Future Focus: Most surprising tax rules in 2025-2026
Mr. Taxman, Adrian Raftery, listed 101 tax rules – these are the ones that jumped out at me.
The return an investment generates is not the final amount that ends up in an investor’s bank account.
What matters is that final number. Anything that minimises what detracts from that number improves your outcome.
Tax effective investments usually provide a much larger benefit than the 1-2% that many professional investors fight for to beat the market. It is larger than the fee difference between two ETFs. With tax effective investments and choices, you see the results in the same financial year, while many others can only be seen through years of compounding.
Investing in a tax effective vehicle like super could reduce your tax obligation by 32%.
Investing in a company that offers a fully franked dividend could offer you a 30% credit.
Investing in an investment property that offers negative gearing provides an average deduction of $8,702 (Property Council of Australia).
These are the well-known ways of reducing your tax obligations and maximising your total real investment return. I recently read a book by Adrian Raftery, who is colloquially known as Mr. Taxman. Each year, he releases a book on 101 ways to save tax legally. Some are obvious to seasoned investors, while others are more nuanced parts of the Australian tax system.
Below, I lay out some of the most surprising or helpful tax rules that are not as well known.
Can’t afford an investment property? You have the option to look abroad.
Many Australians are locked out of the housing market. Those that can afford a house find it difficult to also build a diversified portfolio.
Many Australians are familiar with the concept of negative gearing when it comes to investment properties in Australia. Fewer realise that it can also apply to overseas properties. If you own an investment property in another country and it’s generating rental income, you can claim deductions for eligible expenses such as mortgage interest, maintenance costs, and property management fees.
To do this the income and expenses must both be reported to the Australian Taxation Office (ATO). While there are added complexities such as exchange rates and foreign tax treaties, the underlying principle remains the same. If the property is genuinely held for income-producing purposes, you may be able to offset the loss against your Australian taxable income.
For instance, you can buy a $20,000 house in Italy that’s advertised on Instagram (I like to daydream, scrolling @cheappropertyeu). However, for those less inclined to impulse purchase houses on Instagram there are still reasons why people may own foreign property. As the number of foreign-born Australians increases, so do the base of potential investors that would have an adequate understanding of an overseas property market. It may also be useful for new Australians who own existing investment properties overseas.
You can read more here.
Low value pooling
Depreciation is often overlooked by individual investors, especially those that aren’t business owners, or have an investment property. The ATO allows for ‘low value pooling’, a method for simplified depreciation for assets that cost less than $1,000, or that have been substantially depreciated. This pool gets a more favourable rate of 37.5%
Instead of tracking these items separately, you are able to group them into a ‘pool’ and claim a higher rate of depreciation. For investors with rental properties, it could include items such as appliances or furniture. The benefits to this include reducing your administrative burden and allows you to claim deductions quicker.
Although the amounts may seem small individual, over time they can add up.
You’re able to read more here.
Your income protection insurance is tax deductible
Insurances are one of the expenses that many of us groan at paying, because it’s often seen as a cost with not much return. Premiums for income protection insurance, policies that cover you if you’re unable to work due to illness or injury, are generally tax deductible if the policy is held outside of superannuation.
Income protection replaces taxable income, so the premiums are considered an expense incurred in earning that income. For this reason, Life, Trauma and Total and Permanent Disability (TPD) insurance are not tax deductible.
This allows investors to mitigate risk and soften the blow of the premiums.
You can read more here.
PAYG withholding variation
Many people look forward to tax return time. That is because many employees receive a tax refund because too much tax has been withheld from their pay, or their adjusted income is lower than their income from their employer.
With a PAYG variation, you are able to submit a form to the ATO to have less tax withheld from each pay period if you expect to claim large deductions. For example, for an investment property or for significant work expenses.
Instead of waiting until tax time for a refund, the benefits flow throughout the year. This approach can offer significant cashflow relief if you have large, lumpy expenses throughout the year.
To take advantage of PAYG variation requires careful planning and a relatively accurate understanding of your costs over the financial year.
You can read more here.
DICTO – Dependent (Invalid and Carer) Tax Offset
Another lesser-known provision in the tax system is the Dependant (Invalid and Carer) Tax Offset. This offset may apply if you support a dependant who is genuinely unable to work due to a physical or mental condition. It can also apply if you care for your spouse’s parent/s who meet certain eligibility criteria.
If you are caring for an elderly parent, a spouse, their parents, your child (aged 16 or over) or your sibling (aged 16 or over) you may be entitled to this offset.
This is increasingly prevalent for many Australians. I have written before on the sandwich generation. The sandwich generation refers to the growing number of working Australians that need to juggle the caring needs of children and elderly parents.
There are a few parallel issues that are exacerbating this issue. The first is the cost of living and housing in Australia. This keeps many younger people in the family home for longer. The second is longer life expectancies for Aussies. Longer lifespans are generally positive, but it often means facing years of living with chronic illnesses.
Unlike a deduction, an offset directly reduces the amount of tax you pay. To claim DICTO, you must be deemed eligible. If you satisfy the criteria, you can claim up to $3,300. You may also be able to receive multiple DICTO grants if you had more than one dependant during the year.
You can read more here.
Final thoughts
Raftery shows that the Australian tax system is deep, and occasionally more generous than many realise. The rules can be complex but understanding them can help contribute to better outcomes.
His book is released each year to reflect changes to the tax rules.
Further resources
Found this article interesting? I’ve written the below articles, including leaning on the insights of tax professionals:
The most overlooked investment property deductions. An investment property tax expert runs through what every investment property owner should know
Property has negative gearing. What do shares have? The most common tax deductions for share investing
Future Focus: One of the most generous tax breaks in Australia. But only if people owning a home get it right.
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