TRADE SECRETS

August 2026 Edition

New Tax Changes:

A Focus on Winners and Losers

By Sam Eley

The 2026–27 financial year, which began on 1 July 2026, brings one of the busier mixes of tax changes we have seen in some time. Some measures are already law and are flowing through pay packets and super funds right now; others were announced in the Federal Budget on 12 May 2026 and remain proposals that still require legislation before they take effect — in many cases not until 1 July 2027 or later. The gap between “law” and “announced” matters enormously for planning, so throughout this article, we have been careful to distinguish between the two.

Below, we work through the headline changes and, in the spirit of every good Budget wrap, identify who the likely winners are and who should be paying closer attention.

Already law — effective from 1 July 2026

A tax cut for every taxpayer. The marginal rate on taxable income between $18,201 and $45,000 fell from 16% to 15% on 1 July 2026. Because this is the second band that every taxpayer passes through, everyone earning above $18,200 is better off — by up to $268 a year. The rate is legislated to fall again to 14% from 1 July 2027, lifting the saving to up to $536 a year compared with 2024–25 settings. This is the second instalment of the personal tax cuts that began on 1 July 2024, so when both rounds are combined, the relief is more meaningful than the headline numbers suggest: the Government estimates the average earner is around $1,900 better off in 2026–27, rising to roughly $2,200 a year from 2027–28, measured against 2023–24 settings. The cut is delivered automatically through PAYG withholding so that most employees will notice a little more in each pay from the first pay run on or after 1 July 2026.

Higher super contribution caps. The concessional (pre-tax) cap has risen from $30,000 to $32,500, and the non-concessional (after-tax) cap from $120,000 to $130,000, with the three-year bring-forward maximum increasing to $390,000 for those eligible. The general transfer balance cap — the ceiling on what can be transferred into a tax-free retirement pension — has increased from $2.0 million to $2.1 million. However, the amount available to any individual depends on how much of their own cap they have previously used. A related opportunity that is easy to overlook: individuals whose total super balance was under $500,000 can still “carry forward” unused concessional cap space from the previous five financial years, which — combined with the higher cap — can allow a substantially larger deductible contribution in a high-income year. The Super Guarantee rate, meanwhile, remains at 12%, its permanent level since 1 July 2025.

A $1,000 instant tax deduction. From the 2026–27 income year, employees can claim up to $1,000 of work-related expenses without receipts or substantiation. It is aimed at simplification as much as savings: anyone whose genuine work expenses fall under $1,000 gets the full deduction with no record-keeping. At the same time, those with larger claims continue to itemise, as they have always done. Charitable donations, union and professional-membership fees, and other non-work deductions can still be claimed separately, in addition to the $1,000. The benefit is realised when the 2026–27 return is lodged, so that it will be felt at tax time next year rather than in take-home pay now.

A permanent $20,000 instant asset write-off. Eligible small businesses can continue to immediately deduct the cost of assets under $20,000, now permanently rather than renewed year by year. The certainty helps plan capital purchases.

Medicare levy relief. The low-income thresholds for which the 2% levy is reduced or not payable have been lifted again, keeping more low-income earners, seniors and pensioners out of the levy or on the reduced “shade-in” rate.

Who should be paying closer attention

Very large super balances — Division 296. Also from 1 July 2026, an additional 15% tax applies to the earnings attributable to the portion of an individual’s total super balance above $3 million, with a further 10% on the portion above $10 million — so the effective rate on earnings on that top slice rises to 30%, and to 40% above $10 million. Critically, the final law taxes realised earnings only; the earlier and much-debated proposal to tax unrealised gains was dropped. However, the thresholds are indexed. For those affected, the practical questions are around valuations, ensuring the fund has the liquidity to meet the extra tax, whether some growth assets are better held outside super, and whether balances between spouses can be more evenly arranged. If your balance is approaching these levels, this is worth a dedicated conversation.

Employers — Payday Super. From 1 July 2026, Super Guarantee must be paid at the same time as wages rather than quarterly. For employees, this is a clear win — super starts compounding sooner, and unpaid amounts are far easier to spot — but for business-owner clients, it is a genuine cash-flow and payroll-systems change that rewards getting ahead of it rather than being caught out.

Announced but not yet law — proposals from the May 2026 Budget

The following measures were announced on 12 May 2026 but still require legislation, and several are scheduled well into the future. We flag them now because, were they to proceed, the lead time creates real planning opportunities — particularly around the timing of asset sales and property decisions.

• Capital gains tax reform (proposed, from 1 July 2027). The long-standing 50% CGT discount would be replaced by cost-base indexation, so that only the “real” gain above inflation is taxed, together with a new 30% minimum tax rate on eligible gains. This would be the most significant reshaping of CGT since the 50% discount was introduced in 1999, and it makes the timing of any large asset sale in the meantime a live consideration. Note that superannuation is treated separately and continues to enjoy concessional treatment — an effective 10% rate on realised gains in accumulation phase and nil in pension phase.
• Negative gearing (proposed, from 1 July 2027). The ability to negatively gear against salary income would generally be confined to newly built dwellings. Existing arrangements are protected: residential properties held at 7:30 pm on 12 May 2026 are proposed to be grandfathered under the current rules, with transitional treatment for properties purchased between that date and 30 June 2027.
• Discretionary trusts (proposed, from 1 July 2028). A 30% minimum tax on distributions from discretionary (family) trusts has been flagged, which — if enacted — would materially change the calculus for income-splitting through trusts.
• Working Australians Tax Offset (from 2027–28). A new $250 tax offset for working Australians is legislated to begin in the 2027–28 year, effectively lifting the point at which tax starts to bite for many workers.
• Electric vehicle FBT concession. The FBT exemption for eligible electric vehicles is being wound back, phasing down to a 25% discount by 1 April 2029 — relevant to anyone considering an EV through a novated lease.

The first tranche of these investor measures — the CGT and negative gearing changes — has since begun moving through Parliament, and in doing so carried with it a significant superannuation change: a ban on new SMSF borrowing for residential property. Because that affects a well-known strategy, we have given it its own article in this edition (see “The End of SMSF Borrowing for Residential Property”).

