SJM Accountants Pty Ltd

OCTOBER 2026 TAX ROUND UP

This month we look at several practical issues that could affect your tax and superannuation position. The ATO’s expanded passenger movement data-matching program means international travel records could come under greater scrutiny, particularly where tax residency is unclear or circumstances have changed. We then turn to lost superannuation, with more than $21 billion currently sitting unclaimed and a simple check potentially uncovering money that belongs to you. Recent changes to the negative gearing reforms that apply from 1 July 2027 have also fixed some unintended outcomes affecting jointly owned properties and former main residences, providing greater certainty for taxpayers in these situations. Finally, we look at SMSF investment strategies and why regularly reviewing the strategy is about more than meeting a compliance requirement, particularly as members move from the accumulation phase into retirement.

Travel records under the microscope

If you spend time outside Australia for work, family or personal reasons, your travel history could become increasingly important when it comes to your Australian tax affairs.

On 24 August 2026, the ATO gazetted its latest passenger movements data-matching program. Under the program, the Department of Home Affairs is expected to provide the ATO with travel information for around 115,000 individuals each year from the 2026–27 income year through to 2028–29.

The information may include an individual’s name, date of birth, arrival and departure dates, passport details and citizenship or visa status. The ATO can then compare this information with its own records to identify potential issues with tax residency, registration, lodgement, reporting and payment obligations.

For taxpayers who regularly travel overseas, one of the most important areas to consider is their tax residency position.

Why tax residency matters

Your Australian tax residency status can have a significant impact on how you are taxed.

For example, Australian residents are generally taxed on their worldwide income, while foreign residents are generally taxed only on their Australian-sourced income. Residency can also affect the tax-free threshold, Medicare levy obligations and capital gains tax (CGT) outcomes.

This means that where you have moved to or from Australia, or spent extended periods overseas, the exact dates you entered and left Australia can be important when preparing your tax return.

The ATO will now have access to passenger movement information from an independent government source. If the dates reported by a taxpayer do not appear to align with those records, this could potentially prompt the ATO to seek further information.

Importantly, spending time overseas does not automatically make someone a foreign resident for tax purposes. Tax residency is determined by considering a range of factors, including family circumstances, the strength of connections with Australia and someone’s intentions and behaviour. However, accurate travel records can be an important part of establishing the overall position.

When could your travel history matter?

There are several situations where keeping accurate travel records could be particularly useful.

Part-year residency

If you became or ceased to be an Australian tax resident during the year, the dates you arrived in or departed Australia may form part of the evidence supporting your residency position. They can also be relevant when determining whether a part-year tax-free threshold applies.

Working overseas

If you regularly travel overseas for work, your travel history may help establish when you were working in Australia and when you were overseas. This can be particularly relevant where your tax position involves foreign employment income, work-related travel or other overseas activities.

Selling an Australian property

If you have moved overseas and later sell an Australian property, your residency history can be relevant to the CGT treatment. An individual’s tax residency status can have a significant impact on whether the main residence exemption can apply on sale of someone’s home, so keeping a clear record of when you were living in Australia and when you were overseas can be helpful.

What should you do?

There is no need to be concerned simply because you travel overseas. However, if you spend significant periods outside Australia, it is worth making sure your records are accurate and consistent.

As a practical starting point:

• Keep a record of your arrival and departure dates for each trip, including the year in which the travel occurred.
• Retain useful supporting records such as flight itineraries, boarding passes and passport records where available.
• Let us know about significant periods spent overseas, particularly if you have moved overseas or are considering doing so.
• Before lodging your tax return, check that the dates used in any residency calculation or other relevant tax treatment are accurate.

Good record-keeping is particularly important where your residency position is not straightforward. If there is a difference between the dates you have reported and the information available to the ATO, having supporting records can make it much easier to explain the position.

A small detail that could make a big difference

For most taxpayers, the ATO’s passenger movements data-matching program is unlikely to have any direct impact. However, for people who regularly travel overseas, have moved countries or have a residency position that is finely balanced, accurate travel records could become increasingly valuable.

Rather than waiting for the ATO to raise a query, it is worth discussing your circumstances with us if you have spent substantial time overseas during the year or plan to in the near future.

A few minutes spent checking your travel dates and residency position could help avoid unnecessary questions later and provide greater confidence that your tax return accurately reflects your circumstances.

$21 billion in lost super is waiting

More than $21 billion in lost and unclaimed superannuation is currently sitting idle across Australia, according to the latest ATO figures. The average lost account holds around $41,000. Last year alone the ATO reunited more than $1.1 billion with members.

That is real money that could be working harder for your retirement. Tax time is the natural moment to check whether any of it belongs to you.

How super becomes “lost”

Super generally becomes lost when an account becomes inactive and the fund can no longer contact the member. Common triggers include:

• Changing jobs and leaving an old account behind
• Moving house or updating your phone number without telling the fund
• Changing your name

When the fund cannot reach you, the account may be classified as lost. In some cases, the balance is eventually transferred to the ATO to hold until the rightful owner claims it. The money does not disappear; it simply sits waiting to be reunited with its owner.

A five-minute health check

Finding lost super is straightforward and free. The quickest way is through ATO online services via myGov:

1. Log in to myGov and open the ATO section.

2. Select Super, then Fund details.

3. You will see any active accounts plus any lost or ATO-held super linked to your tax file number.

You can also use the ATO app or call the automated lost super search line on 13 28 65. A paper form is available if you prefer.

Many people are surprised by what turns up from old accounts from early jobs, small balances that have grown over time, or larger amounts they had completely forgotten about.

Especially valuable if you are approaching retirement

For clients still decades from retirement, finding lost super is useful. For those at or approaching retirement age it can be particularly meaningful. An extra $20,000 or $40,000 (or more) can make a noticeable difference to the size of the nest egg available to draw on. Even smaller amounts compound further once consolidated into a single active account that continues to earn returns and attract any future contributions.

One important practical warning before you consolidate

If you decide to roll multiple accounts into one preferred fund, check the insurance cover attached to each account first. Death, total and permanent disability, or income-protection cover that comes with a super account can sometimes end when the balance is rolled over. Losing that cover without realising it can leave a gap in your protection at the exact time you may need it most. Speak with your fund or adviser before consolidating so you understand exactly what will transfer and what will not.

The commercial upside is simple

Every dollar sitting in a lost or low-balance account is potentially earning less than it could, or incurring unnecessary fees. Bringing the money into one active account usually reduces fees, improves investment choice, and makes it easier to keep track of your overall position. The ATO’s reunification figures show that when people do the search, meaningful amounts are regularly returned.

The process takes only a few minutes and costs nothing. Given that more than $21 billion is currently waiting to be claimed, the odds that some of it belongs to you are higher than many people expect.

You can start the free search here:

https://www.ato.gov.au/forms-and-instructions/superannuation-searching-for-lost-superannuation

If you would like help interpreting what you find, or advice on whether consolidation makes sense in your circumstances (including the insurance check), just get in touch. A short conversation now can put money back into your retirement savings that might otherwise stay forgotten.

“Widow tax” fixed

Federal Parliament has closed an unintended loophole in the recent negative gearing and capital gains tax reforms that became widely known as the “widow tax”. At the same time, the Government also fixed a technical issue that could have affected people who first use a main residence to generate rental income after Budget night on 12 May 2026.

What the problem was

As you might be aware, the tax rules have recently been changed to ensure that losses generated from residential rental properties from 1 July 2027 can be ‘quarantined’. This means that they can only be offset against income or capital gains generated from other residential rental properties. However, the changes won’t generally apply to properties that were purchased by the relevant taxpayer before 12 May 2026.

However, a problem could arise when an ownership interest in a property passes to someone as a result of the death of the original owner or because of a relationship breakdown and this occurs after 12 May 2026. Under the original version of the new rules, that transfer could be treated as a new acquisition. This could have meant that a surviving spouse or former partner risked losing the protected negative gearing treatment that had applied to the property in the hands of the previous owner.

How it was fixed

The Government moved quickly once the issue was identified. Some new rules now specifically protect people who acquire a residential property interest from a spouse because of death or relationship breakdown. The rules can also potentially protect someone who inherits an additional ownership interest in a rental property from a co-owner who isn’t their spouse.

Case study 1 – the widow tax fix

Sarah and David bought a rental unit in 2019 as equal joint owners. The property has always been negatively geared, with annual rental losses of around $8,000 offset against their other income each year.

Under the original May 2026 reforms, the property was protected because it was acquired well before Budget night. However, if David had died and the property transferred fully into Sarah’s name, the additional 50% interest that Sarah inherited from David’s estate risked being treated as a new acquisition. Sarah could have lost the ability to claim the losses generated from this interest in the property against her other income.

With the updated rules now in place, that outcome is avoided. Because the transfer occurs due to the death of a spouse, Sarah keeps the original protected treatment and can continue offsetting the rental losses in the same way as before.

Former main residences

A related technical issue also needed fixing. Under the original rules there was a risk that an existing main residence purchased before 12 May 2026 could lose its protected status if it was later first used to generate taxable rental income after that date. This was because of the interaction with a long-standing tax rule that can treat someone as if they had reacquired a former main residence when it is first used to produce income.

The Government has now passed legislation to correct this. The new rules specifically disregard that “first use to produce income” rule when determining the acquisition date for negative gearing purposes.

Case study 2 – renting out a former home

James bought his home in 2018 and has lived in it as his main residence ever since. In 2027 he decides to move in with his partner and rent the property out for the first time.

Under the original drafting of the 2026 reforms, first renting the property after 12 May 2026 risked resetting its acquisition date. That could have caused the property to be treated as a post-Budget night acquisition and subjected to the tighter negative gearing limits.

With the new rules now in place, that reset is disregarded for negative gearing purposes. Because James originally acquired the property before 7:30 pm on 12 May 2026, it keeps its original acquisition date. He can continue to offset any rental losses in the same way as if the property had always been an investment property acquired before Budget night.

Why these fixes matter

Both changes remove sources of unexpected cash-flow disruption. The “widow tax” fix protects people at a difficult personal time. The main residence clarification gives homeowners greater flexibility if their circumstances change and they later decide to rent out a property they already own.

What you should do now

• If you own a jointly held investment property acquired before 12 May 2026, the “widow tax” fix provides reassurance that a future transfer on death or separation should not remove negative gearing rights, but the rules are still complex and it is always best to have the position checked.
• If you own a main residence bought before 12 May 2026 and are considering renting it out in future, the new rule means the property should keep its original acquisition date for negative gearing purposes, but there could still be some complex CGT implications.
• Keep clear records of the original purchase date and ownership history.

If either situation applies to you and you would like confirmation of how the amended rules work in your circumstances, contact us.

Reviewing your fund’s investment strategy

Superannuation law requires trustees of SMSFs to formulate, regularly review and give effect to an investment strategy that has regard to the whole of the circumstances of the fund. Although there is nothing in the law stating a timeframe that may define ‘review regularly’, it is commonly accepted that this would be at least annually. This aligns with comments on the ATO’s website where they expect reviews to occur at least annually.

