As the end of the financial year approaches, it's the ideal time to explore ways to legitimately reduce your tax bill and boost your retirement savings. Whether you're an employee, investor, or nearing retirement, small strategic steps now can have meaningful long-term benefits.
OPPORTUNITIES FOR INDIVIDUALS
Individual Tax Rate: The reduction in income tax rate as announced in the 2025 Federal Budget (and legislated shortly thereafter) will take effect from 1 July 2026. Income between $18,201 and $45,000 will be taxed at 15%, with a further reduction to 14% from 1 July 2027.
Electric Car Tax Saving for Employees: The Government announced in the 2026 Federal Budget that it intends to phase out the generous FBT exemption for Electric Vehicles (EV) from 1 April 2027, with battery electric vehicles (BEV) costing above $75,000 but below the luxury car tax threshold of $91,387 (currently) to be subject to FBT, but with an effective 25% discount on the rate of FBT. The FBT exemption will then be fully phased out from 1 April 2029, with all EVs falling under the reduced rate of FBT.
Individuals looking to change into EVs, particularly during this time of skyrocketing fuel prices, will only have a limited window of opportunity to lock in a novated lease before the FBT exemption ends. There may even be smart strategies to lock in this benefit post 1 April 2029 by structuring a novated lease arrangement with your employer (including those that are self-employed) that rolls over just prior to 1 April 2029.
Make the Most of Tax Deductions: If you've made charitable donations during the year or are planning to, remember they're tax-deductible if given to a registered charity. Similarly, if you have an investment loan (such as for an investment property or shares), consider pre-paying 12 months of interest before 30 June, the deduction could reduce your 2026 tax bill.
And don't forget superannuation. Contributions to super made from your personal funds can also be deductible (more below), giving you a double benefit: reduce tax now and grow your future retirement nest egg.
MAKE THE MOST OF YOUR SUPERANNUATION
Superannuation Contributions – Powerful, Flexible, Tax-Effective
Concessional (pre-tax) contributions: You can contribute up to $30,000 this year into your super from your pre-tax income, this includes employer payments, salary sacrifice, and personal contributions where you intend to claim a deduction. These contributions are taxed at just 15% inside super (or 30% for high earners), which may be lower than your marginal tax rate. That means you save tax now and add to your retirement savings in a tax-friendly environment. Reminder that money must be received in your fund by 30 June 2026 to be counted as a FY26 contribution, it is not sufficient to transfer the money on 30 June 2026.
Using unused contribution caps: If you didn't reach your contribution limit in earlier years (since FY2021), and you had less than $500,000 in super at the start of this financial year, you may be able to "catch up" and contribute more this year. This is especially useful if you've had a higher income year due to a bonus, capital gain, or windfall, and want to offset that income with extra deductible contributions.
Government co-contribution: If you're a low or middle-income earner (earning less than $47,488) and make a non-deductible contribution to super, the government may boost your super with a co-contribution of up to $500. It's a great way to get an effective return on a relatively small contribution and build your retirement savings with help from the government.
Spouse contribution tax offset: If your spouse earns less than $40,000, contributing up to $3,000 to their super could give you a tax offset of up to $540. It's a smart strategy to support your partner's retirement savings while reducing your own tax bill.
Contribution splitting with your spouse: Want to balance out super between you and your spouse or help them boost their retirement savings. You may be able to "split" up to 85% of your concessional contributions with your spouse (subject to age and work status). This can also help with Centrelink planning and tax-free income later in retirement.
Important Considerations for Over 67s Work test for contributions: If you're aged 67–74 and want to make personal deductible contributions to super, you need to meet the "work test", that's working 40 hours in a 30-day period during the financial year. If you recently retired, a one-off exemption may apply if your super balance is under $300,000.
Planning to Downsize? Downsizer contributions: If you're 55 or older and sell your long-term family home (owned for 10+ years), you may be able to contribute up to $300,000 (each, for a couple) from the proceeds into super, without affecting your normal contribution caps. The catch? The contribution must be made within 90 days of settlement, so timing is crucial.
