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August brings important updates for business owners and individuals from new super rates and interest deduction rules to luxury car tax changes and the RBA’s latest decision. Here’s what you need to know to stay compliant and in control.
Interest Deductions: What You Can and Can’t Claim
When it comes to claiming interest expenses, the purpose of the loan is what matters — not the security used.
If funds are borrowed for personal use (like a new home), interest is not deductible, even if the loan is secured against an income-producing asset.
Be cautious with redraws and offset accounts:
Money redrawn from a loan is treated as a new borrowing, and deductibility depends on how the funds are used.
Withdrawals from offset accounts, however, are not borrowings, and won’t make interest deductible.
The ATO has tightened its stance on “parking” borrowed funds in offset accounts — it can taint future deductions even if the money is later used for investment purposes.
Tip: Always seek professional advice before setting up or redrawing a loan to ensure the structure is tax-efficient.
Luxury Cars: Know the Limits Before You Buy
Buying a high-end vehicle for business? The ATO’s luxury car limits can restrict how much GST and depreciation you can claim.
For 2025–26, the luxury car limit is $69,674, meaning deductions and GST credits are capped at this value.
Luxury Car Tax (LCT) also applies:
33% on amounts above the threshold
$91,387 for fuel-efficient vehicles
$80,567 for all others
The definition of a “fuel-efficient” vehicle has tightened to those consuming 3.5L per 100km or less (previously 7L).
Before buying or leasing, confirm whether your vehicle qualifies — or risk losing valuable deductions.
Superannuation Updates for 2025–26
Super Guarantee now 12%
From 1 July 2025, employers must contribute 12% of ordinary time earnings — up from 11.5%.
Make sure payroll systems, employment contracts and cash flow forecasts are updated to reflect the change. Late payments can trigger penalties and loss of deductions.
Contribution caps and limits
Concessional cap: $30,000
Non-concessional cap: $120,000, or up to $360,000 with the three-year bring-forward rule
General Transfer Balance Cap: $2,000,000
For individuals planning personal deductible contributions, remember to submit a valid Notice of Intent (NAT 71121) to your fund before lodging your tax return.
RBA Holds Interest Rates at 3.85%
The Reserve Bank kept the cash rate at 3.85%, signalling caution amid economic softness.
While inflation is easing, weak consumer spending and employment concerns prompted the RBA to hold steady — though analysts expect a possible cut later this year.
For businesses: now is a good time to review debt exposure, optimise cash flow and prepare for possible shifts in borrowing costs.
From tightening interest deduction rules to higher super contributions and cautious monetary policy, the new financial year brings plenty of movement.
If you’d like help reviewing your structures, super or business strategy, reach out to Strategic 360 — we’re here to guide you through every change with confidence.
Kerrily and Louise – Directors