Some trustees will undertake an annual review leading up to, or at the beginning of a new financial year, while others will undertake the review as part of reviewing the completed financial accounts from the previous financial year. Neither is the right or wrong option, and you must consider what is best for your situation.

Either way, you will need to be able to show your fund’s auditor that you have reviewed the investment strategy and documented any decisions made, whether it be recording changes deemed necessary or determined the existing strategy remains appropriate.

There may be other times that it is appropriate to review the investment strategy. These may include when:

• There is a market correction;
• A member joins or leaves the fund;
• A member starts a pension in the fund.

An investment policy will generally be comprised of two parts:

1. Investment objective – this part outlines the fund’s objectives and expected outcomes. For example, an objective may be to achieve a certain level of return over a certain period. This would generally take into account the age of the members, their retirement needs and investment risk profile.

2. Investment strategy – this part outlines how the fund will achieve the stated objectives. For example, it may include investment asset ranges or specific assets that will be held.

When reviewing your fund’s investment strategy, consideration must be given to:

• The risk of holding particular investments and their returns, with regards to the fund’s objectives and expected cashflow requirements;
• Composition of investments and the risk of inadequate diversification;
• Liquidity of investments, with regards to expected cashflow requirements;
• Ability to discharge existing and prospective liabilities; and
• Whether insurance cover for one or more members should be held by the fund.

Although these points need to be considered, it is up to the trustees to determine how they are applied, based on the circumstances of the fund.

As an example, you must consider the diversification of the fund’s assets, but that does not mean you are required to have a diversified investment strategy. Many funds hold just a property and a bank account, and this may be appropriate for those funds. However, the trustees should document what consideration they gave to diversification, why the lack of diversification is appropriate and why they have chosen these particular assets.

Likewise, there is no legal requirement to hold insurance cover for the members, but you do need to document that it has been considered.

As noted above, a member starting a pension may be reason to review the fund’s investment strategy. This is due to the fact that this is likely to change the liquidity considerations and investment profile of the fund. When members are all in the pre-retirement growth phase, expenses are usually more predictable and there isn’t a need for many funds to hold large cash reserves. Once members reach the point they are accessing their benefits, as either pension or lump sum payments (or both), cashflow, liquidity and a potential cash buffer become a more important consideration.

It is not uncommon that leading up to the end of any given financial year we will field enquiries and concerns from trustees that do not have the cash to satisfy even the minimum pension requirements for the year. While there may be several reasons for this, it should raise questions about the appropriateness of the fund’s current investment strategy and considerations as to whether a review of the asset holdings is warranted.

If we revisit the one property and one bank account funds mentioned early, this may have been a reasonable strategy during the growth phase, but does it remain so during the drawdown phase?

Although many people are comfortable with property and Australian investors in general have an affinity for the old bricks and mortar, this does not mean it is an appropriate investment in all circumstances. If the rental income from the property cannot support your retirement needs and minimum pension withdrawal requirements, something needs to change. This will hold true for any other investment that may not be easily sold, such as holdings in unlisted companies and trusts.

Reviewing your fund’s investment strategy and giving consideration to the needs of the members and the asset holdings of the fund should not be seen as just a tick-a-box legal requirement. You’ve worked hard to build you retirement wealth and when the time comes, you want to be able to enjoy it. Having an appropriate investment strategy that will allow this is an important element of running an SMSF. Have you reviewed your strategy lately?   

Note: The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.

SEPTEMBER 2026 TAX ROUND UP

This month we look at several important developments and practical compliance issues affecting individuals, businesses, trusts and SMSF trustees. The Government’s proposed 30% minimum tax on discretionary trusts could have significant implications for some family groups, particularly where trusts distribute income to companies, although the rules remain subject to consultation and aren’t final yet. We also clear up some common misconceptions regarding deductions for travel expenses and overtime meal expenses in light of the ATO’s new 2026–27 travel and overtime meal allowance rates. With the Commonwealth penalty unit increasing from 1 July 2026, we highlight how this change could increase the cost of late lodgements and other compliance mistakes. Finally, we look at SMSF property valuations and related-party leases, and the importance of having appropriate evidence ready to support market values and arm’s-length rental arrangements during the annual audit.

Discretionary trusts and the proposed 30% minimum tax

Discretionary trusts, often referred to as family trusts, have been a popular structure for Australian families and businesses for many decades. They are commonly used to operate family businesses, hold investments and assist with succession planning. Their flexibility, together with asset protection and estate planning benefits, has made them an attractive option for many groups.

In the 2026–27 Federal Budget, the Government announced a significant proposed change. From 1 July 2028, trustees of discretionary trusts would generally be required to pay a minimum tax of 30% on the trust’s taxable income.

According to the Government, the proposal is intended to better align the tax paid on trust income with that paid by salary and wage earners, while reducing opportunities to split income between family members. However, the announcement has generated considerable debate. Professional bodies, business groups and tax advisers have expressed concerns that the changes could increase complexity and compliance costs for many genuine family businesses and investment structures.

How the proposal is expected to work

Under the proposal, the trustee would generally pay the minimum 30% tax on the trust’s taxable income.

Where trust income is distributed to individual beneficiaries or certain other non-corporate beneficiaries, those beneficiaries would generally receive a non-refundable tax offset recognising the tax already paid by the trustee. This is intended to reduce the risk of the same income being taxed twice, but while maintaining the impact of the 30% minimum tax rate.

Importantly, the minimum tax would not apply to every trust. The Government has indicated that a number of trusts would be excluded, including fixed trusts, widely held trusts, complying superannuation funds, charitable trusts, deceased estates, special disability trusts and genuine testamentary trusts. Primary production income and certain income relating to vulnerable minors would also be excluded.

The Government has also stated that more than 90% of small businesses are not expected to be affected. While that may be reassuring for some taxpayers, there are still some important issues that could affect family groups using discretionary trusts.

What could this mean in practice?

One area likely to receive close attention is the use of companies as beneficiaries of family trusts.

Many family groups have historically distributed some trust income to a company. This can provide flexibility in managing cash flow, retaining profits within the business and funding future growth. Under the proposed rules, however, the corporate beneficiary would not receive a tax offset for the tax already paid by the trustee. In many cases this will mean that income distributed from a discretionary trust to a company would be subject to double taxation.

Another practical impact of the proposed change is that some family groups may find it more difficult to fully utilise existing tax losses.

While the impact will depend on each group’s circumstances, the proposed minimum tax is likely to reduce some of the flexibility that currently exists when managing taxable income across a family structure within many groups.

The Government has also proposed a temporary three-year rollover period, commencing from 1 July 2027, to help restructure into alternative business structures, such as companies or fixed trusts, without triggering immediate income tax or capital gains tax consequences.

While this may assist some groups, restructuring is rarely straightforward. Depending on the circumstances, it might be necessary to consider things like stamp duty, loan approvals, financing arrangements, contract changes, licensing requirements and professional advice. Even relatively simple restructures can involve significant time and cost, so careful planning will be important.

The rules are not yet final

At this stage, the proposal remains subject to consultation. Treasury released a consultation paper in July 2026 seeking feedback on a range of design issues, including how the new rules would operate in different situations. Final legislation has not yet been introduced, meaning aspects of the proposal could still change before the rules become law.

For this reason, most groups utilising discretionary trust structures should avoid making major structural decisions based solely on the announcement. Instead, it is sensible to monitor developments while considering whether existing structures are likely to remain appropriate if the proposal proceeds.

What should you do now?

For many families, discretionary trusts are about much more than tax. They can continue to provide valuable asset protection, succession planning and business flexibility. The proposed changes do not remove those benefits, nor do they prevent discretionary trusts from continuing to be used.

However, the proposal does have the potential to change the tax outcomes for some family groups, particularly those with more complex structures or those that regularly distribute income to companies.

With the proposed start date still some time away, there is an opportunity to pause and carefully understand how the changes may affect your circumstances and consider whether any planning or restructuring might be appropriate. As the legislation develops, we can help you assess the impact on your business or investment structure and determine whether any action is warranted.

New reasonable travel and overtime meal rates

The ATO has released its updated reasonable travel and overtime meal allowance rates for the 2026–27 income year in Taxation Determination TD 2026/4.

The overtime meal allowance has increased to $40.00, while the reasonable amounts for domestic and overseas travel have also been updated based on salary levels and travel destinations.

Although these figures are widely publicised each year, they are often misunderstood. A common misconception is that employees can automatically claim a tax deduction up to the ATO’s published rates. In reality, the rules are much narrower, and applying them incorrectly could lead to deductions being denied as well as interest and penalties.

A travel allowance is the starting point

The ATO’s reasonable amounts only become relevant if an employee receives a genuine travel or overtime meal allowance from their employer.

Generally, an allowance should:

• Be paid specifically to cover work-related travel or overtime meal expenses;
• Relate to particular work trips or overtime worked, rather than being a general additional payment;
• Be shown separately from normal salary or wages; and
• Be intended to help cover expenses the employee is expected to incur.

If an amount has simply been built into an employee’s normal salary package or is not identified as a separate allowance, the ATO’s reasonable rates generally do not apply. Instead, the normal substantiation rules will usually apply to any deduction claimed.

The reasonable rates are not an automatic deduction

One of the most common misunderstandings is that receiving a travel allowance allows an employee to automatically claim the ATO’s published rate as a tax deduction.

This is not how the rules operate.

Employees can generally only claim the amount they actually spend on deductible work-related travel or overtime meal expenses. The ATO’s reasonable amounts simply mean that, in certain circumstances, employees may not need to keep a receipt for every specific expense.

Importantly, the expenses must still have been incurred and they must relate to work-related activities.

Good records are still essential

Even where a genuine travel allowance has been paid, employees should still keep sufficient records to demonstrate that they incurred the expenses and that their claim is reasonable.

Useful records may include:

• A diary recording work trips and overnight travel;
• Details of meals and incidental expenses incurred while travelling;
• Bank or credit card statements showing the expenses were personally paid;
• A representative sample of receipts; and
• Where travel involves six or more consecutive nights away from home, a travel diary recording the dates, locations and purpose of the travel.

While receipts may not always be required, relying solely on the ATO’s published rates without any supporting evidence could expose you to unnecessary scrutiny if your return is reviewed.

Practical tips for employees and employers

If you receive a travel or overtime meal allowance, it is worth checking that the arrangement satisfies the ATO’s requirements before claiming a deduction.

Some practical steps include:

• Review your payslip. Check that the allowance is separately identified rather than being included in ordinary salary or wages.
• Keep records throughout the year. Maintaining a simple travel diary and retaining some supporting documents is much easier than trying to recreate the information months later.
• Only claim what you actually spend. The ATO’s reasonable amounts are not a target or standard deduction. They simply provide a benchmark for when the normal receipt requirements may be relaxed.
• Take extra care on longer trips. If you are away from home for six or more consecutive nights, additional travel diary requirements will generally apply.

A little preparation can avoid problems later

The updated reasonable amounts provide a useful guide for employers and employees during the 2026–27 income year, but they should not be viewed as an automatic entitlement to a tax deduction.

