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The Death, Divorce and Disaster Tax Explained.
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Investors could be $600k worse off when buying new builds Property investors rushing to negatively gear new build homes in light of the looming budget changes have been warned they could be making a huge mistake.

The four sets of data that show how the property market is transforming Global instability, shifting tax policies and interest rate pressures force buyers and sellers to adjust to the changing property landscape.

Monday Money Talk with Noel Whittaker

Aged care decisions are too important to make without knowing the cost
One of the biggest financial decisions many Australians will ever make is choosing aged care. Yet thousands of families make that decision without first understanding what it will cost. Their focus is naturally on finding the right care. Is the home suitable? Are the staff caring and experienced? Will Mum or Dad be comfortable? Can they maintain their dignity, independence and quality of life? Those are exactly the right questions to ask. But there is another question that is just as important, and it is often overlooked until it is too late: what will it actually cost? Every week families agree to home care or residential aged care without fully understanding the financial consequences. They know the care that is needed, but they don't know what they will actually pay, how their assets and income will be assessed, or how their decisions may affect their Age Pension and other government benefits.
This isn't because people are careless. It is because aged care funding has become one of the most complicated parts of Australia's retirement system. For many families, the process begins with a crisis. A parent has a fall. A spouse can no longer cope. Living at home is no longer safe. Decisions that would normally take months suddenly have to be made within days. Care providers and placement services do an excellent job helping families answer the immediate questions. What services are available? Which homes have vacancies? What level of care is required? But the financial questions are often left until later. That creates a dangerous gap between agreeing to care and understanding the true cost of that care.
Many people assume aged care fees are based simply on income or the amount of money they have in the bank. Nothing could be further from the truth. The Government uses detailed means-testing rules that take into account both assets and income, and the rules differ depending on whether a person remains at home or moves into residential aged care. Residential aged care can involve accommodation costs, basic daily fees, hotelling fees, non-clinical care contributions and higher everyday living fees. Under the new Support at Home program, contributions also depend on whether the services provided are classified as clinical care, independence support or everyday living assistance. The result is a maze of rules that can overwhelm even financially sophisticated people.
To make matters worse, aged care decisions rarely stand alone. A decision to sell or retain the family home, pay a Refundable Accommodation Deposit, or structure finances in a particular way can have a significant impact on Age Pension entitlements, cash flow, estate planning and, in an ironic twist, even the amount eventually paid for aged care itself. Looking only at the aged care fees does not tell the whole story. The Government provides online calculators to estimate costs, but they are only as accurate as the information entered. Many of the questions require an understanding of financial terminology and aged care legislation. Enter one figure incorrectly and the answer may appear convincing while being completely wrong. The cost of that mistake can easily run into many thousands of dollars.
The biggest mistake I see is that families concentrate entirely on finding the right care and assume they can sort out the finances later. Unfortunately, by then many of the important decisions have already been made. Agreeing to aged care without understanding the cost is like buying a house without knowing the purchase price. Nobody would sign a contract to buy a property without understanding the financial commitment involved. Yet every day Australians make aged care decisions involving tens, and sometimes hundreds, of thousands of dollars without first obtaining a clear picture of the financial consequences. Better information before decisions are made almost always leads to better outcomes.
Fortunately, help is available. Aged Care Decisions, Australia's largest aged care placement provider, supports tens of thousands of seniors and their families every month in finding the right care. It has now partnered with Rachel Lane, creator of Village Guru, a software program specifically designed to remove much of the mystery surrounding aged care costs. Together they provide two essential services. One helps families find the most appropriate care, while the other explains what that care is likely to cost and how different decisions may affect their broader financial position. Village Guru produces an easy-to-understand report outlining the available options, the expected fees and the likely impact on Age Pension entitlements and other financial matters.
The goal is simple: to give families the information they need before they make one of the biggest financial decisions of their lives, not afterwards. Aged care is no longer simply about finding a bed or organising services. It is one of the most important financial and lifestyle decisions a family will ever face. When people understand both the care options and the financial consequences, they ask better questions, compare alternatives more effectively and make decisions with confidence. Good care is essential, but so is understanding what that care will cost. Before you make one of life's biggest decisions, make sure you know the price as well as the destination.