Winners and losers, at a glance

What this means for you

For most clients, the net effect of the 2026–27 changes is modestly positive: a rate cut, higher super caps, and a simpler deduction at tax time. The measures that call for genuine planning are concentrated among a smaller group — clients with large superannuation balances, those with significant investment property or family trust structures, and business owners adjusting to Payday Super. It is also worth remembering that several of the most consequential items remain proposals; we will keep you informed as they move through Parliament, and where the timing of a decision could be affected (an asset sale, a property purchase), we would rather have that conversation early. As always, if you would like to understand how any of these changes apply to your particular circumstances, please speak with your adviser.

Witi:

My 30 Years at GFM

By Paul Nicol

Every so often, a milestone comes along that says as much about the firm as it does about the person — and this edition, we’re delighted to mark one of ours: Witi Suma has been part of the GFM team for 30 years.

Across three decades, Witi has been there through much of the firm’s growth, and generations of clients have come to know her as one of the steadiest and most trusted points of contact at GFM. Her care for our clients and her knack for getting the details right have become part of who we are.

It’s a genuine pleasure to celebrate the occasion — and, fittingly, we’ll let Witi tell the story in her own words.

My journey with GFM began in 1996 — I had just finished my Economics/Arts degree at Deakin and enrolled in a short course to tidy up my resume. I had no idea it would change my life. It was there that I met Trish Cresp, a long-standing GFM client, who mentioned that the firm’s founder, Tony Gilham, was looking to grow the team. She kindly introduced me to Tony, and I’ve never forgotten that gesture. One interview later, I had the job — and 30 years on, I’m still here!

I started in an administrative role and, in 1999, moved into looking after our growing number of SMSFs and private investment portfolios. I’d never even heard of an SMSF at the time, but I was keen to learn and built my knowledge from the ground up — from fund establishment and investment administration through to ongoing ATO compliance. When I joined, GFM was a far smaller operation, and one of the real privileges of these 30 years has been watching it grow into the substantial, well-established firm it is today.

Every client has an adviser — often supported by a secondary adviser — and, alongside them, I’m one of their main points of contact at GFM. I also look after onboarding and manage the implementation process for new clients from start to finish. In the onboarding meetings I run, I take clients through GFM’s service offering and how everything works, so they know what to expect from the start.

I always make a conscious effort to explain concepts and processes clearly, succinctly and in plain English. Where it’s useful, I’ll also introduce clients to Macquarie’s online banking and apps so that they can access and manage their information with confidence.

One of the things I enjoy most is working with our clients and being a genuinely responsive point of contact. From the beginning, I wanted to bring a personal touch to the service we provide, so that clients feel well looked after and confident they’re in good hands. That care has become part of GFM’s DNA, and I’m proud that so many clients trust us enough to refer their family and friends.

Witi with clients Robin and Jan

Over the years, I’ve been fortunate to get to know many clients well, sharing in their milestones and achievements, and hearing about their travels, interests, and the occasional challenge along the way. Being trusted enough to be there in the tougher times as well as the good ones is something I genuinely value, and those long relationships are something I’ll always treasure.

One of the best things about working at GFM is how much I’ve learned about managing money, building wealth and planning for the future. That knowledge has helped me achieve a level of financial security I wouldn’t have imagined in my 20s, and I’m very grateful for it.

On a personal note, and as luck would have it, that same short course back in 1996 was where I met my partner, Rob — we’ve just celebrated our 30th anniversary! We love travelling and camping around Australia wherever there’s wildlife, as we both adore animals of every kind. Aside from travel, I enjoy biking, singing, true crime documentaries, biographies, and craftwork such as crochet, painting, life drawing, and pottery. I’m also a lover of classic cars — one of my wildest dreams came true when I bought my beloved black 1965 Mustang coupe, which is my absolute pride and joy.

After 30 years, I look back with real warmth and gratitude for all the people, experiences and opportunities that have shaped my time at GFM. I love what I do here, and I’m looking forward to many more years.

Baby News!:

Congratulations to Sam and Blair, and Orrin and Kirsten

By Mai Davies

Everyone at GFM Wealth Advisory and GFM Gruchy is delighted to celebrate some wonderful family news.

We warmly congratulate Senior Financial Planner Sam Eley and his wife, Blair, on the birth of their son, Connor, on 21 June. Connor joins his big brothers Sullivan and Walker, making them a happy family of five.

Baby Connor with big brothers Sullivan and Walker

We also extend our congratulations to Financial Planner Orrin Shaw and his wife, Kirsten, on the arrival of their beautiful baby boy, Ethan, born on 21 May.

Baby Ethan

We are pleased to hear that everyone is healthy and settling into life with their newest addition.

On behalf of the entire GFM team, we wish both families every happiness. Congratulations on your beautiful new arrivals!

Markets in Review:

The 2025–26 Financial Year

By James Malliaros

The financial year to 30 June 2026 was a solid one for patient, diversified investors — but the headline numbers conceal just how uneven the journey was, and how much depended on exactly where your money was invested. It was a year of extremes: one part of the market delivered its best result in a generation, while other parts suffered losses not seen since the pandemic. Understanding that dispersion is the key to making sense of the year.

The building blocks

Most diversified portfolios are constructed from four broad ingredients: Australian shares, international shares, listed property and fixed interest. Here is how each performed over the year.

The spread between the best and worst of those numbers — close to 25 percentage points — is unusually wide. In most years the asset classes finish within a far narrower band. That gap is the single most important fact about FY2025–26, and we will return to what it means for your own portfolio at the end of this article.

Australian shares — an index that flattered the market

On the surface, the local market had a quiet year: the S&P/ASX 200 rose 2.77% in price terms, or 6.11% once dividends are included. The Price Index reached a record high of 9,202.9 points on 26 February before drifting back to close the year at 8,778.7 on 30 June. Beneath that modest headline, however, sat one of the most divided markets in living memory.

The table below shows how the sectors of the ASX 200 performed over the year. It is worth reading carefully, because the story it tells is very different from the one the index headline suggests.

Four observations stand out. First, only four of the eleven sectors beat the index. Second, seven of the eleven finished below it, and five went backwards outright. Third, the gap between the best sector and the worst was an extraordinary 89 percentage points. And fourth — most importantly — the index return was very nearly the work of a single sector.