Understanding how the rules operate, keeping appropriate records and claiming only genuine work-related expenses can significantly reduce the risk of problems if the ATO reviews your tax return.

If you or your employees receive travel or overtime meal allowances, now is a good opportunity to review your current arrangements. We can help you confirm whether the allowances meet the ATO’s requirements and what records should be kept to support any future claims.

Penalty units increase from 1 July 2026

From 1 July 2026, the value of a Commonwealth penalty unit increased from $330 to $364. While this may sound like a minor administrative change, it has a direct impact on many ATO penalties, increasing the cost of a range of compliance failures.

A penalty unit is simply the method used under Commonwealth law to calculate many fines and administrative penalties. Rather than specifying a fixed dollar amount, the legislation often refers to a certain number of penalty units. As the value of a penalty unit increases, so too do the penalties that rely on it.

The new value applies to breaches that occur on or after 1 July 2026. Earlier breaches continue to be assessed using the previous rate.

Where the increase is likely to be felt

Many of the ATO’s administrative penalties are based on penalty units, meaning the increase flows directly through to the amount payable.

Failure to lodge on time

One of the most common penalties applies where tax returns, activity statements or other required documents are lodged late.

The base penalty is generally one penalty unit for every 28 days (or part of 28 days) that a document remains outstanding, up to a maximum of five penalty units.

For a small entity, this means the maximum base penalty has increased from $1,650 to $1,820. Higher penalties may apply to medium and large entities, while significant global entities are subject to much larger penalty amounts.

False or misleading statements

Providing incorrect information to the ATO can also result in penalties.

Where there is no tax shortfall, the law provides for base penalties of 20, 40 or 60 penalty units, depending on the circumstances and the taxpayer’s level of care.

At the new penalty unit value, these base penalties have increased to $7,280, $14,560 and $21,840 respectively, before taking into account any reductions or increases that may apply.

Self-managed super funds

Trustees of self-managed superannuation funds (SMSFs) should also be aware of the higher penalty amounts.

A range of SMSF administrative penalties are calculated using penalty units. For example, some breaches that previously attracted a penalty of $19,800 (60 penalty units) now carry a penalty of $21,840.

Importantly, these penalties are generally imposed on each individual trustee rather than the fund itself. This means the total cost can increase significantly where a fund has multiple individual trustees, and the penalties cannot usually be paid from the assets of the superannuation fund.

Other obligations, such as certain record-keeping requirements, tax invoice obligations and some superannuation guarantee penalties, may also be affected by the higher penalty unit value.

Why this matters

For most taxpayers, these penalties are entirely avoidable.

Late lodgements, poor record keeping and incorrect information remain some of the most common reasons businesses and individuals incur ATO penalties. While the increase in penalty units may not seem substantial on its own, the cost can add up quickly where there are multiple outstanding obligations or repeated compliance issues.

It is also worth remembering that ATO penalties are generally not tax deductible, meaning they must be paid from after-tax income.

The good news is that the ATO will often consider remitting penalties (in part or full) where there are genuine mitigating circumstances, reasonable care has been taken, or a voluntary disclosure is made before the issue is identified by the ATO. Addressing problems early typically results in a better outcome than waiting until formal compliance action begins.

Practical steps to reduce your risk

There are several simple steps that can help minimise the risk of penalties:

• Lodge on time. Providing information to us well before due dates gives enough time to prepare accurate returns and meet lodgement deadlines.
• Keep good records. Accurate and up-to-date records make it easier to prepare returns correctly and support your tax positions if questions arise.
• Review your compliance regularly. If you operate a business or manage an SMSF, periodic reviews can identify issues before they become costly.
• Seek advice early. If you think you’ve made a mistake or have fallen behind with your tax obligations, speaking with us as soon as possible will generally provide more options than waiting for the ATO to contact you.

A timely reminder

The increase in penalty units is a timely reminder that the cost of tax non-compliance continues to rise. While the higher penalties are intended to encourage timely and accurate compliance, they also reinforce the value of good record keeping and proactive tax management.

If you have any concerns about outstanding lodgements, record-keeping obligations or any other tax compliance matter, please contact us. We can help you address issues early and minimise the risk of unnecessary penalties.

SMSF and property – preparing for a smooth audit

For many SMSF trustees, property is one of the most significant assets held by their SMSF. Unlike personally owned assets, there is a legal requirement that all SMSF assets are valued each 30 June. This can be a simple process for assets that have a ready market like listed shares, however the process for other assets like property can be more onerous.

Trustees are responsible for determining the market value of fund assets. After your annual financial statements are prepared your fund auditor will need to see objective and supportable evidence that backs up how you have arrived at the market value.

Trustees have the option to use a qualified independent valuer for this and should consider this where an asset represents a significant part of the fund’s value or might be difficult to value.

Where trustees choose not to use an independent valuer, they will need to be able to support asset valuations with evidence from multiple sources. Typically, for property this may include:

• Recent comparable sales – Generally at least 3 and the properties should be genuinely comparable in terms of size and location.
• A real estate agent appraisal that also includes comparable sales.
• Net income yields for commercial property (generally not sufficient evidence on its own).

The ATO includes some helpful guidance on this in their Guide to valuing SMSF assets.

Where an SMSF holds property that meets the business real property (BRP) definition it is possible that this property can be leased to a business that is operated by a member or a related party of the SMSF. However, the fact that an arrangement like this is permitted does not mean the fund trustees can charge a non-market rate of rent.

When a rental arrangement is entered into with a related party of the super fund, that arrangement should be on arm’s length (commercial) terms and this should be supported by a rental appraisal. An easy way to think about this is – do all the lease terms reflect an arrangement that would be agreed to if the tenant was an unrelated third party?

To evidence that a related party arrangement is on arm’s length (commercial) terms an auditor should be provided with;

• A properly documented lease;
• A rent appraisal when the lease was first entered into;
• Evidence that the arrangement is operating based on the terms of the lease; and
• Evidence that where a prior lease term has expired the terms have been reset to market value – backed up by a new rent appraisal.

Although your financial year 2026 SMSF audit might not be taking place for some months, the process can be much smoother where SMSF trustees are proactive and start to compile this evidence in advance, rather than waiting for the auditor’s request. 

Note: The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.

AUGUST 2026 TAX ROUND UP

This month we explore a range of recent tax and superannuation developments that may affect individuals, business owners and trustees. We begin with the High Court’s landmark Bendel decision, which provides greater clarity around the tax treatment of unpaid trust distributions that are owed to corporate beneficiaries, while also highlighting the need to consider other anti-avoidance provisions. We then explore the ATO’s increasing focus on sharing economy income as expanded data-matching programs make it more important than ever to correctly report earnings from online platforms. Next, we outline the updated 2026–27 business vehicle thresholds, including the latest depreciation limits, GST credit caps and Luxury Car Tax thresholds, to help businesses make more informed purchasing decisions. Finally, we examine the new restrictions on SMSF borrowing arrangements, with changes that are likely to affect trustees looking to acquire property through limited recourse borrowing arrangements and important transitional rules that may apply to existing transactions.

High Court Brings Greater Clarity on Trust Distributions

The High Court has recently handed down an important decision that will impact many private business groups using discretionary trusts and corporate beneficiaries.

In Commissioner of Taxation v Bendel [2026] HCA 18 (10 June 2026), the Court rejected the ATO’s long-standing view that an unpaid distribution (also known as an unpaid present entitlement or UPE) owed by a trust to a corporate beneficiary will automatically constitute a loan for the purpose of the integrity rules in Division 7A.

The rules in Division 7A are aimed at situations where private companies provide benefits to shareholders or their associates in the form of payments, loans or forgiven debts. When these rules are triggered the tax rules apply as if the company had paid an unfranked dividend to the recipient of the benefit.

Why this matters

Many private business groups use discretionary trusts as part of their structure. It is common for a trust to distribute at least some income to a corporate beneficiary so that this income can be taxed at the corporate tax rate (currently 25% or 30%), while the cash remains within the trust to fund working capital, future investment or business growth.

Until now, the ATO’s view was that these unpaid distributions would typically be treated as loans under Division 7A. This often meant businesses needed to put complying loan agreements in place, charge benchmark rates of interest and make annual repayments to avoid the risk of deemed unfranked dividends being recognised for tax purposes. For many groups, this created an additional administration burden, reduced cash flow flexibility and increased compliance costs.

The High Court has now clarified that an unpaid distribution will not necessarily amount to a Division 7A loan simply because the corporate beneficiary has not demanded payment.

While every arrangement will depend on its particular facts, the decision is likely to provide greater certainty for many business groups that have historically retained funds within their trusts.

What happens with existing loan arrangements?

The ATO has since released a Decision Impact Statement (26 June 2026), confirming that it will generally administer the law in accordance with the Court’s decision, while also highlighting that other integrity provisions may still need to be considered.

One of the key things that the ATO has clarified is that where formal written loan agreements have been put in place in response to the ATO’s previous views in this area, these can’t simply be unwound just because of the High Court decision.

That is, the trust still needs to make minimum loan repayments each year until the loan period ends or the loan is completely repaid to prevent a deemed unfranked dividend from being recognised under the tax rules.

Other tax rules still matter

Although the decision represents a significant development, it should not be viewed as removing all Division 7A or tax related concerns.

The ATO has made it clear that other provisions within Division 7A can still apply in certain situations. For example, if a trustee appoints income to a corporate beneficiary and this is left unpaid, but the trustee subsequently lends money to a shareholder of the company (or an associate of a shareholder), then this can potentially still trigger a deemed unfranked dividend for tax purposes unless appropriate steps are taken.

Other integrity rules also need to be considered when trust distributions are left unpaid. For example, the rules in section 100A can potentially trigger adverse tax outcomes in situations where a trustee appoints income to a beneficiary but the real benefit of the funds is enjoyed by another party.

These provisions remain highly fact-dependent, making it important to review arrangements carefully rather than assuming the Bendel decision resolves every issue.

Looking ahead

The decision provides a timely opportunity for private groups to review their trust structures, distribution resolutions and patterns, accounting records and the way unpaid entitlements have been managed over time.

However, we also need to keep an eye on the Government’s proposed trust tax reforms. The Government announced in the recent Federal Budget that it will be introducing a 30% minimum tax rate for discretionary trusts from 1 July 2028. The Government has also indicated that income distributed by discretionary trusts to corporate beneficiaries will generally be subject to double taxation because companies won’t receive a credit for the tax that is paid at the trust level on its income. This is likely to significantly reshape tax planning strategies over the coming years.

A recent consultation paper released by Treasury in connection with the proposed 30% minimum tax rate also suggests that the Government might modify the tax rules to ensure that Division 7A can apply to unpaid distributions. This isn’t law yet, so we will need to monitor developments because this could mean that tax planning strategies need to be revisited before we reach 1 July 2028.

Please let us know if you would like to discuss how the Bendel decision and proposed 30% minimum tax on discretionary trust income will impact on your group.