The 50% CGT discount is not the tax free for all it is claimed to be by the government. It was introduced as a simplification compared with indexation, a rough rule of thumb that had a similar result. In fact the 50% CGT discount was bad for people with just mediocre gains, indexation would have meant they paid less tax. But no one complained it made things simple.
If the 50% CGT Discount created a housing crisis then why didn't we have a housing crisis before 1985 when there was no capital gains tax at all?

Monday Money Talk with Noel Whittaker

The investment landscape changed dramatically on Budget night. The Government's objective was simple: to impose a minimum 30 per cent tax rate on investment gains, regardless of a person's income. The result is the extraordinary situation where a self-funded retiree on a modest income who does not receive the Age Pension could pay a flat 30 per cent tax on capital gains while losing the benefit of both the tax-free threshold and the 16 per cent tax bracket that normally applies to taxable income between $18,201 and $45,000.
Furthermore, as far as listed shares are concerned, the CGT indexation provisions and the treatment of capital losses have created a minefield. Already, this is causing a swing away from direct share investment towards ETFs and managed funds. Fortunately, there is one investment that sidesteps many of these problems—investment bonds. They've been around for a long time but have become relatively unknown because many of today's young advisers have never heard of them, while many people who once knew them no longer understand how they work.
Why does this matter? Because for many investors the new rules mean tax efficiency has become more important than ever. Investment decisions can no longer be based solely on expected returns. The way those returns are taxed may now make the difference between a good investment and a great one, particularly for retirees and families planning across generations.
A good way to understand investment bonds is to compare them with superannuation. In both cases, your money is invested in a range of assets that you choose, and the fund pays tax on your behalf. Consequently there is no need to include annual earnings in your tax return. Contributions to super can come from either pre-tax or after-tax dollars—contributions to investment bonds can only come from after-tax dollars.

The key differences are that superannuation funds generally pay tax at 15 per cent, while investment bond funds pay 30 per cent. Super contributions are limited and your money is generally locked away until you reach your preservation age, currently at least 60. The large super funds are also notorious for the time they can take to pay death benefits. In addition, there may be tax of up to 17 per cent if the taxable component of your superannuation is left to a non-dependent child, and if your super balance exceeds $3 million you may also be subject to Division 296 tax.
Investment bonds avoid these issues. There are no contribution limits, your money always remains accessible and quick to access, and there is no death tax payable.
This flexibility is a major attraction. If you hold the bond for 10 years it can be redeemed tax-free. However, you can withdraw all or part of your investment whenever you wish. If you cash it in before 10 years, the profits are taxed as normal income, but you receive a 30 per cent tax rebate to recognise the tax already paid by the fund, making the investment highly tax-effective for many investors.
Suppose an investor earns $65,000 a year and cashes in a bond for $50,000 that originally cost $40,000. The tax on the $10,000 profit will be $3,250, but the rebate will be $3,000, leaving just $250 tax to pay. They also offer significant capital gains tax advantages.


CASE STUDY Sarah is in her early 40s, single and has a family trust set up with her as the sole beneficiary which she plans on using once she establishes a family. Sarah holds down a well-paid job and is currently on the highest marginal tax rate of 47% (including the Medicare levy). Sarah has accumulated in her family trust $100,000 of assets, currently held in a short-term deposit account earning an assumed return of 5% p.a. Sarah is looking to more tax effectively manage her trust’s investment and has considered an investment bond as an alternative. She has run the numbers to compare the after-tax outcome of her trust investing in cash directly, versus using an investment bond that earns the same amount on a pre-tax basis. Based on the analysis, over a 10-year period, Sarah would be almost $25,000 better off on an after-tax basis.

