Don't miss these EOFY tax opportunities + Ouch, how much streaming is costing us

Hi everyone,

Happy end of financial year. Hope you’ve been coping with the winter chill. It was pretty cold at the football last night.

Just a reminder to keep those EOFY sales purchases to just what is needed ... that’s what Libby has been reminding me to do this week, but I know it’s tempting to step over the line.

Some good news on the inflation front was the economic highlight of the week and I reckon that spells good news for borrowers as the Reserve Bank is more inclined to ease rates at its board meeting next month.

In this newsletter:

• Inflation continues to ease, and interest rate cuts are expected to follow.

• The cost of lifestyle: The massive rise in the cost of streaming service subscriptions.

• EOFY investor tax tips but hurry.

• The Tax Office cracks down tax debt and interest is no longer tax deductible.

• Good news: Mortgage distress levels stay low.

• Bad news: You’re going to die at some stage ... so make sure you have a financial plan for it.

• Aussies love their shares, even more than Americans.

• The Middle East: Who does all the oil go to?

Inflation continues to ease … great news for rate cuts

The May monthly Consumer Price Index was released on Wednesday and the Reserve Bank would have loved it - all the key inflation measures had slowed, and they slowed more than expected.

Economists are now factoring in another interest rate cut at the July RBA board meeting and maybe another cut in August as well.

The annual headline CPI inflation fell to 2.1 per cent in May, from 2.4 per cent in April. Financial markets had expected 2.3 per cent, so this was below the estimate. The RBA’s favoured measure of underlying inflation, the annual trimmed mean, fell to 2.4 per cent, also slower than economists had expected.

The biggest worries for the RBA, in terms of inflation, have been building costs and services inflation (goods inflation has been slowing for quite a while), which have been stubbornly high. But both of these are now falling into line.

New dwelling costs are the biggest component of the CPI basket and were a flat 0.1 per cent for the month of May, after a 0.5 per cent rise in April.

Market services inflation has eased to 3.2 per cent for the year.

Rents inflation rose by an expected 0.3 per cent, and on an annual basis is down to 4.5 per cent.

Electricity prices rose by 2 per cent because of some government rebates ending, while gas prices fell by a larger than expected 2.4 per cent.

Other highlights of the CPI figure were:

• Insurance premiums, surprise surprise, actually FELL 0.5 per cent for the quarter ... It's the first fall since 2019. In annual terms, insurance inflation has fallen from 16 per cent in early 2024 to 4 per cent now. Home and car insurance premiums are easing the most.

• Dining out inflation is steady. Restaurant meals saw only a modest rise while takeaway meals were stronger.

• Petrol prices fell 2.9 per cent for the month.

• Fruit fell 2.7 per cent for the month, while vegetable prices rose 0.7 per cent.

• Domestic travel prices fell 9.2 per cent for May and international travel was down 4.8 per cent.

The cost of lifestyle: Streaming services

I often have this discussion with my adult children: Not only does their generation have a cost-of-living issue, like everyone else, but they also have a cost-of-lifestyle issue.

They have expenses which previous generations simply didn’t have - like mobile phones, data costs etc. Case in point is the cost of streaming services. I’ve been a big fan of Bryce and Alec at Equity Mates since they started the business and have followed them closely ever since. On their Instagram feed this week they posted the subscription costs of major streaming services and how much they’ve increased over the last two years.

It is incredible. Remember inflation over that time has been 3-5 per cent ... streaming prices have increased a minimum of 50 per cent over that time and some as high as 71 per cent.

The monthly subscription fees all add up when you’re using four to five streaming services. Netflix, Stan, Apple and Kayo would cost over $100 a month ... $1,200 a year - that’s equivalent to an economy flight to London.

A good trick my kids have passed on to us is to subscribe through your Apple iTunes account because it is the easiest way to unsubscribe and then re-subscribe later if you want to. They rotate between streaming services depending on what’s available.

EOFY investor tax time tips 

The June 30 financial year deadline is on Monday and time is running out to check your tax strategy, rebalance portfolios and set some strong foundations for the year ahead.

Leading fintech, InvestmentMarkets, has put together a good checklist for this reason. So whether you’re managing an SMSF, rethinking your super contributions, or realising gains and losses, now’s the time to take action.

1. Know what you own

Review your full investment portfolio, not just what’s sitting in your main trading app. Consider listed and unlisted investments across all brokers and platforms, including shares, ETFs, managed funds, and alternative assets.

For SMSF trustees, this is also when accurate valuations are critical. The ATO requires all fund assets, including property, private investments, and securities, be reported at market value as of 30 June. These valuations also feed into each member’s total super balance, influencing contribution limits, transfer caps, and broader strategy eligibility.

2. Understand your tax position

Capital gains tax (CGT) is assessed based on the contract date of a sale, not settlement, so the timing of any transactions before 30 June could materially affect your tax position.

This is particularly important if you’ve realised significant capital gains throughout the year. Keep in mind that if an asset is sold after being held for less than 12 months, the full gain is taxed at your marginal rate. Hold it for longer and you may qualify for the 50 per cent CGT discount.

3. Use losses to your advantage

EOFY offers a strategic opportunity to review underperforming assets and consider tax loss harvesting. That is, selling investments at a loss to offset capital gains elsewhere. It’s a smart way to reduce your tax bill and rebalance your portfolio.

Just be cautious of ‘wash sales’. The ATO has flagged these, where investors sell and quickly repurchase the same or a similar asset, as tax avoidance strategies are subject to penalties. Instead, think of this as a chance to cut underperformers and reallocate to better long-term opportunities.

4. Maximise super contributions

While super may not always be top of mind, EOFY is the ideal time to revisit your strategy. This year, you can contribute up to $30,000 in concessional (pre-tax) contributions, and up to $360,000 in after-tax contributions using the bring-forward rule.

Spouse contributions or downsizer contributions of up to $300,000 per person from the sale of a family home can also be effective ways to boost your retirement savings while potentially reducing tax. And from July 2025, super balances over $3 million are set to attract a higher tax rate of 30 per cent. Reviewing your asset mix now could help you stay ahead of these upcoming changes.

5. Don’t forget your SMSF obligations

For SMSF trustees, EOFY comes with a few critical deadlines. Ensure all minimum pension payments have been made, contributions are within caps, and assets are accurately valued with clear documentation. Auditors are placing greater emphasis on independent evidence, so get ahead of it now.

It’s also worth reviewing your fund’s investment strategy. If your asset mix has drifted or if your members’ circumstances have changed, make sure the strategy is updated to reflect your current goals and market conditions.

Think of EOFY as more than just a deadline, it’s an opportunity to pause, plan and position yourself for what’s ahead. By making a few smart moves now, investors can strengthen their financial footing and step into the new financial year with greater clarity and confidence.

Whether it’s reviewing your portfolio, managing capital gains, or making the most of your super, EOFY is the time to take control and start the new year on the front foot.

Tax Office crack down on tax debt repayments

I know there are a lot of small business owners reading this newsletter, so here is a bit of a warning if you have a tax debt to the Tax Office:

From 1 July 2025, interest charged by the Australian Taxation Office (ATO) on late tax payments (currently set at 11.17 per cent and compounding daily) will no longer be tax deductible.

With more than $45 billion in tax debt owed by small businesses, the stakes are high.

Small businesses may not have been concerned about accumulating interest on tax debt, as it was deductible at tax time. Now it won’t be.

Here are five tips from Chartered Accountants to help small businesses prepare for the upcoming change:

1. Know and monitor your cash flow. Understand when your tax is due and align it with your incoming payments. Planning ahead is essential.

2. Get paid faster. Automate invoicing, offer flexible payment options and consider debt factoring to improve cash flow.

3. Cut unnecessary costs. Review expenses such as energy, insurance, and inventory. Negotiate better terms and eliminate waste.

4. Review your pricing. Ensure your pricing reflects rising costs and that you’re focusing on profitable, reliable customers.

5. Explore alternative finance. Interest on bank loans and overdrafts remains deductible and may be cheaper than ATO interest.

Mortgage distress still relatively low

Even though Australian households have been experiencing a cost-of-living crisis and relatively high mortgage repayments (compared with the Covid period), the number of borrowers falling behind on their repayments remains relatively low.

The key to these low figures seems to be low unemployment (everyone has a job), rising property values (very little negative equity) and the serviceability rules which have protected borrowers when coping with higher rates.

APRA data measuring the proportion of borrowers who are overdue or impaired on their mortgage repayments ticked slightly higher through the March quarter to 1.68 per cent ... but below the recent high of 1.86 per cent in 2020.

While highly leveraged borrowers and lower-income households tend to have higher arrears rates, even in these categories, arrears are generally low and trending lower.

Mortgage arrears for borrowers with a loan-to-valuation ratio of 80 per cent or higher peaked around 2.5 per cent in 2024 but are now falling, while borrowers with a loan-to-income ratio above four reached roughly 1.5 per cent and are also trending lower.

Several factors help explain how the vast majority of mortgagors have kept on top of their mortgage repayments during a period of elevated interest rates and severe cost-of-living pressures, including strong prudential standards, tight labour markets, extremely low levels of negative equity, and accrued liquidity buffers.

Interest-only lending comprised 19.7 per cent of new loans in the March quarter and has consistently held well below the previous temporary limit of 30 per cent set by APRA between 2017 and 2018.

The mortgage serviceability buffer, which assesses prospective borrowers on their ability to repay a mortgage at 3 per cent above the current mortgage rate, has also played into the resilience of borrowers.

While tight lending policies have contributed to financial stability and provided protection for borrowers, there is a counter-argument that lending policies may be too tight, reducing access to credit.

Debt servicing costs have risen substantially over the recent rate cycle. Variable mortgage rates have roughly moved in-line with the RBA cash rate, bottoming out below 3 per cent in 2022 before surging by around 4 per cent. A borrower with a $750,000 mortgage saw their monthly repayments rise by around $1,550 between the low point and high point of the rates cycle.

This graph also shows that in the past, new home loan customers (pink line) were on a better interest rate than existing loyal borrowers (purple line). But in the last year, those two lines have converged as customers have woken up to the ‘loyalty tax’ and demanded a better deal. It looks like that is paying off.

