As we step into the 2025/26 financial year, there’s plenty happening in the world of tax, superannuation, and business strategy. From the Reserve Bank of Australia’s (RBA) interest rate hold to changes in superannuation contributions and updates on luxury car tax, these developments could affect your financial decisions in the months ahead.
This blog unpacks the key changes highlighted in recent updates and explains what they might mean for individuals, families, and small business owners. Whether you’re looking at your super, considering buying a new car, or reviewing your loan structure, these are the insights you’ll want to know.
Interest Deduction Rules: Risks and Opportunities
One of the most common tax queries is whether interest on a loan can be claimed as a deduction. The Australian Tax Office (ATO) keeps it simple in principle: deductions depend on how the borrowed money is used, not what asset secures the loan.
For example, if you borrow against your rental property but use the money to buy your own home, the interest won’t be deductible. On the flip side, if you redraw funds from your mortgage and use them to buy shares, that portion of interest may be deductible.
Offset vs Redraw
A redraw facility is treated as a new loan, meaning the purpose of the redrawn funds determines deductibility. By contrast, funds in an offset account are simply your own savings. Withdrawing money from an offset to buy shares does not create deductible interest because the original loan was for private purposes.
Key takeaway: Always consider the intended purpose of loan funds. Mixing personal and investment spending in the same loan can complicate tax reporting and reduce what you can claim.
Superannuation Guarantee Increases to 12%
From 1 July 2025, the superannuation guarantee (SG) rate officially rose to 12%. This marks the final step in the phased increase designed to strengthen retirement savings for Australians.
For employers, this change impacts payroll systems, employment contracts, and cash flow planning. If an agreement states remuneration is “inclusive of super,” employees may see a small reduction in take-home pay unless renegotiated.
For employees, the upside is clear: higher super contributions mean stronger retirement balances in the long term.
Action points for businesses:
- Update payroll systems immediately to reflect the 12% rate.
- Review contracts to avoid accidental shortfalls.
- Budget for the higher contribution rate in your forecasts.
Updated Superannuation and Tax Thresholds for 2025/26
The government has also updated a range of thresholds that affect superannuation contributions and tax planning:
- General transfer balance cap: now $2,000,000 (up from $1.9m)
- Defined benefit income cap: $125,000
- Capital gains tax (CGT) lifetime cap: $1,865,000
- Non-concessional contribution cap: $120,000 (unchanged)
- Bring-forward rule: still allows up to $360,000 over three years for eligible individuals
This means more Australians may have additional room to make contributions, particularly if their balances sit just under the new $2 million cap.
Personal Super Contributions: Notices of Intent
If you’re making personal contributions to super and want to claim a tax deduction, remember the notice of intent process. The ATO requires this form to be lodged before you lodge your tax return or by 30 June of the following year, whichever comes first.
Miss this deadline and you may lose the deduction, which could mean a higher tax bill than expected.
Tip: Always get confirmation from your super fund that your notice has been received and accepted.
Luxury Cars: What’s Changed in 2025
For those eyeing a new vehicle, the luxury car tax (LCT) rules can make a big difference. The luxury car limit for 2025/26 is $69,674, meaning depreciation deductions and GST credits are capped at this level even if you spend more.
The LCT thresholds are:
- $91,387 for fuel-efficient vehicles
- $80,567 for other vehicles
And here’s the catch: from 1 July 2025, the definition of “fuel-efficient” tightened to cars consuming no more than 3.5L per 100km (previously 7L/100km). This means fewer cars qualify for the higher threshold.
For business owners, this can alter the after-tax cost of acquiring a vehicle. If you’re planning to buy a dual cab ute or a heavy vehicle designed to carry at least one tonne, you may avoid the LCT limits altogether.
RBA Holds Rates at 3.85%
In July 2025, the Reserve Bank of Australia chose to hold the cash rate steady at 3.85%. While inflation is easing, the RBA remains cautious due to signs of a softer labour market and subdued consumer spending.
For households with mortgages, this decision means repayments remain steady but high, prolonging pressure on budgets. For businesses, the pause provides breathing room but highlights the importance of reviewing debt exposure and cash flow strategy.
Many analysts expect a possible cut later in 2025 if economic conditions continue to ease.
How These Updates Affect Everyday Australians
- Homeowners and investors: Need to review how loan structures are set up to maximise deductible interest.
- Employers: Must ensure compliance with the 12% super guarantee and factor in payroll changes.
- Employees: Benefit from stronger super balances but may want to review contribution strategies.
- Car buyers: Should understand the impact of luxury car tax before signing contracts.
- Small business owners: Ongoing interest rate pressures mean cash flow management and refinancing strategies are crucial.
Final Thoughts
The 2025/26 financial year is already proving to be a big one for superannuation, tax planning, and financial strategy. Staying across these changes now can save you from costly mistakes later.
If you’re unsure how these updates affect you or your business, the smartest step is to talk it us.
✅ Chat with us to see what might work for you.
✅ Find out if these changes could suit your financial goals.
✅ Check if this is right for you.