Don’t Let Sharing Economy Income Catch You Off Guard This Tax Time

The sharing economy has created new opportunities for Australians to earn additional income. Whether it’s driving for a ride-sharing service, renting out a holiday property, completing freelance work, hiring out equipment, or creating digital content, many people are supplementing their regular income through online platforms.

However, one aspect that can sometimes come as a surprise at tax time is that this income generally needs to be declared in your tax return. Unlike salary and wages, sharing economy income isn’t always fully pre-filled in your tax return, so it’s important to maintain your own records and check that tax returns are completely accurately.

The ATO continues to focus on income earned through the sharing economy and has expanded its data-matching capabilities in recent years. As a result, it is becoming increasingly likely that income reported by online platforms will be compared against returns that are lodged by taxpayers.

What counts as sharing economy income?

Sharing economy income can arise from a wide range of activities, including:

• Ride-sourcing services such as Uber or DiDi
• Short-term accommodation through platforms like Airbnb or Stayz
• Hiring out assets such as vehicles, caravans, tools, parking spaces or storage areas
• Freelance or task-based work, including deliveries, cleaning, handyman services or graphic design
• Creating digital content, streaming, selling digital products or receiving tips through online platforms.

Even if these activities are only occasional or generate relatively modest amounts of income, they may still have tax consequences. In many cases, the income will be assessable for tax purposes, regardless of whether the activity is carried on as a business, as a contractor, or simply as a way of earning extra money.

Increased reporting to the ATO

Under the Sharing Economy Reporting Regime (SERR), many electronic platform operators are required to provide transaction information directly to the ATO. This regime applies across a growing range of sharing economy activities, including ride-sharing, short-term accommodation and certain personal services.

This information may be used by the ATO to compare against the income reported in tax returns. Where discrepancies arise, the ATO may contact taxpayers to seek clarification and, in some cases, adjustments, interest or penalties could apply.

Practical tips to help stay on top of your tax

If you earn income through the sharing economy, a few simple habits can make tax time much easier.

Keep good records

While many platforms provide annual income summaries, it is generally worthwhile maintaining your own records as well. Keeping receipts and tracking expenses such as platform fees, vehicle costs, repairs, cleaning expenses or equipment purchases can help support any deductions you may be entitled to claim.

Understand what expenses may be deductible

You may be able to claim deductions for expenses that are directly related to earning your sharing economy income. This will always depend on your particular circumstances and the nature of the expenses you are incurring, so it’s worth discussing your situation with us to ensure claims are appropriate and adequately supported.

Plan ahead for your tax bill

Unlike employment income, tax is often not withheld from sharing economy earnings. This can result in an unexpected tax liability when you lodge your return.

Depending on your circumstances, it may be worthwhile considering strategies such as making voluntary tax payments during the year, setting aside part of your earnings in a separate account, or, where appropriate, entering the PAYG instalment system.

Don’t overlook other obligations

In some situations, GST registration may be required if your activities reach the relevant turnover thresholds. If you are involved in ride-sourcing activities then you will normally need to register for GST regardless of the income you generate.

Depending on the nature of your income, there may also be opportunities to make additional superannuation contributions, which could provide longer-term financial benefits.

Looking beyond tax time

Treating your sharing economy activities in a business-like manner can provide benefits beyond simply meeting your tax obligations. Good record-keeping and proactive tax planning may help you better understand the profitability of your activities, improve cash flow management and make it easier to access finance if the activity continues to grow.

If you’ve earned income through an online platform during the year, now is a good time to review your records and ensure you’re well prepared before lodging your tax return. A conversation with your accountant may help identify deductions you are entitled to claim, confirm that your reporting is accurate and avoid unnecessary surprises at tax time.

The sharing economy can provide valuable opportunities to earn additional income. With some forward planning and good record-keeping, managing the tax implications should become a straightforward part of making the most of those opportunities.

For more information, visit the ATO’s guidance on sharing economy income and tax or speak with us about your individual circumstances.

Navigating the 2026–27 Car Thresholds

If you’re thinking about purchasing or leasing a vehicle for your business in the new financial year, it’s worth understanding the updated car thresholds that apply from 1 July 2026. While these limits may seem technical, they can have a practical impact on the amount you can claim for tax depreciation deductions, the GST credits that are available, and whether luxury car tax (LCT) could apply.

Knowing how these rules work before signing a contract can help you make a more informed decision and potentially improve your overall tax and cash flow position.

The car limit – understanding the depreciation cap

For vehicles first used or leased in the 2026–27 income year, the car limit is $69,883.

This limit generally represents the maximum value that can be used when calculating tax depreciation deductions for a passenger vehicle, regardless of how much was actually paid for the car.

From a commercial perspective, this is an important consideration if you’re looking at a higher-value vehicle. While purchasing a more expensive car may still make sense for operational or business reasons, the portion of the purchase price above the car limit will generally not attract depreciation deductions.

If the vehicle is used for both business and private purposes – which is common for many business owners – you would typically only be able to claim deductions for the business-use portion. Maintaining appropriate records, such as a valid logbook and odometer readings, remains an important part of supporting those claims should the ATO undertake a review or audit.

Rather than focusing solely on the purchase price, it is often worthwhile considering the overall after-tax cost of the vehicle. In many cases, a vehicle priced around the car limit may provide similar practical benefits while maximising the available tax deductions.

It’s also worth confirming which depreciation rules apply to your circumstances, including whether any simplified depreciation concessions are available so that deductions can be claimed at a faster rate.

GST credits – also subject to a cap

Businesses that are registered for GST may also be entitled to claim GST credits when purchasing a business vehicle. However, where the purchase price exceeds the car limit, the GST credit is also capped.

For the 2026–27 financial year, the maximum GST credit available is $6,353 (being one-eleventh of the $69,883 car limit) for passenger vehicles.

Even if the vehicle costs considerably more, the GST credit will generally not increase beyond this amount. However, when the vehicle is sold you will normally need to pay GST on the full sale price.

For many businesses, GST credits can provide an important short-term cash flow benefit, so it is important to ensure they are claimed correctly and within the relevant time limits through your Business Activity Statement (BAS).

Luxury Car Tax thresholds increase

The Luxury Car Tax (LCT) thresholds have also increased from 1 July 2026 and are now:

•              $91,661 for fuel-efficient vehicles.

•              $80,809 for all other vehicles.

Where applicable, LCT is generally imposed at 33% of the value above the relevant threshold, increasing the overall purchase cost of eligible vehicles.

If you’re considering a premium vehicle, these thresholds may become an important part of the purchasing decision. In particular, many fuel-efficient vehicles, including a range of hybrid and electric models, benefit from the higher threshold. Depending on the vehicle selected, this could potentially reduce the amount of LCT payable while also delivering lower running costs over the life of the vehicle.

Planning ahead can pay off

These updated thresholds apply to vehicles first used or leased from 1 July 2026, making now an ideal time to review any planned vehicle purchases.

Before making a decision, it may be worthwhile considering:

• The total after-tax cost of ownership, including depreciation deductions, GST credits and any LCT;
• Whether purchasing or leasing is likely to be more suitable for your circumstances;
• The expected business use of the vehicle and the records you’ll need to maintain; and
• How the purchase fits within your broader cash flow and business plans.

Whether you’re replacing a work vehicle, expanding your fleet or purchasing a new car for client-facing activities, taking these factors into account can help ensure the vehicle meets both your operational requirements and your tax objectives.

Key takeaways

A business vehicle is often a significant investment, and while tax considerations shouldn’t drive the decision, they can influence the overall cost of ownership.

Before committing to a purchase, it’s worth speaking with your accountant to model the likely tax outcomes based on your individual circumstances. A little planning upfront may help you maximise available tax concessions, avoid unexpected costs and ensure the purchase aligns with your broader business strategy.

For more information, refer to the ATO’s Small Business Newsroom: Car thresholds from 1 July | Australian Taxation Office, or contact our team to discuss how these changes may apply to your business.

Changes to Self Managed Super Fund (SMSF) borrowing rules

To ensure passage of the negative gearing and CGT discount changes that were announced in the May 2026 Federal Budget the Government agreed to make amendments to the SMSF borrowing rules.

SMSFs are able to borrow in restricted circumstances which includes borrowing under a limited recourse borrowing arrangement (LRBA) to purchase a single acquirable asset. While there have previously been no specific legislative restrictions on the type of asset a SMSF can borrow to purchase, most commonly we see LRBAs being used to purchase property. Up until this point, this could have been any type of real property. 

These amendments will mean that when SMSF trustees wish to borrow to purchase a property, it must meet the business real property (BRP) definition. This BRP definition relates to usage of the property rather than zoning or what the property was originally built for.

This change became law on 26 June 2026, but the Bill includes a 45 day transitional period which will finish on 10 August 2026. This transitional period may allow for arrangements that are currently being implemented on non-BRP assets to be allowable under the new rules where settlement occurs after 10 August 2026, provided the arrangement to purchase the property was entered into on or before 10 August 2026. We recommend that SMSF trustees who are currently implementing LRBA arrangements on non-BRP assets seek specialist SMSF legal advice to ensure their arrangements meet these transitional rules. 

While this change has been referred to in the media as a ban on super funds borrowing to purchase residential property, the use of the BRP definition makes the change slightly more complex than this. As this definition relates to usage of the property, it is possible that some residentially designed properties could meet the BRP definition (for example, a medical practice that operates from a residentially designed terrace dwelling).

The BRP definition also requires that the property is wholly and exclusively used for business purposes. This could mean that some properties that may initially appear to be commercial in nature may not meet the BRP definition (for example, a mixed use residential and retail property on a single title). 

We recommend that SMSF trustees entering into new LRBAs seek advice from specialist legal and financial advisers to ensure the new requirements are met. 

Existing arrangements

The updated rules allow for existing LRBAs over non-BRP assets to continue. They also allow for existing arrangements to be refinanced, subject to lender availability and approval. 

Note: The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.

JULY 2026 TAX ROUND UP

This month we focus on several significant developments affecting employers, investors, business owners and SMSF trustees.

While the Federal Budget was only handed down in May, the Government has already announced some changes to key proposals and we take a look at the latest developments. We highlight the commencement of Payday Super from 1 July 2026 and what employers need to do now to ensure they comply with more frequent superannuation payment obligations. We also examine the ATO’s increased scrutiny of personal services income arrangements and the practical steps business owners can take to reduce the risk of anti-avoidance rules applying. We explore the sharp rise in complaints to the Tax Ombudsman, including important developments around tax debt interest and penalty remission. Finally, we provide a practical checklist for SMSF trustees as a new financial year begin

Updates to Budget Measures and New Developments

Since the Federal Treasurer handed down the 2026-27 Federal Budget on 12 May 2026 there has been a significant amount of commentary on some of the more controversial proposals, including the decision to replace the CGT discount with an indexation system and impose a 30% minimum tax rate on discretionary trusts.

Since our latest update in this area, the Government has announced some changes to these proposals, as well as some other areas of the tax system that weren’t initially impacted by the Budget.

CGT Changes

On Budget night the Treasurer announced that the existing 50% CGT discount for individuals and trusts would be replaced with an indexation system and a 30% minimum tax rate on capital gains accruing from 1 July 2027 (with limited exceptions).

However, the Government has announced that it plans to introduce a new Innovative Business CGT Concession that would provide a 50% CGT discount to early-stage investors, including founders and employee share scheme participants in innovative start-up businesses. A consultation paper has been released on the design of this concession.

In addition, the Government is taking steps to increase the annual turnover threshold that applies in determining whether a small business or its owner can access the existing 50% “active asset reduction” under the small business CGT concessions, from $2m to $10m. This change would apply from 1 July 2027.

The existing $2m turnover threshold would remain in place for the other three small business CGT concessions, being the 15 year exemption, retirement exemption and small business rollover relief. Taxpayers who can’t pass the turnover test can still access the concessions if they can pass a $6m net asset value test.

Testamentary Trusts

In the Budget the Government announced that a 30% minimum rate of tax would apply to the net taxable income of discretionary trusts from 1 July 2028. The Government had indicated that this would apply to testamentary trusts, unless they already existed at 12 May 2026.

However, the Government has announced that it will now exempt income from all testamentary trusts from the new minimum tax rate rules, as long as they are established for “genuine testamentary purposes”.

The exclusion from the rules will be limited to income from assets of the relevant deceased estate. For discretionary testamentary trusts established on or after 1 July 2028, the exclusion will only apply to trusts that can only benefit individuals and income tax exempt entities.

SMSF Borrowing Arrangements

As a result of negotiations with the Greens in connection with the changes to the CGT discount and negative gearing, the Government has agreed to remove the ability for SMSFs to borrow to purchase residential property (SMSF borrowing is commonly known as a limited recourse borrowing arrangement).

It seems that existing arrangements will be grandfathered.

We will keep you updated as more developments occur. However, please don’t hesitate to contact us if you want to discuss how these changes impact on your position.

Payday Super Has Arrived – What Employers Need to Know

One of the most significant changes to the Australian superannuation system in decades has now commenced. From 1 July 2026, Payday Super requires employers to ensure super contributions reach employee super funds within seven business days of each payday. For many businesses, this represents a major shift from a quarterly payment cycle to a more frequent, real-time obligation.

While the Government is aiming to get super into employee accounts faster and help close the national super gap, the new system introduces new compliance, cash flow and administrative considerations for employers. Businesses that have prepared well should find the transition manageable, but those still relying on quarterly processes need to act quickly to avoid significant problems.

What Exactly Has Changed?

Under the previous rules, employers generally had until 28 days after the end of each quarter to make super contributions. Under Payday Super, the clock now starts on each “Qualifying Earnings” (QE) day — essentially your payday for salary, wages, commissions, bonuses and certain contractor payments.

Key Requirements

• Contributions must be received and allocated to the employee’s fund within 7 business days of payday (there are limited exceptions to this).
• Shortfalls are now calculated per QE day rather than quarterly.
• The ATO’s Small Business Superannuation Clearing House has closed, meaning businesses previously using the service must now use a SuperStream-compliant alternative.

Penalties are also tougher. The administrative uplift can reach 60% of the shortfall (with reductions available for early voluntary disclosure), although the Superannuation Guarantee Charge itself is deductible in more circumstances.

The ATO’s first-year compliance approach (PCG 2026/1) adopts a risk-based view, with businesses that make genuine efforts to comply and promptly rectify mistakes generally treated as lower risk. However, if an employee reports a problem to the ATO then don’t expect the ATO to ignore this.

Managing the June – July Changeover

There is a technical quirk in the rules which could catch out unsuspecting employers, especially when it comes to SG contributions made across the month of July 2026.

If a business has paid employees during the June 2026 quarter then the SG deadline for this quarter would normally be 28 July 2026. However, many employers have decided to pay the SG amount for the June quarter before this deadline to reduce the risk of accidentally triggering a SGC problem.

This is because any SG contributions made from 1 July 2026 will reduce the super owing for the June quarter first, before any remaining amount is used to meet Payday Super obligations relating to pay runs that occur in July.

The best way to manage this situation to avoid SGC liabilities really depends on the dates of any July pay runs. Please contact us if you need help identifying any potential problems or to help come up with a practical solution.

Three Practical Steps to Take Now

1. Review Your Systems: Confirm that your payroll software, clearing house and internal processes are operating correctly under the new rules. If you have not already done so, review pay codes and contribution workflows to ensure QEs are correctly identified.
2. Monitor Cash Flow and Processes: Assess the impact of more frequent super payments on cash flow. Review approval processes, onboarding procedures and the handling of bonuses or out-of-cycle payments.
3. Strengthen Controls and Communication: Ensure payroll and finance teams understand the new requirements and have appropriate controls in place. Ongoing monitoring and periodic reviews will help identify issues before they become compliance problems.

The interdependencies between payroll systems, clearing houses and super funds mean small oversights can quickly create larger compliance issues. Businesses that continue to monitor and refine their processes will be best placed to meet their obligations.

At [Your Firm Name], we are helping clients navigate the practical implications of Payday Super through readiness reviews, payroll process assessments and cash flow planning. Our goal is to help businesses remain compliant while building stronger and more efficient systems.

If you would like to discuss how Payday Super affects your business, contact your [Your Firm Name] adviser. We can help identify any remaining gaps and ensure your systems and processes continue to operate effectively under the new system.

ATO Cracks Down on Personal Services Income Arrangements: Is Your Business at Risk?

The ATO is sharpening its focus on how taxpayers generating income from personal services deal with that income for tax purposes. In a recent Spotlight bulletin, Small Business Assistant Commissioner Tony Poulakis highlighted the release of Practical Compliance Guideline PCG 2025/5.

This guideline clarifies the ATO’s compliance approach to the “alienation” of personal services income (PSI) — essentially, arrangements which involve routing income earned through your personal skills and efforts via a company or trust, rather than receiving it directly.

Why the ATO Is Interested

Many business owners operate through a company or trust rather than earning income personally. In many cases this is entirely legitimate and provides commercial benefits such as asset protection, flexibility and succession planning.

However, where income is generated primarily from the efforts, skills or reputation of one individual, the ATO is concerned about arrangements that divert income away from that individual in order to reduce tax.

Even where a business is able to pass certain tests to be classified as a Personal Services Business (PSB) under the tax rules and falls outside the strict PSI attribution rules, the ATO has made it clear that general anti-avoidance provisions in Part IVA can apply if the arrangement is primarily tax-driven. If Part IVA applies then this can lead to higher tax liabilities as well as significant penalties and interest charges.

What Does the ATO Consider Low Risk?

The ATO’s guidance focuses heavily on whether the individual generating the income receives an appropriate share of the profits.

Generally, an arrangement is more likely to be considered low risk where:

• The individual who performs the work receives most of the economic benefit through salary, wages, bonuses, director fees or trust distributions.
• Profits retained in a company are kept for genuine and short-term business reasons.
• Family members or associates are only paid reasonable amounts for genuine work performed.

For example, retaining profits in a company to fund the purchase of new equipment in the short-term could be viewed favourably if there is evidence supporting those plans and the company actually follows through with these plans.

What Will Attract ATO Attention?

The ATO has specifically identified a number of higher-risk behaviours, including:

• Splitting income with family members who have made little or no contribution to earning that income.
• Retaining substantial profits in a company without a genuine short-term commercial purpose.
• Directing profits generating from someone’s personal services to entities or beneficiaries primarily because they are taxed at lower rates or because they have tax losses.

The ATO’s expectations in this area are very strict. The greater the mismatch between who performed the work and who is ultimately taxed on the profits from that work, the greater the likelihood of ATO scrutiny.

A Limited Opportunity to Review Existing Arrangements

The ATO has provided a transition period for taxpayers who genuinely review and adjust their arrangements.

Businesses that take genuine steps to move from higher-risk arrangements to lower-risk arrangements by 30 June 2027 are unlikely to face Part IVA action in relation to those arrangements if reviewed by the ATO.

This is not an amnesty, but it is an opportunity for business owners to proactively assess their position and make changes where necessary.

What Should Business Owners Do?

Now is an ideal time to review how profits are being distributed within your structure.

Questions worth considering include:

• Are retained profits supported by documented short-term commercial reasons?
• Are payments to family members commercially justifiable?
• Would your arrangements withstand ATO scrutiny if reviewed?

If you operate through a company or trust and derive income largely from your personal skills or efforts, it is important to review existing arrangements in light of the ATO’s updated guidance. A proactive review today may prevent costly issues tomorrow.

Tax Ombudsman Sees 127% Surge in Complaints: What It Means for You

The Tax Ombudsman has reported a dramatic 127% increase in complaints about the ATO this financial year (to 30 April 2026), with nearly 3,000 complaints received in the first ten months. Debt collection, penalties, and tax debt interest charges have dominated the issues raised.

Tax Ombudsman Ruth Owen has linked the sharp rise directly to the ATO’s intensified focus on recovering outstanding debts amid tighter economic conditions. Many SME owners and individuals are feeling the pressure from cash flow challenges, rising costs, and stricter ATO enforcement.

Why Complaints are Rising

Debt collection accounted for around 23% of complaints, followed by payment-related issues (16%) and penalties plus interest (15%). Common concerns include:

• Refund offsets against debts
• Director Penalty Notices
• Challenges in setting up or maintaining payment plans
• The rapid accumulation of General Interest Charge (GIC) on overdue amounts

This surge reflects real-world pressures: businesses navigating post-pandemic recovery, higher interest rates, and increased ATO activity to close the tax gap. For many clients, these issues create significant stress and can distract from core operations.

Practical wins: Relief is Possible

The good news? The Ombudsman’s office is proving effective as an independent escalation point. Around 31% of complaints relating to penalties and interest resulted in some form of debt reduction or remission.

This highlights that persistence and proper representation can sometimes deliver favourable outcomes when initial ATO decisions feel overly harsh or inconsistent.

Important Developments on GIC Remission

A key theme in the complaints data is the GIC – the daily interest applied to unpaid tax debts. In March 2026, the Tax Ombudsman released a major review titled In the Interest of Fairness, which examined the ATO’s handling of GIC remission requests.

The review identified inconsistent decision-making, unclear guidance, and communication gaps that left many taxpayers confused about their options. It made several recommendations, including clearer upfront interest-free payment plans for compliant taxpayers.

The ATO’s response has been positive. It accepted all recommendations and has already begun implementing improvements, such as:

• Enhanced website guidance with practical examples
• New, more user-friendly remission application forms
• A $2,500 cap on phone approvals with a dedicated review team for larger requests to improve consistency
• Better support frameworks for vulnerable taxpayers

These changes should hopefully make the process fairer and more predictable going forward, but sometimes best intentions don’t translate into practical reality so we will have to wait and see how this plays out.

What this Means for You

1. Act early on tax debts: Don’t wait for the ATO to contact you. If you’re facing cash flow pressure, engage proactively before penalties and GIC escalate. Early action often leads to better terms.
2. Keep detailed records: Strong supporting documentation is crucial when seeking remission of penalties or interest. Demonstrate why the delay occurred (eg, unexpected revenue drop, illness, or system issues) and what steps you’ve taken to rectify it.
3. Use professional representation: Tax agents can liaise directly with the ATO on your behalf, prepare strong submissions, and escalate to the Tax Ombudsman where appropriate. This often leads to faster and more commercially practical outcomes than dealing with the matter alone.

While the ATO must collect revenue fairly, the Ombudsman plays a vital role in ensuring processes remain reasonable and transparent. With economic headwinds continuing, understanding your rights and options has never been more important.

If you’re concerned about a tax debt, penalty notice, or GIC charge, contact our team promptly. Early intervention can significantly reduce costs and protect your business or personal finances.

For more information, visit the Tax Ombudsman’s complaints snapshots and reports: Complaints snapshots – Tax Ombudsman

Get Ready for 2026–27: Practical Steps SMSF Trustees Must Take Now

With the start of the 2026–27 financial year, SMSF trustees should take a proactive approach to ensure funds remain compliant and well positioned. Below is a concise checklist of the key legislative changes, compliance deadlines and practical steps trustees should prioritise.

1. Review Transfer Balance Cap and Pension Planning

• Indexation of the general TBC: From 1 July 2026 the general transfer balance cap (TBC) increases from $2.0 million to $2.1 million. Members should check whether their personal transfer balance cap is eligible for indexation, particularly if they started a pension before the latest indexation dates.
  
  The ATO will calculate a member’s entitlement to indexation of their personal TBC, however, this will be based on reported transfer balance account (TBA) events (eg, commencement or commutation of a pension). It’s important that all TBA events up to 30 June 2026 have been reported to the ATO to ensure an accurate calculation of TBC indexation entitlement.
• Legacy pensions: The five-year legacy pension exit measure (7 Dec 2024 – 6 Dec 2029) remains available. Where clients hold legacy lifetime, life expectancy or market-linked pensions, confirm deed powers and consider the interaction with Division 296 and commutation rules before acting.

2. Update Contribution Strategies and Caps

• Higher caps for 2026–27: The concessional contributions cap rises to $32,500 and the standard non-concessional cap becomes $130,000. However, the non-concessional cap is subject the member’s 30 June 2026 total superannuation balance (TSB) being less than $2.1 million. Review your planned contributions to avoid cap breaches.
• Bring-forward and TSB thresholds: Check each member’s TSB at 30 June 2026 prior to applying bring-forward rules in 2026-27. Thresholds and allowable bring-forward periods changed for 2026–27.

The increase to the standard non-concessional cap means the maximum bring forward cap has increased from $360,000 to $390,000. However, if the bring-forward rule was triggered in 2024-25 or 2025-26, the member does not get the benefit of the increase.

3. Pension Minimums, TRIS and ECPI Risks

• Minimum pension percentages: Check minimum pension percentages for age groups and ensure pensions meet the standards to avoid breaches and potential loss of fund tax exempt income.
  
  

For a transition to retirement (TTR) pension, in addition to making at least the minimum pension payment, make sure you don’t exceed the 10% maximum. Also, if turning 65 in 2026-27, a TTR pension automatically moves into retirement phase and has TBC consequences. Speak to your adviser about implications and options well before your 65th birthday.

• Commutations and starting pensions: Follow correct commencement and commutation procedures; incorrect handling can trigger multiple events and adverse tax outcomes. Report all TBA events to the ATO by the due date.

4. Review Related Party Loans and Update Interest Rate

• The ATO document PCG 2016/5 sets out many of the terms and conditions a related party loan should have, including the interest rate. These are commonly referred to as the ‘safe harbour provisions’.
  
  Each year, the interest rate of the loan should be reviewed and updated in line with the relevant rate determined in May immediately before the commence of the financial year. The rate for the 2025-26 year was 8.95% for property and 10.95% for listed securities.
  
  

As a result of increases in the RBA’s cash rate over the last 12 months there has been an increase to the safe harbour interest rates to 9.35% and 11.35% for property and listed securities respectively. The repayments of any related party loans that are complying with the safe harbour provisions will need to be adjusted to reflect these new rates. 

5. Check Compliance for Payroll and Contributions (SuperStream 3.0 / Payday Super)

• NPP readiness: From 1 July 2026 funds and employers must be capable of receiving contributions via the New Payments Platform (NPP). Ensure the SMSF bank account can accept Osko/PayID and other NPP payments.
• Member Verification Requests (MVRs): Employers will use MVRs to confirm whether a fund can accept a contribution. SMSFs receiving employer contributions should be prepared to respond to MVRs promptly (within required timeframes). Generally, SuperStream messages will be received in the SMSF administration platform that is used by the SMSF’s accountant or administrator. Members should inform their SMSF accountant or administrator if their employer will be sending a message via the MVR to confirm whether their SMSF can accept the contribution.
• Closely held employees: If your SMSF has related employees, confirm whether SuperStream exemptions apply and ensure payroll systems are updated as late lodgements may result in penalties. Remember the ATO can remove fund details from the SMSF lookup database if tax returns are overdue. This could impact on a fund’s ability to receive employer contributions.

6. Consider the Division 296 Transitional Rules and Tax Traps

• 2026–27 transitional year treatment: The 2026–27 year has specific transitional rules for Division 296 where the relevant TSB is measured at 30 June 2027. Trustees should assess whether electing to set a Div 296 cost base to 30 June 2026 market values is appropriate. This election does not need to be made until the lodgement of the 2027 SMSF Annual Return (tax return), and if made, applies to all assets and has consequences for capital losses and later adjustments. Seek tailored advice before electing.

7. Practical Housekeeping

• Deed powers and trustee structure: For SMSFs with individual trustees, consider whether a corporate trustee is a potentially better option. Talk to you adviser about these potential benefits and the process to change. Ensure that any changes to the trustee structure is reported to the relevant authority within the required timeframe (eg, the ATO, ASIC).
• Document everything: Keep clear records of trustee decisions, valuations used for elections, contribution timing evidence and communications with employers — documentation is key for the annual audit and if the ATO queries an event.

Preparing now will reduce 2026-27 year-end stress and help avoid costly compliance issues. Speak to us if you have any questions or wish to discuss any of the issues raised above.

Note: The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.

JUNE 2026 TAX ROUND UP

This month we unpack some of the most controversial proposals from the Federal Budget, including changes to negative gearing, the CGT discount and trust taxation. We examine key proposals and practical issues that can be considered now, even though some of the final details of the changes aren’t yet available. We then turn to the business payments landscape, outlining the Reserve Bank’s ban on card surcharges from 1 October 2026 and the practical actions businesses should take now. We explore the Government’s plan to wind back the current FBT exemption for electric vehicles and how this will play out over the next few years. Finally, our SMSF year-end article highlights the critical compliance steps trustees should turn their minds to before 30 June, including valuations, contributions, pensions and documentation.

Key 2026–27 Federal Budget tax reforms: What they mean for you

The 2026–27 Federal Budget, released on 12 May 2026, has received more attention than most budgets in recent years.

With proposed changes to negative gearing, the CGT discount and the taxation of trusts, this is a budget that has the potential to materially impact on property investors, business owners and families using discretionary trusts.

However, it is important to remember that the proposed changes are not yet law and we might yet see further developments with some of these key proposals. For example, even though legislation has been introduced into Parliament in relation to some of the measures, there is no guarantee that the Bills will be passed in their current form.

While don’t yet have certainty on how this will all play out, we understand that the proposals are causing some confusion and concern and so we have set out below some comments on what we know so far.

Negative gearing – changes to apply from 1 July 2027

The Government is planning to tighten up negative gearing on established residential properties. For properties purchased after 7:30pm AEST on 12 May 2026:

• Rental losses can only be offset against rental income or capital gains from other residential properties.
• Any remaining losses must be carried forward and applied only against future residential rental income or residential property capital gains.

Grandfathering applies. If you already own an established property—or had exchanged contracts before Budget night—nothing changes in terms of negative gearing. You can continue to deduct losses against salary, business profits and other income sources until you sell the property.

The explanatory memorandum released with the legislation indicates that existing negative gearing rules will apply to properties that were acquired before Budget night, even if they weren’t used as rental properties at that time. For example, if you own a property that is currently used as your private residence but you later move out and start using it to generate rental income then the Government is indicating that existing negative gearing rules can still be available. However, the position is more complex than this and there is a technical issue that could potentially change this outcome. As a result, please contact us to discuss this further if you are thinking about converting your private home into a rental property.

The new restrictions only apply to residential property, so losses relating to commercial property, shares and other asset classes should not be impacted. There are also carve-outs for commercial residential properties such as hotels, motels and boarding houses.

‘New builds’ remain fully eligible for current negative-gearing rules both before and after 1 July 2027, but final details of what will qualify as a ‘new build’ haven’t been released yet. Additional carve-outs apply to build-to-rent projects and certain government-supported housing.

CGT discount – changes to apply from 1 July 2027

Individuals who hold an asset for more than 12 months often qualify for a 50% discount to reduce the taxable gain made on sale of the asset. A similar outcome can arise when a trust makes a capital gain and this is distributed to an individual beneficiary.

However, from 1 July 2027 the CGT discount will be replaced for individuals and trusts with:

• Cost base indexation (inflation adjustment), and
• A 30% minimum tax on capital gains.

This change will apply across all CGT asset categories—including residential and commercial property, shares, business assets and even pre-CGT assets.

Importantly, gains that accrue up to 1 July 2027 will still receive the existing CGT discount or benefit from the existing exemption for pre-CGT assets. It will be necessary to determine the market value of assets at that date so that CGT calculations can be performed.

For new residential properties, investors can choose either the existing CGT discount or the new indexation / minimum tax method.

Companies won’t have access to indexation and complying super funds will continue to enjoy the benefit of the existing 1/3 CGT discount. Indexation won’t be available to individuals who have been classified as a foreign resident or temporary resident for tax purposes during the ownership period of the asset.

Example

Michael owns an investment property purchased before Budget night that is currently negatively geared. He can continue offsetting rental losses against his salary. When he sells:

• The portion of the gain attributable to ownership before 1 July 2027 receives the 50% CGT discount.
• The portion accruing after that date is subject to indexation plus the 30% minimum tax.

Michael’s overall tax outcome will depend on his marginal rate and how long he holds the property, but in a situation like this we would typically expect Michael to pay more tax overall as a result of these changes compared with the current rules.

Practical issues

While it isn’t time to panic, a review of your investment portfolio is essential.

Existing assets bought before Budget night will typically receive more favourable tax treatment compared with newer assets, but the overall impact of the proposed changes will vary depending on your situation.

Discretionary trusts – changes to apply from 1 July 2028

The introduction of a 30% minimum tax rate on the taxable income of discretionary trusts would represent a fundamental change to the way the tax system operates at the moment.

The Government is indicating that the 30% tax would initially be paid by the trustee, with beneficiaries (other than companies) receiving a non-refundable tax credit for the tax paid at the trust level.

