August Update | The RBA's Decision, the Hunt for Reliable Income & Why Tax Debt Just Got More Expensive

Market Update: The RBA's August Decision

The Reserve Bank has left the cash rate unchanged at 4.35%, where it has remained since May. After three consecutive increases earlier in the year, a second straight hold suggests the Bank is comfortable pausing to see how those rises are working through the economy, helped by a softer-than-expected June quarter inflation figure of 3.8%.

It is worth being clear about what a hold does and does not mean. It is not necessarily the beginning of rate cuts. The major banks do not expect those until well into 2027, and the RBA has kept the door open to a further rise if inflation proves stubborn.

For borrowers, the message remains much the same. Rates around these levels increasingly look like something to plan around, rather than a temporary spike to simply wait out. That makes this a sensible time to check whether your loan is still competitive, your offset is working as hard as it can, and your fixed-versus-variable mix still suits your position. For those holding cash and quality fixed income, the other side of higher rates is that returns on deposits remain among the healthiest they have been in years.

Message from the Team

There is plenty happening across markets, super, property and business at the moment, but not every headline needs a reaction. This month, we look at what four strong years of super returns mean for expectations from here, the changing landscape for people who rely on their investments for regular income, the rising cost of carrying a tax debt, the warning signs to watch for as investment scams become harder to spot, and why knowing what your investment property is genuinely worth can open up more options than you might think.

As always, the focus is on what these changes actually mean for you, and where a little planning now could make a meaningful difference later.

 

Feature Insight: Why Four Strong Years for Super May Not Mean a Fifth

If you have glanced at your super balance lately, the numbers have likely been encouraging. The median growth fund returned around 9.5% over the past financial year, marking a fourth consecutive year of returns above 9%. By any measure, that is a strong run.

It is precisely at times like this that keeping expectations grounded becomes especially important. Those returns have been driven largely by an exceptional period for share markets, with global shares rising more than 25% over the year. History tells us that periods like this do not continue indefinitely, and the professionals managing these funds are themselves warning that returns of this order are unlikely to be sustained.

None of this is cause for concern, and it certainly does not mean you should suddenly change course. What it does mean is that your expectations should be anchored to the long term rather than the recent past. A retirement plan built around the assumption of earning 9% every year rests on shaky ground. The same plan built around a sensible long-term average is far more resilient.

Two questions are worth considering. Is your super still invested in a way that suits your stage of life and your tolerance for risk, rather than simply benefiting from a strong market? And if returns were noticeably lower next year, would your retirement plan still hold together? The best time to ask those questions is after a strong run, not during a poor one. If you would like us to stress-test your position using more modest assumptions, we are always happy to help.

 

The Lakeside Lens: The Hunt for Reliable Income, and the Risk It Invites

For anyone who relies on investments to produce income, a meaningful shift is underway. More importantly, how investors respond to that shift could matter far more than the change itself.

Bank hybrids, the securities many income-focused investors have relied on for years, are being phased out. Following an APRA decision, banks will stop counting them as capital from January 2027, and the roughly $40 billion market will eventually wind down entirely by 2032, with most securities expected to be called well before then. For investors, that means a dependable source of franked income of around 5% to 7% is disappearing, and replacing it will not necessarily be straightforward.

The wind-down itself is orderly. The bigger risk is what investors may be tempted to do next. When a familiar source of income disappears, the natural response is to look for something offering a similar return. Increasingly, that search is leading investors towards private credit, which involves lending outside the traditional banking system. The sector has grown rapidly, from around $35 billion a decade ago to roughly $250 billion in Australia today, supported in part by the promise of higher returns.

Private credit is not inherently bad. Used appropriately, it can play a legitimate role in a diversified portfolio. But higher returns rarely come without higher risk. ASIC has raised concerns around parts of the sector, including inconsistent risk management, the possibility that defaults are being under-reported, and valuations that may not hold up as well if economic conditions deteriorate.

The sector has also expanded largely during relatively favourable economic conditions and has not yet been tested through a serious downturn at its current scale. Many Australians may already have some exposure through their superannuation without having actively chosen it, as funds have looked beyond traditional assets in search of stronger returns.

The key point is simple. As reliable income becomes harder to find, higher yields will become more tempting. But those higher yields will almost always come with additional risk. Replacing lost income is entirely possible. Doing it without quietly taking on far more risk requires care. If hybrids form part of your income strategy, or you are considering higher-yielding alternatives to replace them, it is worth having the conversation before you make a change rather than after.

 

The Rising Cost of Carrying a Tax Debt

For anyone carrying a tax debt, or running a business that occasionally does, there has been an important change to what that debt now costs. Two things have happened at the same time. The ATO's general interest charge, which applies to unpaid tax, currently sits at 11.43% for the July to September quarter and compounds daily. And since 1 July 2025, that interest is no longer tax-deductible.

Together, those changes alter the maths considerably. Because the interest can no longer be claimed as a deduction, the true cost of carrying an ATO debt has risen by roughly a third for many businesses. Put simply, tax debt is now one of the more expensive forms of finance a business can carry, and in many cases may cost more than a commercial loan.

That means an ATO payment plan deserves a little more scrutiny than it may have in the past. For many businesses, it is now worth comparing the cost of leaving the debt with the ATO against other ways of funding it, as refinancing elsewhere may genuinely work out cheaper. One important point to remember is that entering into an ATO payment plan does not stop the interest. It continues to accrue at the full rate while the debt remains outstanding.

If you are carrying a tax debt, it is worth giving us a call. There are often better options than letting it sit with the ATO, and we can help you find the right one.

 

The Lakeside Check-In: Before You Invest, Check Who You're Dealing With

Investment scams are becoming much harder to spot. Australians lost more than $837 million to investment scams in 2025, and ASIC is now warning that scammers are increasingly using familiar names, professional-looking websites, fake celebrity endorsements and even AI-generated deepfake videos to make an opportunity appear legitimate.

Older Australians and those approaching retirement are being specifically targeted, often through social media advertisements and private messaging groups such as WhatsApp. In some cases, the investment itself may even involve real shares bought through a legitimate trading account, making the scam even more convincing.

The important thing to remember is that a recognised name, an AFS licence number or a professional-looking website is no longer enough on its own. Criminals are increasingly copying the names, licence details and websites of genuine Australian financial services businesses. ASIC has responded by publishing verified website addresses through its Professional Registers Search, giving investors another way to check that they are dealing with the business they think they are.

A few simple checks can make a significant difference: do not feel pressured to act quickly, be cautious of guaranteed or unusually high returns, independently verify who you are dealing with, and make sure you understand how the investment actually works.

And if an investment opportunity lands in your inbox, on social media or through someone you do not know, and something about it does not feel quite right, please send it through to us before taking any action. A quick second opinion is always better than finding out after the money has moved.

 

A Current Valuation Is Worth More Than You Think

If you own an investment property, now is a good time to get clear on what it is genuinely worth, and the reason is a change on the horizon. From 1 July 2027, the capital gains tax rules are shifting. Any gain on a property you already own will be split in two: growth up to 1 July 2027 taxed under the current 50% discount rules, and growth after taxed under a new system. That single date makes your property's value at the time an important number to have on record, not one to reconstruct years later when you sell.

The timing is worth noting because values have moved very unevenly across the country. According to Cotality, over the past year Perth values are up more than 20%, with Darwin, Brisbane and Adelaide all posting double-digit growth — while Sydney and Melbourne have gone backwards, with Melbourne dwelling values down around 2.8%.It is a reminder that national headlines rarely reflect what is happening in your own state or suburb.

A current valuation does more than prepare you for 2027. It shapes how much you can borrow, the loan terms available to you, whether your current structure still makes sense, and how much usable equity you could draw on if the right opportunity comes along. It also gives you a clearer picture of your overall net worth.

None of this means you need to act on the number today. It simply means good decisions tend to start from current information rather than outdated assumptions. If you are not sure where your investment properties really stand, it is worth finding out.

 

The Whole Picture, in One Place

Much of what we have covered this month comes back to one idea: good financial decisions are easier when you can see the whole picture. That is exactly what shaped Wealth Locker, the secure online vault Ross built to bring your financial world into one organised place.

Your insurance, superannuation, loan details, Will and estate documents can all be stored securely and accessed whenever you need them. It also means the people you love can find what they need at a time when searching through paperwork may be the last thing they want to do.

Wealth Locker is free to our community for the rest of 2026. If you have already set yours up but have not added much yet, this is a good month to get it organised. We are also happy to help populate it with the information we already hold on file.

A look inside Wealth Locker:

 

Here to Help

Financial decisions rarely sit neatly in one box. Your super can affect retirement planning, your property can influence borrowing options, and changes to interest rates, tax or investment markets can flow through to the rest of your financial position. That is why we always encourage you to look at the whole picture.

If anything in this month's update raises a question about your own situation, please do not hesitate to get in touch. We would be very happy to talk it through.

Warm regards,

The Lakeside Financial Team