Materials did the heavy lifting almost single-handedly, returning 52.1%. Surging prices for gold, silver, lithium, copper and rare earths, driven by the raw-material demands of the artificial intelligence build-out and the energy transition, and by central banks diversifying their reserves into gold, produced the sector’s best year in decades. Gold miners have been the standout over a longer horizon, returning 33.6% per annum across the past three years and a further 31.8% this year. Energy added 14.5% as Middle East supply disruption pushed oil higher, and consumer staples returned 13.7% as investors sought defensive earnings amid resurgent inflation.

Everything else lagged. Financials — the banks that anchor most Australian portfolios — returned just 1.7%. Industrials managed a modest 5.2%, ahead of the banks but still short of the index, while telecoms fell 9.4%. Health care, home to some of the highest-quality businesses on the exchange, fell 36.2%, hit by an unfavourable exchange rate for companies reporting in US dollars, higher shipping and labour costs, and regulatory uncertainty for biotechs in the United States. Information technology fell 37.0% as concerns about stretched valuations and the sustainability of AI-related capital spending took hold; the sector peaked in September and entered a bear market within two months.

The practical consequence is significant. A portfolio built around Australia’s largest, most familiar and most reliably profitable businesses — the major banks, the big healthcare names, the leading consumer and industrial companies — experienced a materially different year from the one the index headline implies. Matching the index return depended almost entirely on how much mining exposure a portfolio carried, at a point in the cycle when commodity prices had already run very hard.

One year is not the whole story

A single financial year tells you very little about whether an investment is doing its job, and this year’s table is a good illustration of why.

Consider how recently the rankings were reversed. Materials, the runaway leader of FY2025–26, spent the four years before this one trading sideways, going nowhere while investors looked elsewhere. Health care and technology, now at the bottom of the table, spent much of that same period as the most admired holdings on the exchange. Nothing about those businesses changed overnight; what changed was the price investors were prepared to pay for them.

That cuts both ways. A 52.1% year for a sector is an outlier rather than a new baseline, and anyone tempted to extrapolate it forward is making a version of the same mistake as the investor who bought technology at its peak last September.

The ranking in the table above will look quite different twelve months from now. It usually does.

International shares led the way — and currency mattered

The strongest returns of the year came from overseas. On a currency-hedged basis, global shares returned 22.35%, powered by the largest US technology companies and resilient corporate earnings, with enthusiasm around artificial intelligence and the capital investment flowing into chipmakers, data centres and energy infrastructure remaining the dominant market theme.

Currency was an important sub-plot. A stronger Australian dollar trimmed the returns of unhedged international investments, and the difference was substantial: 14.78% unhedged against 22.35% hedged — almost eight percentage points, from the same underlying shares. It is a timely illustration of why we treat currency as a distinct investment decision rather than an afterthought, and why holding a deliberate mix of hedged and unhedged exposure makes sense over time.

It is worth noting that the international result was itself narrow. A relatively small group of very large technology companies generated a disproportionate share of the gain. Breadth was thin in global markets too — the concentration was simply less visible from the outside.

Listed property went backwards

Australian listed property was one of the disappointments of the year. The S&P/ASX 200 A-REIT Accumulation Index returned –2.24%, meaning that even after distributions were counted, investors finished slightly behind where they started.

The cause was interest rates. A-REITs are among the most rate-sensitive assets in a portfolio: higher rates lift borrowing costs, increase the discount rate applied to future rental income, and put downward pressure on the valuations of the underlying buildings. With the Reserve Bank raising the cash rate three times during the year, the sector faced a persistent headwind. Distributions continued to be paid — the income kept flowing — but capital values fell far enough to more than offset them. Over three years, A-REITs have still returned 11.6% per annum, which puts the single-year setback in context.

Fixed interest — a difficult year for bonds

Fixed interest had a harder year still than most investors expected. The Bloomberg AusBond Composite 0+ Yr Index, the standard benchmark for Australian bonds, returned just 1.53%.

The explanation lies in the same place. Inflation proved far more stubborn than anyone anticipated, and the Reserve Bank responded by raising the cash rate three times — in February, March and May — taking it from 3.60% to 4.35%. Bond prices move inversely to interest rates, so as rates rose, the capital value of existing bonds fell. The interest those bonds paid was largely consumed by that capital decline, leaving a small positive return overall.

This is worth understanding rather than being alarmed by. A bond portfolio that falls in value as rates rise is simultaneously being reinvested at those higher rates, which lifts the income it will generate in future years. The Australian bond market now yields close to 4.85%, a far more attractive starting point than investors have had for most of the past decade. In the meantime, cash and term deposits — which carry no capital risk — were the quiet winners, with one-year term deposit rates moving to around 4.5% to 5.0% as the cash rate climbed.

Not a straight line

It is worth dwelling on how bumpy the path to these returns actually was, because the experience matters as much as the destination. Markets were unsettled throughout the year by trade and tariff tensions, and by an inflation picture that kept surprising to the upside. Then they fell sharply in March as conflict in the Middle East flared and oil prices spiked, before recovering strongly once a ceasefire took hold and attention returned to earnings. An investor who reacted to the March fall by moving to cash would very likely have locked in a loss and missed the rebound that followed within weeks.

What this means for your portfolio

Every year we are asked a version of the same question: markets went up, so why didn’t my portfolio go up by the same amount? For FY2025–26, the answer is unusually clear, and the tables in this article contain most of it.

A diversified portfolio is a blend of asset classes, held in proportions determined by your objectives, your timeframe and the level of volatility you are prepared to tolerate. Its return is therefore a weighted average of its parts. It will always finish below the best-performing asset class and above the worst. That is not a shortcoming of diversification — it is precisely the trade-off diversification asks of you, and the reason it protects you in the years when today’s leader becomes tomorrow’s laggard.

Consider what capturing the highest number in the table would have required: a portfolio invested entirely in fully hedged international shares, with no Australian shares, no property, no bonds and no cash. Almost no investor could accept the volatility and concentration risk that portfolio carries, and nobody drawing an income from their capital should. The same is true within Australian shares, where reaching the index return depended on a heavy weighting to a single sector that had already risen sharply, and which has returned a far more ordinary 13.2% per annum over the past three years.

