March 2026 Newsletter
Please click on the following link to view this month's newsletter for March 2026. We would like to highlight the following articles:-
Investment Properties: Tax Return Errors That Trigger ATO Follow-Up
Owning an investment property can be tax-effective, but it is also one of the ATO's most closely monitored areas. Here are the most common errors that trigger ATO follow-up — and what to keep in mind.
One of the most frequent mistakes is over-claiming repairs that should be treated as capital works. Repairs and maintenance that remedy defects arising from normal use are generally deductible in the year incurred, but work that improves the function or value of a property is capital in nature and must be claimed at 2.5% over 40 years. Similarly, interest deductions must be apportioned where a loan is used for both private and rental purposes — only the portion relating to the rental property is claimable, and this applies throughout the life of the loan including after any redraws or refinancing.
Deductions cannot be claimed for periods when a property is used privately, and a holiday home or mixed-use property must be genuinely available for rent — not simply advertised through limited channels or subject to unreasonable conditions. It is also important to report all rental-related income, which extends beyond rent to include retained bond money, insurance payouts, booking fees from cancelled reservations, and potentially disaster relief payments. The ATO now cross-checks data from banks, land registries, insurers, rental bond authorities and digital platforms, making discrepancies easier to detect than ever. Records must be kept for at least five years from the date of lodgement.
Superannuation Changes Proposed for High Balances and Low-Income Earners
The Government has introduced legislation proposing significant changes to Australia's superannuation system, targeting both ends of the income spectrum.
For those with large super balances, a tiered Division 296 tax system is proposed to commence 1 July 2026. The existing 15% tax rate would remain for earnings on balances up to $3 million; earnings on the portion between $3 million and $10 million would be taxed at an effective 30% rate; and earnings above $10 million would face a 40% effective rate. Thresholds would be indexed to inflation, and the tax would apply only to future realised earnings — not unrealised capital gains. This change would affect fewer than 0.5% of current superannuation members, approximately 80,000 Australians.
For low-income earners, the Low Income Superannuation Tax Offset (LISTO) is proposed to receive a significant boost from 1 July 2027, with the eligibility threshold rising from $37,000 to $45,000 and the maximum payment increasing from $500 to $810. Future adjustments would be automatically indexed to tax thresholds and superannuation guarantee rates. The Government estimates these changes will benefit over 1.3 million Australians, with around 60% being women, and an average retirement benefit equivalent to an extra $15,000. Note that this remains proposed legislation and may be amended before becoming law — we recommend seeking advice to understand how these changes may affect your circumstances.
Please do not hesitate to contact us if you have any queries in relation to your tax and accounting matters.
Important: Clients should not act solely on the basis of the material contained in Client Alert. Items herein are general comments only and do not constitute or convey advice per se. Also changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas. Client Alert is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval.