End of Financial Year 2025: Key Updates for Netplan Members April 28th, 2025

The Markets

Everyone expected that the election of Donald Trump would bring major changes to the way the US does business. For better or worse, US electors were under no illusion when they voted that Trump’s agenda was to “Make America Great Again.”

The Republican view of a greater America centres on bringing manufacturing and jobs back onshore. Their hope is that, through economies of scale, US manufacturing could reduce production costs. Combined with lower energy prices from increased domestic oil production (“drill, drill, drill, baby”), this would theoretically lead to cheaper goods for American consumers.

While those objectives sound appealing in theory, the global economy of 2025 is vastly different to that of previous decades. Automation, robotification, low wages in developing countries, and ultra-efficient international transport have fundamentally changed economic realities. Whether we like it or not, the greatest efficiency and lowest production cost wins. It will be difficult to find workers in the US willing to make T-shirts for $5 an hour. Large factories employing thousands to manufacture goods are largely a thing of the past.

The US’s attempt to create negotiating leverage through tariffs has effectively backfired, leading to significant financial turmoil. US Treasury bonds, historically seen as the safest store of wealth, are now under threat. Gold prices have surged, US asset markets have seen dramatic sell-offs, and US Government borrowing costs have risen sharply. Mortgage rates are now back near 7%, while US house sales have fallen to levels not seen since 1995.

The ongoing uncertainty, lack of cohesive strategy, and frequent flip-flopping on tariffs and other policies have left markets extremely anxious. In professional trading circles, where assets are bought and sold in fractions of a second, the safest strategy is often to sell and move to cash. That is exactly what has been happening. Even Berkshire Hathaway, one of the most successful investment firms in history, is now heavily overweighted to cash.

For everyday investors, what should you do?

If you’ve been following previous Netplan Premium market updates, you’ll know we suggested earlier that profits should be taken to replenish cash pools - exactly for periods like this. For those who came into unexpected cash windfalls, we advised parking funds in high-interest savings accounts to wait out the volatility.

Markets are rarely priced perfectly. They behave like a pendulum, sometimes swinging to overvaluation and sometimes to undervaluation. In my view, we are now much closer to the bottom of the arc. Share markets are not yet truly undervalued, but they are certainly more reasonably priced than a few weeks ago when record highs were the daily norm.

Now may be the time to start carefully allocating some cash reserves into growth assets again, primarily shares. If you have the choice, consider focusing on markets outside the US - particularly Australia, Europe, and perhaps India.

An unexpected caution for industry super funds

There is an additional caution for those with industry super funds, especially if you plan to access your superannuation soon. Industry super funds traditionally hold a significant proportion of unlisted assets. These assets - because they are not readily traded on open markets - can present valuation issues, especially in turbulent times.

Recently, major listed property investor DEXUS sold a Sydney office tower for 17% less than the value recorded just two months earlier. This shows how rapidly unlisted asset values can fall when conditions change. In fact, the regulator, the Australian Prudential Regulation Authority (APRA), has already written to some super funds about the accuracy and frequency of their valuations.

While these valuation issues may correct over time, if you are retiring soon, there is a risk of copping a sudden downward revaluation at the wrong moment - right before you draw down your retirement savings. Some “balanced” and “conservative” super funds now have up to 25% exposure to unlisted assets. It pays to be cautious.

If you are nearing retirement, you may be better served by switching to investment options that only hold listed assets. Many industry funds offer “My Mix” or similar options to tailor your investment choice.

For retirees with an account-based pension, a typical split might involve 10–20% in cash (to fund payments), 50–60% in traded fixed interest investments (bonds), and 30–40% in growth assets (property, Australian shares, international shares - with roughly a two-thirds domestic, one-third international split).

Younger members or those at least 10 years from retirement should generally remain in growth options. While current volatility is uncomfortable, it is part and parcel of achieving better long-term returns.

End of financial year tax strategies

With just a few weeks remaining, now is the time to assess your position - particularly if you have unexpected taxable income such as realised gains. Remember: winnings, gifts, and inheritances are not taxable and do not need to be declared. However, profits from asset sales are taxable.

If an asset was sold within 12 months of acquisition, the full gain is included in taxable income. If held longer than 12 months, only half the gain is taxed, thanks to the 50% CGT discount. Capital losses can only offset capital gains, but income losses (for example, from negative gearing) can offset any taxable income, including net capital gains after discounting.