Meanwhile, the defensive part of a portfolio did exactly what it is designed to do — preserve capital and pay income while share markets swung through a volatile year — but it did so at a cost in a strong year for equities. Any portfolio holding a meaningful allocation to those assets, which is to say any portfolio built for someone drawing an income or unwilling to watch a third of their capital disappear in a poor year, was always going to finish well below an all-equity number.

None of this is an argument against reviewing performance. It is an argument for reviewing it over a reasonable time horizon and against the right yardstick: your objectives, and the return you actually need to fund the life you want — not the largest number printed in a newspaper in July.

Looking ahead

FY2025–26 rewarded diversification and punished the assumption that any one asset class, sector or theme will keep leading. After several strong years for shares, and with inflation and interest rates still unresolved, it is sensible to plan for a more moderate return environment, and to use periods of strength to rebalance back towards your target mix rather than letting the winners run unchecked. Higher interest rates, for all the difficulty they have caused, also mean that the defensive half of a portfolio is now being paid properly for the first time in years.

As always, the right portfolio is the one that matches your goals, your timeframe and your tolerance for the inevitable bumps along the way.

Chris & Jane:

Clients of GFM Since 2017

By Paul Nicol

Chris and Jane have kindly shared the story of their careers, family life, retirement adventures and their relationship with GFM Wealth Advisory. From building a successful business and raising four children to travelling the world and enjoying time with their nine grandchildren, their story is one of hard work, family and making the most of retirement. We sincerely thank them for contributing to this edition of Trade Secrets.

We have been with GFM since April 2017.

We both come from families of 7 children; Chris being the second eldest and Jane being the third eldest.

After 6 years as a boarder at Assumption Kilmore, Chris commenced work as a trainee building estimator with his father’s construction company in Deniliquin NSW. In 1979, along with his dad and brother Michael, Chris formed a new housing company called Hotondo Homes. In 1986, we relocated the company and our families to Melbourne due to our ongoing commitment to the Victorian Ministry of Housing. After 48 years working in the building industry, Chris retired at the end of 2020.

Jane’s first job after school was working for the Deniliquin Municipal Council as a junior clerk and then as a computer operator. We married, and along came our four children, which made Jane a very happy stay-at-home mum. As time progressed, Jane found herself helping at Hotondo and working for a period at Bakers Delight. During the last seven years of Jane’s working life, she was a medical receptionist at MIA in Camberwell. Jane retired in March 2014 to help with our beautiful grandchildren, of which we now have 9.

We find ourselves living very full lives in retirement. Chris volunteers with Blood Bikes Australia, has played the piano accordion (since the age of 7) in 2 wedding bands and continues to both play and run our church choir. Photography and motor bikes are also a real passion. Jane fills her days with family and gardening. We thoroughly enjoy travelling in our motor home and overseas and have very recently walked part of the Camino in Spain.

We were first introduced to GFM by my brother Michael, and our accountant further supported this recommendation. Right from our first introduction, we felt very comfortable with the warm and genuine interest Paul Nicol and GFM instilled in us. They listened to what was important to us and have helped us achieve our goals of financially assisting our children, whilst also making sure that we were ticking items off our own bucket list.

GFM’s professionalism is outstanding. They go above and beyond to reassure us that we matter. The seminars are so important in giving us an understanding and keeping us current with happenings in the world of finance. And then there are also the fabulous social gatherings which allow us to mingle with other clients while having a fun outing.

We would highly recommend GFM to anybody who is considering other options regarding their financial planning.

GFM has given us peace of mind. They have helped us secure our future and that of our children, and for that we will always be so very thankful.

Structured Giving:

An Introduction to Private Ancillary Funds

By Paul Nicol

Many of our clients give generously to charities — but often in an ad hoc way: a cheque here, a donation there, decided each year with little structure and little thought to tax. For those who want their giving to be more deliberate, more tax-effective and, above all, more lasting, there is a purpose-built vehicle worth understanding: the Private Ancillary Fund, or PAF. In essence, a PAF lets a family establish its own charitable foundation. In the following paragraphs, we explain what a PAF is, how it works, its tax treatment, the obligations that come with it, and the type of client for whom it makes sense. In our next edition, we will bring this to life with a detailed client case study.

What a Private Ancillary Fund is

A PAF is a private charitable trust, established and run from Australia, whose sole purpose is to provide money to other charities — specifically, organisations with Deductible Gift Recipient (DGR) Item 1 status. It is controlled by the family (or individual, or business) that founds it, through a corporate trustee. Unlike a public ancillary fund, a PAF cannot seek donations from the general public; it is funded by its founders. Think of it as a family foundation: the founders put in capital, the fund invests it, and each year, a portion is granted out to the causes the family chooses to support. It is a way to separate the decision to commit money to charity (which brings an immediate tax deduction) from the decision about which charities ultimately receive it and when.

How it works — contribute, invest, distribute

The cycle is straightforward. First, the founders make a tax-deductible contribution — cash, or assets such as listed shares — which forms the fund’s capital, or “corpus”. Second, that corpus is invested according to a formal investment strategy, and because the fund is endorsed as income-tax exempt, those investments grow tax-free. Third, each financial year, the fund must distribute a minimum amount to eligible DGR charities. The founders, acting as directors of the trustee company, decide which charities benefit and how much each receives, researching causes and making grants much as a small foundation would. The capital base remains invested and, well-managed, can grow and give in perpetuity.

The tax benefits

• An immediate deduction that can be spread. Contributions to the PAF are tax-deductible in the year they are made, and if the deduction cannot be used in that year, it can be spread over a period of up to 5 years. This makes a PAF especially powerful in a year of unusually high income — such as the sale of a business, a large capital gain, or a bonus year — when the deduction offsets income taxed at the highest rates.
• Tax-free growth inside the fund. Because the fund is income-tax exempt, its investment earnings and capital gains are not taxed, and franking credits on Australian shares are refundable. The corpus therefore compounds faster than the same money would in the founders’ own hands — meaning more, over time, for the causes they support.
• Concessions on gifts made through an estate. Testamentary gifts to a PAF can also carry capital gains tax concessions, making a PAF a natural component of a considered estate plan.