Sarah is also quite keen on taking on more risk but still be highly tax-effective, so she looks at other investment classes and decides that she’d like to consider Generation Life’s Tax Effective Australian Share Fund option to provide her that exposure. Her analysis shows that based on her $100,000 initial investment, if she’d invested in the Generation Life investment bond assumed as earning 9% p.a. on a pre-tax basis, she would be almost $59,000 better off on an after-tax basis over a 10-year period, compared to investing directly in an equivalent index fund strategy.
In both cases, Sarah’s after-tax returns would improve. In addition, because the earnings were held within the investment bond structure, her personal assessable income would also reduce, meaning that her marginal tax rate would have fallen from the 47% to 39% (including Medicare levy).

Investment bonds are also exceptionally effective estate-planning tools because they sit outside the will and generally bypass probate.
CASE STUDY Rachel is 60 and wants to provide for her family. She has two children, Sam and Louise, who have one and three children respectively. To reflect the different family sizes, she wants Sam's family to receive $100,000 and Louise's $300,000. She invests $400,000 in an investment bond, naming Sam to receive 25 per cent of the proceeds and Louise 75 per cent. Because the bond passes directly to the nominated beneficiaries, it bypasses her estate and probate.
If she later changes her mind, she can simply alter the nominations without rewriting her will. Even divorce or remarriage does not affect the nominations unless she chooses to make changes. If Rachel lives another 20 years, the $400,000 could easily grow to more than $1.3 million, helping her legacy keep pace with inflation. If the grandchildren need help with university fees or a house deposit before then, she can withdraw part or all of the investment.
Think about Harry, aged 80, re-married after a nasty divorce, who wants to leave bequests to children of both marriages. He knows there is acrimony within the family and wants to ensure his assets are distributed exactly as he intends, without costly legal disputes.
He invests $250,000 in each of five separate investment bonds, naming a different child as the beneficiary of each. Because an investment bond is a life policy, the proceeds are generally outside the estate and cannot normally be challenged, allowing Harry to distribute his wealth exactly as he intends.
Investment bonds are also an excellent way for grandparents to help their grandchildren.
Most financial institutions will not accept investments in the name of a minor. If the money is held by a parent or grandparent as trustee, the income may be subject to children's penalty tax rates of up to 66 per cent. Investing in a parent's name can reduce family tax benefits, push them into a higher tax bracket or affect eligibility for the superannuation co-contribution. Investing in a grandparent's name may also reduce their Age Pension as the investment grows.
Investment bonds provide an elegant solution. After 10 years the proceeds can generally be withdrawn tax-free, but there is no obligation to do so. The investment can remain in the bond for as long as you wish. Nor are they just for wealthy investors. Most providers allow you to start with a modest investment and add to it over time.
Consider a simple example. Grandparents want to establish an investment for a grandchild with an initial contribution of $10,000. They hope to add more over time but don't want to commit themselves to doing so. Their adviser recommends an Investment Bond owned by the mother, with the grandchild nominated as the future owner on a specified date.
When taking out this type of policy you can nominate a date at which the policy will automatically transfer to the child.
Now comes the best part. Until the policy is transferred to the child, the parent retains complete control over the investment, including the ability to change the date of transfer. There is also no capital gains tax on the transfer.
Can you think of a better intergenerational investment? The parent retains complete control, there is no annual personal taxable income and it’s invested tax effectively. The money is available whenever it is needed. The bonds tick every box. There is no death tax, no widow's tax, no lack of access, and they can sit outside of your estate providing certainty around asset distribution. One final advantage is that the proceeds from redeeming a bond are generally paid into your bank account within 10 working days.

Australians face record-high rents as agents see 'inquiries flooding in' Rents are soaring in several capital cities as low vacancy rates collide with rising interest rates and population growth.