If you have shares that no longer trade, you may still be able to realise a loss by selling them through services such as Delisted.com.au. While there is a fee, it is deductible, and the crystallised loss can help offset taxable capital gains.

Another strategy is to pre-pay next year’s deductible expenses before 30 June to claim a deduction this financial year.

For simple tax affairs, consider completing your own tax return via the ATO’s online myGov portal. The majority of information is pre-filled, and you can generally claim up to $300 in work-related expenses without receipts, provided the expense was genuinely incurred.

If your primary reason for lodging a tax return is to reclaim franking credit refunds and your refund is usually under $6,000, DIY lodgement becomes even more attractive. After two years, you may automatically enter the ATO’s refund program - where your refund is paid without lodging a tax return - provided you are not using a tax agent.

Superannuation Strategies

Session 3 of Netplan discusses the workings of superannuation in detail, so we won’t repeat the basics here.

The concessional contribution cap for 2024–25 is $30,000. Importantly, the carry-forward rules have now reached their full five-year limit.

Concessional Contribution Caps

Total available to contribute: $162,500

Be mindful: if your Adjusted Taxable Income exceeds $250,000, concessional contributions are subject to an additional 15% tax. Furthermore, claiming deductions that reduce your taxable income below the tax-free threshold ($22,575 for singles) is not beneficial, since you would be paying no tax anyway. In contrast, concessional contributions always incur 15% tax on entry into the super fund.

Non-concessional contributions remain capped at $120,000 per year, with the bring-forward rule allowing up to $360,000 if eligibility criteria are met.

If you are unsure where you stand with contribution limits or super balances, the ATO’s myGov portal provides real-time information.

Setting Up MyGov Access

Access your super contribution details easily via the ATO myGov portal.

To set up your service you only need:

• An email address and mobile phone to receive text messages (two factor authentication)
• An ATO “Notice Of Assessment” from the past 4 years. This is NOT the tax return lodged by your accountant but the actual notice received from the ATO

Plus, either:

• Bank account details (BSB and Account number) for a bank account that paid you any interest during the year, where your tax file number (TFN) was provided or;
• The shareholder reference number of any Australian shares you held that paid you a dividend where the TFN was provided.

There are other options to gain access, but the above are the easiest for most of us.

Upcoming election and the deeming rate freeze

Netplan remains strictly bipartisan. However, it’s important to note that neither major political party has committed to extending the deeming rate freeze beyond 30 June.

Deeming rates affect Age Pension and Commonwealth Seniors Health Card (CSHC) eligibility by setting a notional income rate for financial assets. Under current settings, singles are deemed to earn 0.25% on the first $62,600 and 2.25% on balances above that, with higher thresholds for couples.

Potential Impact of Deeming Rate Changes

The freeze on deeming rates ends on June 30 this year. While the rates are set by the Minister of the day, neither of the two major political parties have stated that the freeze will be extended beyond June 30. If we use the RBA’s overnight cash rate as a reference point, deeming rates could easily be reset to 3 and 5 percent.

Under Covid conditions, the government froze the deeming rates used to calculate assessable income for use in the income means testing system.

For singles, the first $62,600 and for couples, the first $103,800 of all financial assets is deemed to be earning just 0.25 percent per annum. All amounts above these levels are deemed to be earning 2.25 percent per annum.

Financial assets includes all cash, bullion, bank accounts, shares, managed investment funds, Superannuation accumulation funds (for those over 67 years of age, Account Based Pension funds and gifts over certain limits. For CSHC card holders, the deeming system is used to calculate assessable income on account based pension balances.

An example:

This would see many pensioners lose part of their Centrelink pension and in some cases, the pension could be cancelled altogether.

Similarly, many Commonwealth Seniors Health Card (CHSC) card holders with large account based pension balances might have their concession cards cancelled.

It’s worth raising this issue with your local candidates before election day.

In conclusion

We’ve sent this update early so you have time to work through any actions needed.

If you have any questions, Netplan Premium subscribers can email support@netplan.com.au.

Let’s hope that in the coming weeks, stability returns to markets - and perhaps that a certain “leader of the free world” realises that damaging the global economy benefits no one.