The obligations that come with control

The flip side of that control is genuine responsibility. A PAF is regulated by both the Australian Taxation Office and the Australian Charities and Not For Profits Commission and must operate within the Private Ancillary Fund Guidelines. In practice, that means a corporate trustee whose board includes at least one independent “Responsible Person” (someone of standing in the community with no personal stake in the fund), a compliant trust deed, a documented and prudent investment strategy, and an annual audit. There are firm investment restrictions — a PAF generally cannot borrow, cannot run a business, cannot invest in collectables, and must deal at arm’s length — and it can only ever distribute to eligible DGR Item 1 charities, never to the founders or related parties. These are not onerous for a well-run fund, and much of the administration can be outsourced, but they are real and ongoing.

A change to be aware of — the “Giving Fund” reforms

Following the Productivity Commission’s review of philanthropy, the Government has announced reforms to ancillary funds. Private and public ancillary funds are to be renamed “Giving Funds”, and the minimum annual distribution rate for private funds is increasing from 5% to 6% of net assets (bringing them into line with public funds at the same rate). To offset the effect of a higher minimum, funds will be permitted to “smooth” their distributions across three years rather than meeting the minimum strictly each year. The new rate applies from the first financial year after the fund guidelines are amended, and existing funds are given a two-year grace period before they must comply. There is time to adjust, but trustees should factor in the higher rate in their planning now.

Who a PAF suits

A PAF is not for every giver. It is best suited to those intending to give at scale and over the long term. As a rule of thumb, an initial commitment of around $500,000 or more is needed for the structure to be cost-effective, given the establishment and annual running costs. It particularly suits families who want to involve the next generation — a PAF board is a wonderful way to teach children to give thoughtfully and to pass on a family’s values — and those experiencing a one-off liquidity event who want to convert part of a large tax liability into an enduring charitable base. One important caution: a gift to a PAF is irrevocable. Once contributed, the capital becomes the property of the charity and cannot be returned to the founders. For those wanting to give meaningfully but on a smaller scale, or without the administrative commitment, a sub-fund within a public ancillary fund can deliver much of the same tax benefit and flexibility with far less complexity.

Coming next edition

A PAF can turn generosity into something structured, tax-effective and lasting — but it is a significant decision that rewards careful advice. In our next edition, we will follow a real client’s journey in detail: why they chose a PAF, how it was established, the tax outcome, and how their family now gives together. In the meantime, if a business sale, an inheritance or another high-income year is on your horizon, or you want your giving to be more deliberate, we would be glad to talk through whether a PAF — or a simpler giving structure — fits your plans.

SMSFs:

The Hidden Cost of Going It Alone

By Witi Suma

A self-managed super fund (SMSF) puts you in the driver’s seat of your retirement savings, so it is no surprise that they continue to grow in popularity. For the right people, that control is precisely the appeal — the ability to choose your own investments, to hold direct property or business premises, and to tailor your strategy to your circumstances. But an SMSF also makes you a trustee, and with that title comes a set of legal responsibilities and a compliance rulebook that is genuinely unforgiving of honest mistakes. A growing number of Australians are establishing and running funds entirely without professional advice. Before going it alone, it is worth understanding, in some detail, what that choice can cost.

Control comes with real obligations

As an SMSF trustee, you are personally responsible for the fund meeting superannuation and tax law at all times — not your accountant, not your administrator, and not your adviser, but you. The fund must be maintained for the sole purpose of providing retirement benefits (the “sole purpose test”), must have a documented and regularly reviewed investment strategy, must keep proper accounting records, and must be audited every year by an approved SMSF auditor before its annual return is lodged. The Australian Taxation Office is the regulator, and it has a graduated set of powers where things go wrong: it can issue education directions, require trustees to rectify breaches, apply administrative penalties (payable personally by trustees, not from the fund), disqualify individuals from acting as trustees, and in the most serious cases make the fund non-complying — an outcome that can see close to half the fund’s assets lost to tax. These are not theoretical risks; auditor contravention reports are a routine part of the system.

Where unadvised trustees most often come unstuck

Across the funds reviewed by SMSF auditors, the same handful of problems recur — and almost all of them are avoidable with advice.

• Contribution cap breaches. The concessional and non-concessional caps, the bring-forward rules, the carry-forward of unused concessional contributions and the Total Super Balance limits all interact in ways that are surprisingly easy to trip over — particularly in a year with a large one-off contribution. Excess contributions create additional tax, extra paperwork, and sometimes the need to withdraw amounts again.
• Non-arm’s-length income (NALI). If a fund deals with a related party on terms that are more favourable than commercial terms — for example, through a related-party loan at an artificial rate or services provided free of charge — income from that arrangement may be taxed as NALI at 47%, rather than the usual 15%. This can be a harsh outcome for arrangements that are often well-intentioned, and it is a common trap in related-party borrowing, where a trustee also provides services to the fund.
• In-house asset and related-party rules. Strict limits govern what a fund can own and with whom it can transact — for example, the in-house asset rule generally caps investments in related entities at 5% of the fund. Breaches here are among the most frequent audit findings.
• Poor diversification and liquidity. Funds concentrated in a single asset — often direct property — may struggle to pay a pension, insurance premium, or member benefit when cash is needed, while also being exposed to the performance of that one asset. An investment strategy that recognises this concentration but does not address it is a recurring concern for auditors.
• Pension minimum drawdown errors. Once a fund is paying a retirement pension, it must pay at least the minimum amount each year. Falling short can cost the fund its tax-free status on earnings for the entire year — an expensive mistake for a missed calculation.
• Insurance overlooked. Unlike large funds, an SMSF has no default insurance. Trustees are required to consider insurance for members as part of the investment strategy, and it is frequently forgotten, leaving families exposed.
• Estate planning gaps. Superannuation does not automatically form part of your will. Without valid, up-to-date death benefit nominations and the right structures, benefits can pass to unintended people or attract avoidable tax in the hands of adult beneficiaries.

The rules keep moving — which raises the stakes

Even a well-run fund faces a moving target. This year alone brings the new Division 296 tax on very large balances, higher contribution caps, and — as covered elsewhere in this edition — a ban on new borrowing to buy residential property. Each of these changes interacts with the existing strategy, and each creates both traps and opportunities that are easy to miss without someone watching the fund’s affairs closely. The pace of change is, if anything, one of the strongest arguments for having an adviser alongside you.