The RBA estimated in their most recent Financial Stability Review that less than 1 per cent of households are experiencing a negative equity situation. Given the low portion of homes in negative equity, most borrowers facing financial hardship should be able to sell their property and clear their debt before moving into default.

Another factor helping to minimise arrears is the increase in the household savings ratio as Aussies have changed their consumption patterns to lower priced goods and services and stashed the difference in savings.

You’re going to die … so make sure you’re money smart about it

I’d like to urge you - in the nicest possible way - to consider what would happen to your money and family if you weren’t around. Yep, dead. Carked it. Fallen off the twig.

I’m not being morbid or funny, but it is going to happen some time and often you don’t have any say in it.

If you don’t think about it, you could cause your loved ones a mountain of unintended financial pain if the worst did happen. All this when, hopefully, they are grieving about losing you.

In fact, to be honest, you’re a bit of a selfish bastard if you haven’t planned for the aftermath of an untimely demise.

For example, if you don’t have a will the Government will decide who gets your money and when, and it may not be in accordance with your wishes. The thought of your hard-earned cash going to a relative you despise should be enough incentive to get your affairs in order.

And if there are loved ones who depend on you financially, it’s important to structure your affairs to support them if something happens.

So here’s what to do now to control what happens to your estate when you die. Then get on with living.

1. Review your affairs 

   The first step is to review your financial situation to make sure everything is in order. That means getting an understanding of what assets you own, whether you own them outright or jointly, and whether they will form part of your estate when you die.

   If you have a partner, make sure to include them during this process and ensure they know how to access your accounts, where the important documents are kept and how to contact anyone who manages your money (such as a financial adviser, accountant or super fund).

   Make sure that copies of all your important documentation are stored safely and readily available.

2. Get super and life insurance sorted

   Don’t forget about your superannuation and life insurance during this process. It’s possible to make a binding nomination on who you want these assets to go to in the event of your death, which will override whatever’s set out in your will. Don’t assume your superannuation will automatically just go into your estate ... your binding nomination has to say that.

   It’s also worth reviewing the level of life insurance cover you have and double-checking it’s still right for your situation. Ideally, a life insurance payout will be able to cover any liabilities (debts) you have, as well as provide a lump sum to cover any ongoing costs for families who depend on you.

3. Organise your will

   A will is a legal document that details how you want to distribute your estate when you die, and can be used to assign guardianship of your children, set up a trust, and provide instructions on your funeral arrangements.

   It absolutely staggers me that up to 45 per cent of Australians don’t have a will. It is just plain stupid. Wills need to be written, signed by the testator (you) and witnessed by two people who are not beneficiaries of your estate. You also have to name one or more executors to carry your directions out. The executors do all the hard work so many experts advise to have two, such as a friend or relative to deal with the family and a solicitor or accountant to do all the legal statutory work.

   While it’s possible to buy ‘do it yourself’ will kits, professional help will ensure that your will is legally binding and your wishes will be carried out as intended.

   Always make sure to review your will regularly, particularly after major life events like getting married (which will invalidate your previous will), divorced (which won’t), having a baby or buying a property.

4. Powers of Attorney 

   In some situations, you may want to set up a trusted person with a Power of Attorney to make decisions on your behalf.

   A general Power of Attorney will allow someone to make financial and legal decisions on your behalf when you are unable to manage your affairs through circumstances, such as being overseas. On the other hand, an Enduring Power of Attorney will allow someone to make financial and legal decisions for you if you become incapacitated, while a Medical Power of Attorney will let them also make medical decisions.

5. Get professional help

   If your financial affairs are complex, you have a large estate, own a private business, want to minimise the tax implications for your beneficiaries or you’d simply like to make sure that your wishes are carried out as intended, it’s worth enlisting professional help.

   An accountant or financial planner can provide advice on estate planning, while a lawyer should be engaged to formalise the documentation.

6. Tell your family 

   The final thing I would recommend is to sit down and talk to your loved ones about your plans.

   I know lots of people keep their will secret as an incentive to keep their adult kids in line, but that runs the risk of splitting the family, causing huge tax problems and even prompting court cases which can run for years.

   Sit the family down and be open about it.

Aussies love their shares, even more than Americans

It’s often thought that Americans are the biggest share investors in the world. Not so. Australian households have a greater exposure to shares than Americans ... thanks to their superannuation.

As individuals, Americans have a greater exposure to direct shares because their superannuation (they call them retirement pension funds) and balances are so low compared with ours:

In Australia, you can see the power of superannuation as a national savings scheme and how self-managed superannuation schemes have a big impact in building wealth.

Middle East tensions: The map and the oil flow

With this week’s attacks on Iran, and the threat to close the critical Straits of Hormuz, sent us all to our maps to refresh our knowledge of where all the Middle East countries sit, and how much of the world’s oil goes through that narrow shipping lane.

I thought the below summary chart was a really good visualisation of what is going on. I was surprised by how Europe and the US had reduced their dependence on Middle East oil, and that China is definitely the country that would feel any disruption to supplies the most ...

Have a good week, everyone.