The 30% Minimum Tax Rate Explained
Another way of explaining the minimum tax rate is that a taxpayer with no other income than that which is subject to the minimum tax rate ie trust income and capital gains is not entitled to earn their first $18,200 tax free, considered to cover the bare minimum cost of survival. They are also not entitled to only be taxed at 15% between $18,200 and $45,000. With a minimum tax rate of 30% applied to this low income that is an extra $9,480 in tax paid by someone on a very low income. That is nearly $200 per week, the grocery bill now gone in tax. The carve out for low income earners in our tax rates, was intended to ensure people only paid tax when they could afford to. On the other end of the scale a person with income of $227,000 has an average tax rate of 30% anyway so the minimum tax rate makes no difference to the amount of tax they pay. Same for all income above that amount too. Make no mistake this minimum tax rate is a tax on the poor, it makes no difference to the wealthy.

Monday Money Talk with Noel Whittaker

Housing affordability has suddenly become the defining political issue of our time. The Government wants us to believe that greedy landlords and generous tax concessions are largely to blame, and that its sweeping changes to capital gains tax and negative gearing were essential to stop house prices spiralling ever higher. Once again, the argument is built on faulty foundations.
Never forget that house prices are determined by the simple forces of supply and demand. Supply depends on planning laws, land releases and the speed at which new homes can be built. Demand is driven by population growth, immigration, consumer confidence and, above all, borrowing capacity. The more people can borrow, the more they can afford to pay, and that extra purchasing power is quickly reflected in higher house prices.
Migration also fuelled demand. Between 2007 and COVID, net overseas migration averaged about 233,000 people a year. It then surged to a record 563,000 in 2022–23, placing even more upward pressure on house prices.
But the biggest driver was borrowing capacity. Let's wind the clock back to 1 July 2007. The Reserve Bank cash rate was 6.25 per cent, standard variable mortgage rates were around 8 per cent, the Sydney median house price was about $560,000 and Average Weekly Ordinary Time Earnings were approximately $53,000 a year. A typical Sydney house therefore cost around ten and a half times the average annual wage. Borrowing was expensive, banks were conservative and buyers could generally borrow only what their incomes would support. House prices were rising, but at a measured pace.
Then came the black swan event that changed everything – the Global Financial Crisis. Concerned that Australia might slide into recession, the Reserve Bank embarked on one of the most aggressive interest-rate cutting cycles in its history. Between September 2008 and April 2009, the cash rate was slashed from 7.25 per cent to 3.00 per cent. Mortgage repayments fell dramatically, allowing buyers to borrow far more. Families who previously qualified for a $500,000 loan suddenly found they could borrow substantially more without increasing their repayments. That extra purchasing power flowed straight into the housing market.
By November 2010, as the Australian economy recovered on the back of China's seemingly insatiable demand for our resources, the Reserve Bank had lifted the cash rate back to 4.75 per cent. Yet mortgage rates remained well below their pre-GFC levels. Sydney's median house price had climbed to about $643,000 while average earnings had risen to around $67,400 a year. A typical home cost around nine and a half times annual earnings. The recovery had not been driven by wage growth. It had been driven by cheaper credit.
And that was only the beginning. From late 2011 the Reserve Bank embarked on another prolonged easing cycle, progressively cutting the cash rate to just 1.50 per cent by August 2016, then the lowest level in Australian history. Every rate cut enabled buyers to borrow more, and house prices responded accordingly.
Between 2017 and 2019 something interesting happened. Interest rates barely moved, but APRA tightened lending standards. Banks became far more conservative in assessing borrowers, maximum loan sizes shrank and Sydney house prices fell despite wages continuing to rise. It was a timely reminder that the availability of credit can matter just as much as its cost.
In 2019 the Reserve Bank resumed cutting rates as economic growth slowed. Then came an even bigger black swan event – COVID. Faced with the prospect of a deep recession, the Reserve Bank slashed the cash rate to just 0.10 per cent while the Federal Government unleashed unprecedented fiscal stimulus through JobKeeper, JobSeeker supplements, cash payments and business support. Banks offered mortgage repayment holidays, households accumulated record savings because they could not travel or spend freely, and confidence returned far more quickly than anyone expected. At the same time, the HomeBuilder scheme triggered an unprecedented surge in residential construction just as supply chains were breaking down and skilled labour was becoming scarce. Building costs soared, completion times blew out and the industry has never fully recovered.