In Pension Phase? Don't Miss Your Minimum: If you're already drawing a pension from your super, make sure you've withdrawn at least the minimum required amount before 30 June. This is based on your age and your pension account balance as of 1 July 2025. If you're in an SMSF, this needs to be monitored closely, the ATO may penalise funds that don't meet the obligation.
LOOKING AHEAD: KEY SUPERANNUATION CHANGES FROM 1 JULY 2026
Concessional Contribution Cap Increase: The limit on how much you contribute to super pre-tax will increase to $32,500 each year (see explanation above for more details).
Non-concessional Contribution Cap Increase: The limit on how much you can contribute to super after-tax will increase to $130,000 each year. You may also have the ability to bring forward up to 2 years of your annual cap and contribute up to $390,000 in one year.
Transfer Balance Cap Increase: The limit on how much super you can move into the tax-free retirement (pension) phase will increase from $2.0 million to $2.1 million. If you're nearing retirement, this gives you more room to grow your super balance in a tax-free environment.
Superannuation tax on Balances Above $3 Million – Division 296: The Division 296 changes will introduce an additional tax on superannuation earnings for individuals with total super balances above $3 million. From 1 July 2026, earnings linked to balances between $3 million and $10 million will effectively be taxed at 30%, while earnings on balances above $10 million will face a 40% rate. The legislation also includes indexation of the balance thresholds over time.
POST FEDERAL BUDGET OUTLOOK
The 2026 Federal Budget proposed a number of significant tax reforms that, if legislated, will affect investors, families using trust structures, and property owners. It's important to remember these are proposals, they have not yet passed parliament, and the detail will likely evolve as consultation continues. We're watching closely and will share more once changes are enacted. In the meantime, here's a summary of what's been announced and what it could mean for you.
Click here for more information on the 2026 Federal Budget.
Changes to Capital Gains Tax: The Government has announced in the 2026 Federal Budget that it will scrap the long-standing 50% CGT discount for individuals, trusts, and partnerships and replace it with an inflation-indexation model from 1 July 2027, as well as a 30% minimum tax on net capital gains, which will apply to all CGT assets, including pre-1985 assets.
While there will be grandfathering provisions to keep all gains made up to 30 June 2027 under the 50% discount model, this will have significant impact for taxpayers who hold pre-1985 assets, or who start a business on or after 1 July 2027 without a cost base.
This proposal is currently under consultation and has not been enacted at the date of publication.
Changes to Negative Gearing Deduction: As part of the 2026 Federal Budget, the Government also announced that it will move to limit negative gearing from 1 July 2027 for existing residential investment properties, while retaining it for new builds. Losses from established residential properties will only be deductible against rental income or the capital gains from residential properties. Normal loss carry-forward rules apply to offset future residential property income.
These changes will apply to established residential properties acquired from 7:30PM on 12 May 2026. Properties acquired prior to this time will be exempt from the changes until disposed of.
There will be exclusions for properties in widely held trusts and superannuation funds, alongside targeted exemptions for build-to-rent developments and private investors supporting government housing programs.
Should this proposal be enacted, it will have significant impact on individual property investors who do not purchase new builds, as well as potentially impacting borrowing capacity when applying for investment loans.
This proposal is currently under consultation and has not been enacted at the date of publication.
Changes to Family Trusts: The 2026 Federal Budget also includes an announcement to introduce a minimum tax rate of 30% on discretionary trust distributions from 1 July 2028, potentially affecting hundreds of thousands of family and business trusts. However, there will also be exclusions, including other types of trusts such as fixed trusts, widely held trusts, complying superannuation funds, special disability trusts, deceased estates and charitable trusts. Farmers are expected to be exempt, as some types of income such as primary production income will be excluded from the minimum trust tax.
Rollover relief will be offered for three years from 1 July 2027 to support affected small businesses that wish to restructure out of a discretionary trust into another entity type, such as a company or a fixed trust. However, no details have been made public as of the date of this publication.
All taxpayers that operate a trust structure should review their arrangements well before any commencement date.
This proposal is currently under consultation and has not been enacted at the date of publication.
This EOFY, a few small steps can make a big difference. Speak with your adviser about what strategies suit your income, super balance and goals. Contact us today on 1300 795 515 or email mail@prosperity.com.