able to deduct the interest expenses or not.

Individuals

If you are an individual with a tax debt, the treatment of interest expenses incurred on a loan used to pay that tax debt really depends on the extent to which the tax debt arose from a business activity:

• Sole traders: If you are genuinely carrying on a business, interest on borrowings used to pay tax debts from that business is generally deductible.
• Employees or investors: If your tax debt relates to salary, wages, rental income, dividends, or other investment income, the interest is not deductible. Refinancing may still reduce overall interest costs depending on the interest rate on the new loan, but it won’t generate a tax deduction.

Example: Sam is a sole trader who runs a café. He borrows $30,000 to pay his tax debt, which arose entirely from his café profits. The interest should be fully deductible.

However, if Sam also earns salary or wages from a part-time job and some of his tax debt relates to the employment income, only a portion of the interest on the loan used to pay the tax debt would be deductible. If $20,000 of the tax debt relates to his business and $10,000 relates to employment activities, then only 2/3rds of the interest expenses would be deductible.

Companies and trusts

If a company or trust borrows to pay its own tax debts (income tax, GST, PAYG withholding, FBT), the interest will usually be deductible if it can be traced back to a debt that arose from carrying on a business.

However, if a director or beneficiary borrows money personally to cover those debts, the interest would not normally be deductible to them.

Partnerships

The position is more complex when it comes to partnership arrangements. If the borrowing is at the partnership level and it relates to a tax debt that arose from a business carried on by the partnership then the interest should normally be deductible. For example, this could include interest on money borrowed to pay business tax obligations such as GST or PAYG withholding amounts.

However, the ATO takes the view that if an individual who is a partner in a partnership borrows money personally to pay a tax debt relating to their share of the profits of the partnership, the interest isn’t deductible. The ATO treats this as a personal expense, even if the partnership is carrying on a business activity.

Practical takeaway

Leaving debts outstanding with the ATO is now more expensive than ever because GIC and SIC are no longer deductible.

Refinancing the tax debt with an external lender might provide you with a tax deduction and might also enable you to access lower interest rates.

The key is to distinguish between tax debts that relate to a business activity and other tax debts. For mixed situations, you may need to apportion the deduction.

If you’re unsure how this applies to you, talk to us before arranging finance. With the right strategy, you can manage tax debts more effectively and avoid costly surprises.