The value of advice

Obtaining good advice is not simply about staying out of trouble, though that alone can be worth many times its cost. It is about using the structure of an SMSF well: matching the investment strategy to your goals and stage of life; sequencing contributions, pensions and withdrawals tax-effectively; keeping the fund compliant as the rules change; ensuring the fund is properly insured; and making certain it works within your broader wealth and estate plan rather than in isolation. An adviser also provides a valuable behavioural safeguard, helping trustees stay disciplined during market volatility and avoid the costly mistake of buying high and selling low. An SMSF can be a powerful vehicle, but it works best when supported by expert guidance.

If you are weighing up having an SMSF, or you already have one but have been managing it without advice, we would welcome the chance to review it with you. Sometimes the most valuable thing an adviser can do is confirm that you are on the right track — and sometimes it is to catch the small problem before it becomes an expensive one.

The End of SMSF Borrowing for Residential Property

By Amelia Paullo

One of the longest-standing and best-known self-managed super fund strategies has just been closed off. From 10 August 2026, SMSFs can no longer take out new borrowing to purchase residential property. It is the most significant restriction on SMSF borrowing since the exception was first introduced nearly two decades ago, and — unusually for superannuation reform, which normally moves slowly — it arrived at considerable speed. Given how many SMSF trustees have used, or plan to use, this strategy, it is worth carefully setting out what has changed, who is affected, and what remains possible.

What has happened, and how

The Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 received Royal Assent on 26 June 2026. Among its measures is a ban on new Limited Recourse Borrowing Arrangements (LRBAs) used to acquire residential property, effected by inserting a new condition into section 67A of the Superannuation Industry (Supervision) Act 1993 — the provision that sets out when an LRBA is permitted. The ban commences 45 days after Royal Assent, which fixes the start date at 10 August 2026. The measure did not originate in the Budget itself; it was introduced as an amendment moved by the Greens, and was the price of the Greens’ support in the Senate for the Government’s broader package of capital gains tax and negative gearing changes. It passed both houses in late June and, whatever one makes of the process, is now law.

A reminder — what an LRBA is, and why it mattered

Superannuation funds are, as a general rule, prohibited from borrowing. Since 2007, SMSFs have enjoyed a narrow and specific exception: the Limited Recourse Borrowing Arrangement. Under an LRBA, the fund borrows to acquire a single asset — most commonly a property on one title — which is held in a separate holding trust (often called a bare trust) until the loan is repaid. The defining feature is that, if the loan defaults, the lender’s recourse is limited to that one asset; the fund’s other assets are quarantined from the lender’s claim. Over nearly 20 years, borrowing to hold geared residential property became one of the signature SMSF strategies, and a sizeable industry grew up around it. By recent estimates, SMSFs hold in the order of $75 billion in assets financed through LRBAs, of which roughly half is residential. It is that residential segment, for new arrangements, that the ban now targets.

Who is affected — and who isn’t

Almost every trustee falls into one of three clear groups, and identifying which one applies to you makes the practical position simple.

• You already have a residential LRBA. Nothing changes. Existing residential LRBAs are grandfathered, so there is no requirement to unwind the arrangement, restructure the loan, or sell the property. The borrowing can continue under the existing rules. Importantly, refinancing of a pre-commencement residential LRBA remains permitted, provided the refinancing relates to the existing borrowing and is undertaken on ordinary commercial terms.
• You are partway through a purchase. If you exchange contracts before commencement on 10 August 2026, you are protected — even if settlement occurs after that date. The transitional window exists precisely so that arrangements already in train can be completed. If this is your situation, the priority is to confirm the exact timing of your contract and to ensure the holding-trust structure is correctly in place.
• You were planning a future purchase. From 10 August 2026, establishing a new LRBA to buy residential property is no longer permitted, and the window will not reopen. If gearing into residential property in super was part of your plan, it is time to reconsider the approach — while being careful not to rush a poor-quality purchase to beat a deadline.

What still stands

It is just as important to be clear about what the ban does not include. It targets one specific strategy and leaves the great majority of SMSF investing untouched.

• Commercial and business real property. LRBAs used to acquire commercial property, including business real property — for example, the premises from which a client’s own business operates — are unaffected and remain available.
• Owning residential property outright. An SMSF can still acquire residential property without borrowing, where it fits the fund’s investment strategy and diversification requirements. The ban is about leverage, not about property ownership as such.
• Shares, ETFs and managed funds. The vast universe of listed and managed investments is entirely unaffected and remains the way most SMSFs build wealth.
• The tax treatment of super itself. None of the concessional tax settings for superannuation change — earnings are still taxed at 15% in the accumulation phase and nil in the pension phase, with the usual concessional treatment of capital gains.

Why the change was made

The Government framed the measure as addressing long-standing regulatory concerns about leverage inside superannuation, pointing to warnings from the Council of Financial Regulators in 2019 and 2022 and, before that, the 2014 Murray Financial System Inquiry, and characterising the change as closing a loophole that could favour wealthy investors. Officials were at pains to note that SMSFs account for less than 1% of residential property borrowing, so the housing-market impact is expected to be small. Industry bodies, including the SMSF Association, were critical — not of the merits of the policy, but of the manner of its introduction as a late-stage amendment without consultation or an evidence-based review. That debate will continue, but for trustees the position is now settled: from 10 August 2026, the door to new residential gearing is closed.

A compliance reminder for existing and commercial LRBAs

If your fund retains a grandfathered residential LRBA or takes out a new commercial-property LRBA, the pre-existing compliance obligations continue to apply. Where the loan is from a related party, its terms must remain genuinely commercial, and the simplest way to demonstrate that is to follow the ATO’s “safe harbour” in Practical Compliance Guideline PCG 2016/5 — which prescribes, among other things, an interest rate that is reset each year, a maximum loan term, a maximum loan-to-value ratio, and registered security. Getting this wrong exposes the fund’s income to the non-arm’s-length income rules and a 47% tax rate, so an annual review of any related-party loan remains essential.