Mortgage rates fell below 2 per cent. Working from home increased demand for larger homes and lifestyle locations. Fear of missing out swept through the market as buyers rushed to lock in historically cheap finance, helped by generous assistance from the Bank of Mum and Dad. Cheap credit, massive government stimulus, parental assistance and FOMO combined to produce one of the biggest housing booms in Australian history.
Successive Commonwealth governments continued to fuel demand through low-deposit guarantee schemes and shared-equity programs under which the Government became a part-owner of the home. Whatever their good intentions, these schemes increased buyers' purchasing power without creating a single additional home. In a market already constrained by limited supply, the inevitable result was further upward pressure on prices.
The lesson is obvious. When more people have the capacity and confidence to compete for a limited number of homes, prices rise. Tax settings may influence the market at the margin, but the dominant drivers over the past two decades have been interest rates, the availability of credit, government stimulus, population growth, migration and simple human psychology. They were the real forces behind Australia's housing boom, not negative gearing or capital gains tax.
Interest rates lit the fire. Governments then poured petrol on the flames.
Even if interest rates had never fallen, housing would still have become far less affordable because governments have quietly transformed new homes into one of their biggest revenue sources.
In 1976, taxes, fees and regulatory charges made up less than 10 per cent of the cost of a new house-and-land package. Today, depending on where you live, governments are taking somewhere between one-third and one-half of the total cost. In Sydney, the figure is pushing 50 per cent, meaning roughly $576,000 of a median-priced new home represents government taxes, charges and compliance costs.
Not bricks. Not timber. Not labour. Just tax.
Half the cost of a new home in Sydney flows into government coffers before the family even walks through the front door. This didn't happen overnight. Over many years, governments at every level shifted the cost of infrastructure away from the general tax base and onto new housing. Developer levies, infrastructure contributions, stamp duty, GST, environmental requirements, planning charges and compliance costs have been piled on one after another until affordability has buckled under the weight.
According to HIA research, government charges now account for roughly 33 to 41 per cent of the cost of a new home in Brisbane and 37 to 43 per cent in Melbourne. These are extraordinary figures, yet politicians continue to speak about housing affordability as though it were some mysterious market failure.
It isn't.
A young couple buying a $700,000 house-and-land package in Brisbane is effectively borrowing somewhere between $230,000 and $290,000 simply to pay embedded government charges. They then spend the next 30 years paying mortgage interest on that tax burden from income that has already been taxed once before. Government gets its money immediately. The buyers carry the debt for decades.
What makes this even more frustrating is that governments continue to announce first-home buyer grants, shared-equity schemes and guarantee programs that supposedly improve affordability while simultaneously inflating demand and maintaining the taxes and levies that have made housing so expensive in the first place. It is the economic equivalent of punching someone in the face and then offering them an ice pack.
The solution starts with honesty. Governments need to stop pretending that housing taxes are somehow separate from the affordability problem when they are one of its major causes. Every levy, charge and regulatory impost attached to new housing should be audited against one simple question: should this cost really be loaded onto first-home buyers?
Some charges will survive that test. Many won't. Infrastructure that benefits the whole community should be funded by the whole community, not disproportionately by younger Australians trying to buy their first home. Loading ever-higher infrastructure costs onto new housing may be politically convenient because the bill is hidden inside a mortgage, but economically it is destructive. It suppresses supply, inflates prices and locks another generation out of home ownership.
Of course, that would require governments to give up one of their favourite revenue streams. That is why voters need to start forcing the issue. The next time a politician claims to care about housing affordability, ask one simple question: if governments are really serious about making housing cheaper, why do they take up to half the price of a new home in taxes, charges and compliance costs?

2026 Tax Return Checklists are out now

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