What to do now

• If you hold an existing arrangement, there is nothing you need to change — but keep it compliant and take advice before refinancing or restructuring.
• If you are mid-purchase, confirm your contract timing immediately; a few days’ difference may determine whether the arrangement is permitted.
• If you had planned to gear into residential property in super, let’s discuss the alternatives — unleveraged property, commercial property, diversifying into other asset classes, or investing outside the fund.

There is still a great deal that an SMSF can do with property and investments generally; it simply cannot borrow to acquire a residential investment property. As always, investment decisions should be considered in the context of your broader objectives and circumstances, rather than the availability of a particular structure or strategy. If any of the above may affect your fund or plans, please speak with us before taking any action.

Helping Kids and Grandkids into Their First Home

By Patrick Malcolm

“How can I help my children into a home?” It is one of the most common questions we are asked, and it comes up in almost every conversation we have about family wealth. Parents and grandparents want to help. What they are far less sure about is how to do it well — how much to give, whether handing over a large sum is wise, what it does to their own retirement plans, and how to help without simply writing a cheque.

In our last edition we looked at making super contributions for children and grandchildren. This time we want to cover the piece that makes that strategy genuinely useful: the First Home Super Saver (FHSS) Scheme. It answers the obvious objection to putting money into a young person’s super — why lock money away for thirty-five years when what they need is a deposit now? With the FHSS Scheme, some of that money can come back out, for their first home.

The idea, in a sentence

Save for your deposit inside super, where the tax rate is lower, and take those savings out when you are ready to buy.

That really is the whole scheme. You make voluntary contributions into super over a few years. When the time comes to buy, you apply to the ATO to release those contributions, along with an earnings amount the ATO calculates, and put the money towards your first home.

Why it works better than a savings account

The advantage is tax. Money paid into super as a before-tax (concessional) contribution — whether salary-sacrificed from your pay or contributed personally and claimed as a tax deduction — is taxed at 15% on the way in, rather than at your marginal rate. For someone earning $100,000, that means considerably more of each dollar survives the journey. Earnings inside super are lightly taxed too. And when the money is released, a 30% tax offset applies, which more than compensates for the tax already paid.

The net effect is that most people end up with meaningfully more in hand than if they had saved the same amount in a bank account, where every dollar of interest is taxed at their full marginal rate each year. For a young person on a decent income, that difference can be worth several thousand dollars by the time they buy.

How much can go in

Two limits apply. You can count up to $15,000 of voluntary contributions from any one financial year, and up to $50,000 in total across all years.

The critical detail is that eligibility is assessed per person, not per couple. Two first-home buyers purchasing together can each access their own $50,000, giving them a combined $100,000 plus earnings towards the same property. They do not need to be married or in a de facto relationship, and if one of them has previously owned a home, the other can still apply in their own right.

One caution worth flagging: these limits sit inside the ordinary super contribution caps rather than on top of them. A before-tax contribution earmarked for a first home — whether salary-sacrificed or personally contributed and claimed as a deduction — still counts towards the annual concessional cap alongside employer contributions, so the two need to be planned together. It is a straightforward thing to get right, but an easy one to overlook.

Where parents and grandparents come in

This is the part that matters most for the families who ask us the question, because it turns a general willingness to help into something structured and tax-effective.

A voluntary contribution made into a child’s or grandchild’s super counts towards that young person’s $50,000 FHSS limit. Years later, when they are ready to buy, those contributions can be released along with the earnings the ATO adds, and put towards the deposit. The same dollar does double duty: it starts building their retirement savings decades earlier than they would have managed alone, and on the way through it helps them into a home.

There is an important practical point. The contribution must genuinely be theirs, which means it needs to be made from the young person’s own bank account rather than directly from yours. Gift them the money first, then let them contribute. It is a small administrative step that makes all the difference to how the contribution is treated.

It is also worth being clear-eyed about what you are doing. Once contributed, the money is theirs, in their name, and subject to their decisions. For most families, that is entirely the point. But it is a conversation worth having openly rather than assuming, and it is one we are very happy to help facilitate.

Nor is this only something done for young people. Children and grandchildren can use the scheme entirely under their own steam, and often the most powerful approach is to do both at once — the young person contributing what they can from each pay, while a parent or grandparent tops up alongside them. Encouraging the habit early, whoever funds it, is half the benefit; the two together get to the deposit faster.

What it looks like in practice

Take Maya, who earns $100,000. Rather than watch her struggle to save a deposit, her parents gift her $15,000 a year for three years. Maya pays each amount into her own super as a personal contribution and claims a tax deduction for it.

Two benefits follow immediately. First, the deduction reduces Maya’s tax bill: at her marginal rate of 32% (including the Medicare levy), a $15,000 deduction puts $4,800 back in her pocket each year — around $14,400 over the three years. Second, the money enters super taxed at just 15% rather than that same 32%, so far more of every dollar stays invested. The tax system has, in effect, already handed the family a sizeable head start before the First Home Super Saver Scheme even comes into play.

When Maya is ready to buy, she applies to release the money. Because these were before-tax (concessional) contributions, she can release 85% of them — the other 15% is the contributions tax already paid inside super — which comes to $38,250, plus an earnings amount.

That earnings amount is worth understanding, because it is not the actual return Maya’s fund happened to make. The ATO applies its own set rate, based on the 90-day bank bill rate plus about three percentage points, calculated daily on the growing balance. At today’s interest rates that works out to somewhere around 7% to 8% a year, which over the three years adds in the order of $6,000 — so Maya releases about $44,000, taxed only lightly on the way out because a 30% offset all but cancels the tax that would otherwise apply.

Now the comparison that matters. Had the family placed that $45,000 in a bank account, after three years Maya would have roughly $48,000 — the $45,000 plus about $3,000 of interest, once tax on that interest is taken out each year. Through the First Home Super Saver Scheme, she instead has about $44,000 released from super, and the $14,400 of tax refunds the deductions produced along the way — close to $58,000 all told. That is more than $10,000 ahead of the bank, from the same $45,000 of family money. Looked at on its own, the released amount is similar to the bank balance; it is the tax refunds collected along the way that make the difference, which is precisely why they should never be left out of the comparison.

And if Maya is buying with a partner whose family has done the same, the figures roughly double: close to $90,000 released towards the deposit between them, with the tax refunds again on top. For many first-home buyers, that is the difference between scraping together a minimum deposit and putting down a substantial one — which can mean avoiding Lenders Mortgage Insurance and saving thousands more again.

Getting the order right

If there is one thing to take away from this article, it is that the sequence matters enormously. The scheme is unforgiving of steps taken out of order, and the mistakes are permanent.

• Apply to the ATO before you sign anything. You need to request a determination, and then a release, before signing a contract to buy or build. This is the single most common and most costly mistake we see — signing first can disqualify you from using the scheme for that property altogether.
• Allow time. Once you request the release, the money takes a few weeks to reach your bank account. It needs to be coordinated with your settlement rather than left to the last minute.
• Buy within the window. After the funds are released, you generally have 12 months to sign a contract, with the option to extend by a further 12 months. If you do not proceed, the money must go back into super or attract a penalty tax.

The conditions worth knowing

• You must never have owned property in Australia — including an investment property or vacant land — subject to limited hardship exceptions.
• You must be at least 18 when you request the release, though contributions can be made before then.
• It is a once-in-a-lifetime scheme; there are no second chances.
• You must intend to live in the home for at least 6 of the first 12 months. It is a scheme for owner-occupiers, not investors.
• Only voluntary contributions count. Compulsory employer contributions, spouse contributions and government co-contributions are not eligible.

Planning ahead

The First Home Super Saver Scheme is one of the genuinely effective ways to help a young person into their first home, and one of the few strategies where the tax system works firmly in their favour. It rewards starting early, and it rewards getting the details right — particularly the order of events and the way contributions are made. The timing point is the one to remember. Because signing a contract before applying to the ATO can rule the scheme out entirely, it is best considered well before anyone starts seriously looking at properties.

Quarterly Business Lunch:

Federal Budget Tax Changes

By Mai Davies

You are invited — Tuesday, 25 August 2026

We would be delighted if you could join us for our next Quarterly Business Lunch on Tuesday, 25 August 2026, at 12.00 pm, at Leonda by the Yarra. This seminar will focus on the key Federal Budget and legislative changes that may affect retirement, tax and wealth planning strategies, and future investment decisions.

We will also discuss the newly enacted Division 296 superannuation tax, which applies from 1 July 2026 to individuals with total superannuation balances above $3 million, with additional implications for very large balances. With the legislation now in effect, it is important for those with larger superannuation balances to understand how the rules operate, who may be affected, and the planning and estate planning considerations that may arise.

Key topics for discussion

• Key Federal Budget and legislative changes effective from 1 July 2026.
• Changes to Capital Gains Tax (CGT), negative gearing, and the taxation of trusts.
• What the new rules may mean for future investment decisions.
• Understanding Division 296 and the additional tax on superannuation balances above $3 million.
• Planning considerations for high-balance superannuation members.
• SMSF implications, including the 30 June 2026 cost base reset opportunity.

If you are affected by the recent Budget tax changes, or if your superannuation balance exceeds or is approaching $3 million, this seminar will provide practical insights into these changes and their potential impact on your financial position. The seminar is also open to colleagues, friends and family, and we encourage clients to bring guests who may benefit from the discussion.

Seminar details

Date: Tuesday, 25 August 2026

Time: 12.00 pm for a light lunch; presentation commences at 12.25 pm and concludes at 2.00 pm.

Venue: Leonda by the Yarra, 2 Wallen Road, Hawthorn. Ample parking is available in the Leonda car park.

Catering: A light lunch will be served. Please advise if you have any special dietary requirements.

How to reserve your place

Please email Mai (mai@gfmwealth.com.au) by Friday, 14 August 2026 to reserve your place. If you would like to bring a guest, please include their name or names when responding. We look forward to seeing you there.

SMSF Association Annual Conference

By Melany McLennan

The SMSF Association is the independent, professional body representing Australia’s self-managed super fund sector. GFM joined the Association in 2003, and ten of our team are accredited SMSF Specialist Advisors — a depth of expertise we are proud of.

Each year, the Association runs an intensive three-day conference offering up-to-date training and education on SMSF legislation, taxation, and estate planning. This year’s conference was held in Adelaide: seven of the GFM team attended in person, with a further four joining virtually.

The overriding message was that the SMSF sector is in good shape — well-regulated and steadily growing. We came away with plenty of valuable insights to help us continue to fine-tune our SMSF advice and service offering. The GFM Group remains firmly committed to delivering high-quality advice in this area.

Members of the GFM team at the SMSF Association Annual Conference, Adelaide.

GFM Podcast

By Mai Davies

We’re pleased to share the latest episode of the GFM Wealth Advisory Podcast, recorded on 15 June 2026.

In Episode 15, Senior Partner Patrick Malcolm and Senior Financial Planner James Malliaros are joined by Leo Barry, Portfolio Manager at Fairview Equity Partners, for an in-depth conversation on Australian equities and investing in small- and mid-cap companies.

Specialising in high-conviction, actively managed portfolios, Fairview has built a strong reputation for identifying quality businesses with attractive long-term growth potential — often in the less efficiently priced areas of the market.

Leo shares insights from his journey into funds management, the key lessons he has learned across his investing career, and how Fairview approaches stock selection with a focus on quality, discipline and valuation. The conversation also turns to the current opportunity set in small caps, where the team sees value today, and some of the common mistakes investors continue to make as market conditions evolve.

Listen or watch: the full episode is available on the GFM website, Spotify, Apple Podcasts and YouTube — follow the links from the podcast page on our website to tune in.

• GFM website
• Spotify
• Apple Podcasts
• Watch on YouTube

Disclaimer: This document is not an offer or invitation to any person to buy or sell any interest in or deposit funds with any institution. The information here is of a generic nature, and does not take into account your investment objectives or financial needs. No person should act upon this information without firstly seeking competent professional advice specifically relating to their own particular situations.

Copyright: © This publication is copyright. Subject to the conditions prescribed under the Copyright Act, no part of it may, in any form, or by any means (electronic, mechanical, microcopying, photocopying, recording or otherwise) be reproduced or transmitted without permission. Enquiries should be addressed to GFM Wealth Advisory.