This measure is aimed at curbing income splitting to lower-taxed family members and corporate beneficiaries (often known as bucket companies).

Some exemptions would apply, including for fixed and widely held trusts, superannuation funds, special disability trusts, deceased estates, charitable trusts, primary production income and some other specific trust types.

While the Government has indicated that existing discretionary testamentary trusts would be exempt from these changes, concerns have been raised about the application of the changes to testamentary trusts that come into existence after Budget night. However, reports in the media suggest that the Government is open to reconsidering this aspect of the changes, but we will have to wait and see how this plays out.

To assist with transitions, three years of roll-over relief will be available for restructures into companies or fixed trusts.

Example (adapted from budget materials)

Kurt operates his business through a discretionary trust and makes a profit of $300,000. Kurt pays himself a salary of $100,000 and distributes the remaining $200,000 to four family members who have no other income. In total, Kurt and his family members pay around $42,000 in tax on this income.

If the 30% minimum tax rate rules are introduced then Kurt and his family members would pay around $86,000 in tax on this income. This is a significant increase in the total amount of tax paid on the same level of profit.

In situations like this there might be scope to restructure the business into a company to potentially access a lower 25% tax rate or pay salary / wages to some family members who are genuinely working in the business.

Practical issues

Many business and investment structures will face higher effective tax rates under the proposed changes, although the Government is planning to undertake a consultation process to refine the rules. It is possible that the final version of the rules will look a bit different to the proposals announced in the Budget.

While the start date for this measure isn’t until 1 July 2028, now is the time to start modelling scenarios and comparing the pros and cons of other options. In some cases the overall impact of the changes might be minimal and no material changes will be required. In some cases it might still make sense to continue utilising discretionary trust structures, but with some alternative distribution strategies in place. In other cases it will make sense to explore whether a restructure might provide better long-term outcomes.

Other measures worth noting

• $250 Working Australians Tax Offset (from 2027–28) – increases the effective tax-free threshold for wage earners and sole traders.
• $1,000 standard deduction for work-related expenses (from 2026–27) – simplifies tax time for many employees.
• Small business measures – a permanent $20,000 instant asset write-off for plant and equipment.

What to do next

The proposed reforms are significant, but the practical impact will depend on your situation.

While we are still waiting to see how this all plays out, if you have concerns in the meantime feel free to contact us. We can review your situation, run tailored projections and help you make informed decisions. We will also keep you up to date as further details emerge and legislation progresses.

Ending card surcharges: What you need to know before 1 October 2026

The Reserve Bank of Australia (RBA) has confirmed that all surcharges on credit and debit card payments — across eftpos, Mastercard and Visa — will be banned from 1 October 2026.

This represents one of the most significant updates to Australia’s payments landscape in years and will have a direct impact on businesses and consumers.

Why this matters

Australians pay an estimated $1.6 billion in card surcharges every year. At the same time, businesses collectively bear even higher card-acceptance costs behind the scenes. Under the new rules, total merchant payment costs are expected to fall by around $910 million per year, with small businesses likely to see the largest percentage savings.

For many businesses this will mean simpler pricing, fewer compliance headaches and potentially better margins — but it also means some preparation is needed.

What’s changing?

The RBA’s reform package has three key components:

1. Surcharges banned

From 1 October 2026, businesses cannot add any surcharge — percentage or flat fee — for payments made using eftpos, Mastercard, Visa or related networks. Customers must see and pay one final price, whether they purchase online, at the counter, or via mobile payment.

2. Lower interchange fees

Interchange fees (the wholesale fees charged between banks when a customer pays by card) will be reduced, with new caps for foreign-issued cards. This should directly lower the cost that a business needs to pay to accept card payments.

3. Greater transparency

Banks, card schemes and payment providers must publish clearer information about fees and margins.

They must also demonstrate how reductions in wholesale fees are being passed through to retailers. This gives businesses more power to compare providers and negotiate.

These changes are supported by oversight from the Australian Competition and Consumer Commission (ACCC) and guidance from the Australian Small Business and Family Enterprise Ombudsman.

What your business should do now

1. Review your merchant fees

Look at your recent statements and determine:

• How much you currently pay in card-acceptance fees; and
• Whether you have been relying on surcharges to offset part of those costs.

If surcharges are part of your pricing strategy, you may need to adjust prices to maintain margins, where commercially appropriate.

2. Speak to your payment provider

With lower interchange fees coming and more transparency required, it’s a good time to negotiate:

• Better merchant service fees
• Updated pricing plans
• POS or terminal upgrades

Small businesses often pay closer to the current fee caps, so they stand to gain the most.

3. Update your pricing and POS systems

You’ll need to remove:

• Surcharge signage
• Online checkout surcharges
• Automatic percentage add-ons

All displayed prices must become all-inclusive.

4. Build changes into your cash flow

Lower merchant fees won’t appear immediately, but most businesses should see reduced costs flow through during the 2026–27 financial year. This is a good time to revisit budgets, especially for cafés, retailers, trades and service-based operators that have a high proportion of small card transactions.

5. Watch customer behaviour

Businesses might find that the removal of surcharges encourages more customers to pay by card. Higher card usage is often positive for convenience and transaction speed, but keep an eye on total acceptance costs as patterns shift.

The broader commercial picture

This reform levels the playing field to some extent.

Businesses that never applied surcharges will simply benefit from lower underlying fees. Those that did add a surcharge will enjoy simpler operations, less admin and fewer compliance risks. Over time, the changes should encourage more competition among payment providers, potentially leading to better products and lower fees across the market.

There may be secondary adjustments (for example, banks reviewing rewards programs), but the combined effort of the RBA and ACCC aims to ensure that cost savings are passed through fairly and transparently.

Final thoughts

This is ultimately a practical reform: fewer add-ons at the checkout, simpler pricing for customers, and lower complexity for businesses. Some businesses will see this as an opportunity to improve margins, streamline processes and enhance the customer experience.

We recommend reviewing your payment arrangements in the coming months. Our team can help analyse your current merchant fees, model the likely impact of the changes, and support negotiations with providers.

If you’d like tailored advice on how the end of card surcharges affects your business, please reach out — now is the ideal time to prepare.

Government to wind back electric vehicle FBT exemption in three stages

The Government has announced a staged wind-back of the current Fringe Benefits Tax (FBT) exemption for electric vehicles (EVs), following recommendations from the Statutory Review of the Electric Car Discount released in May 2026. While the policy continues to support EV uptake, it also aims to make concessions more sustainable and better targeted. The changes are expected to save the Budget an estimated $1.7 billion over five years from 2025–26.

Importantly, nothing changes immediately—the existing full FBT exemption for qualifying EVs continues until 31 March 2027.

Three-phase transition

Phase 1 — Now until 31 March 2027

The current rules remain fully in place.

Eligible EVs below the Luxury Car Tax (LCT) threshold (approximately $91,387 for fuel-efficient vehicles in 2025–26) continue to enjoy a complete FBT exemption.

For businesses and employees using novated leases or salary packaging, there is no change during this period.

Phase 2 — 1 April 2027 to 31 March 2029

The concession begins to narrow, with a focus on more affordable vehicles:

EVs costing $75,000 or less: Full FBT exemption continues if the eligibility conditions are met.

EVs priced above $75,000 and below the LCT threshold: A 25% FBT discount applies when calculating the FBT liability.

This phase is intended to encourage manufacturers to continue supplying competitively priced EVs into the Australian market, complementing the Government’s New Vehicle Efficiency Standards.

Phase 3 — From 1 April 2029

All eligible EVs under the LCT threshold will receive a flat 25% FBT discount, regardless of price.

The import tariff exemption for qualifying EVs remains permanently in place.

Grandfathering of existing leases

The Government has indicated that existing arrangements will be protected: current leases will not be affected by the new rules.

Draft legislation will clarify the precise scope of this grandfathering, but businesses and employees can take some comfort that current packages will continue to qualify for existing FBT concessions.

What this means for your business and your employees

The FBT exemption has been one of the most effective incentives driving EV adoption, particularly via novated leasing, allowing employees to access EVs using pre-tax income.

The Review found that the exemption:

• Led to around 64,000 additional battery EVs in its first three years
• Reduced emissions and improved fuel savings
• Increased EV uptake across metropolitan, regional and outer-suburban areas

However, it also highlighted equity concerns (higher-income employees benefited disproportionately) and noted that costs to the Budget were growing quickly. The new phased approach aims to balance continued access to lower-cost EVs with long-term fiscal sustainability from the Government’s perspective.

Practical considerations for businesses and individuals

• Consider acting before 31 March 2027: Anyone thinking about packaging an EV may benefit from entering arrangements while the full exemption still applies. Timing of orders and leases will be particularly important.
• Review fleet and salary packaging models: From 2027 onwards, the value proposition will shift. EVs at or below $75,000 will remain highly attractive under the full exemption in Phase 2.
• Commercial fleets: Businesses with high work-use vehicles may see limited impact, but reviewing total cost of ownership (including FBT, running costs and charging infrastructure) remains essential.
• Second-hand EVs: A growing used-EV market may provide cost-effective alternatives, particularly where new-vehicle thresholds become restrictive.

EV momentum remains strong. EV/PHEV sales reached 22.9% of new vehicles in March 2026, up from just 1.8% in May 2022, with an increasing number of models now available in the $30,000–$40,000 range.

Next steps

These reforms maintain support for cleaner transport while tightening the focus of concessions. As always, the fine print in the amending legislation will matter, especially when it comes to transitional rules.

If you are considering acquiring an EV—personally or for your business—or want to understand the impact on salary packaging and fleet costs, our team can model the outcomes and advise on the optimal timing. Please let us know if you would like some assistance with working through your options.

SMSF year end reminder — what to check before 30 June

The end of the financial year is fast approaching. For SMSF members and trustees, a few timely checks now can avoid headaches later and help preserve valuable tax and contribution opportunities. Below is a checklist of the things members and trustees should consider before 30 June.

Contributions — timing matters

• Get contributions into the fund by 30 June: For both tax deductibility and contribution cap purposes, cash and electronic transfers generally need to be received by the SMSF’s bank account on or before 30 June.
  
  When transferring amounts between different banks allow extra days for bank processing times. 
• Personal deductible contributions: If you want to claim a tax deduction for a personal contribution, you must notify the fund and receive the fund’s acknowledgement by the required deadline (usually before the earlier of lodging the tax return or 30 June the following year). 
• If you’re looking to start a pension early in the new year, you’ll need to get your notice of intent to claim a deduction processed even earlier (ie, before you start the pension). Otherwise, you may miss out on the opportunity to claim a deduction for the contribution made.

Contribution strategies you might use

• Carry forward concessional amounts: Eligible members with lower total super balances (less than $500,000) at 30 June in the prior year may be able to use unused concessional caps from previous years to make larger deductible contributions this year. 

This may be useful if you have a larger capital gain in your personal name for the 2025/26 financial year. 

• SMSF‑only 28‑day allocation rule: SMSFs can temporarily hold a June contribution in an unallocated reserve and allocate it to a member in July so it counts for the following year’s caps — but this must be done correctly, documented in minutes and the fund’s deed must allow it. 

Commonly referred to as a contribution reserving strategy. Again, this may allow members to take advantage of claiming a larger tax deduction this year. 

Post‑tax personal contributions and limits 

• Non‑concessional contributions and bring‑forward: Whether a member can use the bring‑forward rule depends on their total super balance on the prior 30 June.  

Opportunities may be available for some members to make contributions this year, including bringing forward and taking advantage of future year contribution amounts. 

• Spouse contributions and government co‑contribution: Contributions made by a member for their spouse can attract a tax offset in some circumstances; low‑income members may qualify for a government co‑contribution if they make post‑tax contributions and meet the income test. 

Increase in contribution caps 

Current year (2025/26) contribution caps are: 

• Concessional contributions: $30,000. 
• Non-concessional contributions: $120,000. 

These caps will increase from 1 July 2026 to: 

• Concessional contributions: $32,500. 
• Non-concessional contributions: $130,000

Pensions and the transfer balance cap

• Minimum pension payments: If your fund is paying account‑based pensions, make sure the minimum pension for each member has been paid by no later than 30 June 2026. Failing to pay the annual minimum pension for the financial year can create administrative complications and loss of tax concessions. 
• Other types of pensions will also have minimum or set amounts that must be paid. Certain pensions also have maximum limits that should not be exceeded, as this will also have adverse outcomes. 
• Transfer balance cap timing: Indexation to the general transfer balance cap will apply from 1 July 2026. 
  
  Members thinking of starting a pension around the end of the 2025-26 financial year should consider timing carefully, as commencing before or after 1 July 2026 can affect how much can be moved into a tax‑free retirement pension. 
• Current year (2025/26) general transfer balance cap is: $2.0 million. This is set to increase to $2.1 million from 1 July 2026. 
• Not everyone will have access to the general transfer balance cap, and an individual’s personal transfer balance cap may be lower than this. 

Records, valuations and audit readiness

• Market valuations: Ensure all assets are valued at market on 30 June (or as close to as possible) and supporting evidence is retained — especially for property, related‑party assets and unlisted holdings. 
• Related‑party arrangements: Confirm leases, rents and services with related parties are documented and commercially reasonable. 
• Pension paperwork and minutes: Check that pension commencements, commutations and lump sums are supported by correctly signed documents and trustee minutes. 

If you have any questions in relation to any of the above, please contact us to discuss further. 

Note: The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.

MAY 2026 TAX ROUND UP

This month we cover several practical updates that will matter for businesses and individuals as we head towards the financial year-end. The ATO’s revised EV home-charging rate delivers more generous deductions for work-related car claims and can impact on FBT calculations too. The Federal Government has also released targeted tax relief to help businesses hit by Middle East–driven fuel disruptions, with new flexibility around payment plans, interest remissions and compliance activity. We look at the ATO’s new “verify call” feature, a simple but powerful tool that lets you instantly confirm whether an ATO caller is genuine — a major safeguard as scam activity peaks. Finally, we outline the upcoming increases to superannuation contribution caps from 1 July 2026 and what they mean for optimising concessional and non-concessional contribution strategies.

ATO Updates EV Home Charging Rate: What It Means for You

The ATO has announced a significant update that will affect anyone using electric vehicles (EVs) or plug-in hybrid electric vehicles (PHEVs) for work or fleet purposes and where the vehicle is charged at the relevant individual’s home.

From 1 April 2026 (for FBT purposes) or from 1 July 2026 (for income tax purposes), the ATO’s standard home-charging electricity rate will increase from 4.20 cents per kilometre to 5.47 s

This rate acts as a simple, ATO-approved shortcut when your household electricity bill doesn’t separately show EV-charging usage. For example, instead of tracking kilowatt hours or installing specialised equipment, you can simply apply the cents-per-kilometre rate to the number of kilometres travelled by the vehicle to determine the cost of electricity used in the vehicle.

The update reflects rising electricity costs and gives both businesses and individuals a more realistic amount for home charging costs.

Employers

If you provide EVs or PHEVs to employees — whether through a novated lease, company vehicle, or salary packaging arrangement — the higher rate increases the electricity cost attributed to the vehicle. In practice, this can:

• Initially increase the taxable value of the benefit when using the operating cost method.
• Increase employee “recipient contributions”, which directly lowers your FBT bill.
• Impact on the calculation of reportable fringe benefits amounts.

Individuals claiming work-related car expenses

If you use the logbook method to claim deductions, you can apply the new rate to the business-use portion of kilometres travelled from the start of the 2026–27 year onwards. Older years (back to 2022) continue to use the 4.20-cent rate.

How to make the most of the Guideline

A few basic records are all the ATO requires:

• Odometer readings — ideally at the start and end of each FBT or income year.
• A valid logbook showing business vs private travel (if using the operating cost/logbook method).
• At least one electricity bill to demonstrate that you actually incur home electricity costs.
• For PHEVs — keep petrol receipts. You must separately calculate the petrol component using the manufacturer’s hybrid-mode fuel consumption figure and apply the ATO home-charging rate only to the electric kilometres.

Tip: Many EVs now report the exact percentage of charging done at home vs public stations. Using this data makes claims more accurate and can potentially increase deductions.

An example

An employee owns their own EV and drives 25,000km in 2026–27 for work purposes.

Home-charging cost = 25,000 × 5.47c = $1,367.50 (up from $1,050).

That extra $317.50 can meaningfully reduce the employee’s taxable income for the 2026-27 income year.

What should you do now?

• Ensure the existing lower rate is used when applying the FBT rules for the year ended 31 March 2026 and when calculating deductions for the income year that ends on 30 June 2026.
• Make a note to use the updated rate for the current FBT year and the income year starting on 1 July 2026.

Electric vehicle adoption is accelerating, and the updated ATO rate will improve the tax outcomes for many taxpayers, while keeping compliance simple. If you operate a fleet, offer salary packaging, or claim car expenses personally, now is a great time to model the impact. Our team can help you run the numbers and ensure you receive every benefit you’re entitled to.

Practical Help for Businesses Impacted by Fuel Disruptions

With global fuel supply chains still under strain from conflict in the Middle East, many Australian businesses are feeling the impact through higher operating costs, delayed deliveries and pressure on cash flow.

To help stabilise affected sectors, Treasurer Jim Chalmers and the ATO have announced a package designed to give businesses immediate breathing room and reduce administrative burden during a volatile period.

Importantly, this is not a broad stimulus program. The assistance is practical, temporary and delivered directly through the ATO. If your business has been affected by fuel supply issues—whether through higher input costs, transport delays or reduced margins—the ATO now has discretion to offer flexible, case-by-case support.

What relief is available?

1. More flexible payment plans

The ATO can help you spread existing tax debts over a manageable timeframe. This keeps cash in your business for wages, stock purchases, fleet costs and other essential operations.

2. Remission of interest and penalties

Where payment delays are linked to fuel disruptions, the ATO can cancel general interest charges (GIC) and late-payment penalties. This prevents a temporary cash-flow issue from escalating into a much larger debt.

3. Easier variation of PAYG instalments

If revenue has dropped due to increased fuel expenses or supply slowdowns, you can reduce your quarterly PAYG instalments so they reflect your current trading reality. This can create meaningful short-term cash savings.

4. Reduced compliance activity

For the most affected industries, the ATO is temporarily scaling back audits and review activity. This allows you to focus on operations, staffing and customer commitments rather than responding to information requests.

5. Temporary pause on debt recovery

Where appropriate, the ATO may pause recovery action while your business stabilises. This can be critical for businesses facing short-term pressures that are outside their control.

How to access the relief

You don’t have to deal with the ATO on your own. We can help with assessing your situation, determining which measures might apply and lodge the necessary submissions.

In many cases, a short explanation of how fuel disruptions have affected your business—supported by basic financial information—is enough to start the process.

At this stage the ATO fuel response payment plan is available by application until 30 June 2026.

Why this matters commercially

For businesses in transport, logistics, manufacturing, agriculture and retail, fuel volatility can quickly erode profitability. The Treasurer’s package is designed to improve short-term liquidity so you can:

• maintain staffing and service levels
• manage supplier payments
• adjust pricing strategies
• continue operating without the added stress of compounding tax liabilities.

Put simply, cash-flow relief now can help position your business to take advantage of improved conditions later.

Take action early

If your business has been feeling the strain of higher fuel costs or disrupted supply, reach out to our team as soon as possible. We can review your position, identify which forms of support apply and manage the ATO process from start to finish.

For official information, see the Treasurer’s announcement and ATO fuel response.

New ATO ‘Verify Call’ Feature: Instant Protection Against Phone Scams

As tax time approaches, so does the annual spike in scam calls pretending to be from the ATO. These calls are becoming increasingly convincing — and increasingly costly for those who get caught by them.

The ATO has now launched a simple, powerful solution: the ‘verify call’ feature in the free ATO app. Rolled out in early April 2026, it allows you to confirm — instantly and in real time — whether the person calling you is genuinely from the ATO.

No guesswork. No pressure. No risk.

How the new feature works

If you receive a call from someone claiming to be from the ATO, you can verify it in under 30 seconds:

1. Open the ATO app and log in.
2. Tap ‘Verify Call’ on the main screen.
3. Within moments, you’ll receive a clear notification confirming whether the call is genuine.

If you don’t receive a confirmation, hang up immediately — it’s almost certainly a scam.

This tool gives taxpayers a practical, real-time defence against impersonation scams, which are now one of the most common fraud attempts in Australia. In July 2025 alone, the ATO received nearly 7,500 impersonation scam reports, and numbers always surge between April and July.

Scammers don’t just waste your time — they can redirect refunds, access your superannuation, or steal personal information that takes months (and sometimes thousands of dollars) to fix. That’s why this new feature is such welcome relief.

Why this matters for individuals and businesses

Most scam calls succeed because they create urgency — “pay now”, “confirm your identity”, “your tax file number is compromised”. The verify call tool eliminates that pressure entirely. It lets you check the caller before you share any information.

Better still, it requires no special technology. If you have a smartphone and the ATO app installed, you’re ready to go. Setting it up takes just a couple of minutes.

Add one more layer of protection: Strengthen your myID

For maximum security, we strongly recommend ensuring your myID (digital identity) is set to the highest identity-strength level, known as ‘Strong’. This makes it significantly harder for anyone else to access your tax or super information online.

What you should do now

To get the benefits straight away:

• Download or update the ATO app (available on Apple and Android).
• Register your device within the app.
• Check your myID settings in myGov and upgrade to ‘Strong’ if you haven’t already.
• Practise using the verify call feature once, so you’re confident before tax time arrives.

These are simple steps that can prevent major financial and administrative headaches.

We’re here to help

This is one of the most practical security upgrades the ATO has delivered in years — and it genuinely makes life easier for taxpayers. Now is the perfect time to get set up, stay protected, and make this tax season as stress-free as possible.

If you ever have doubts about a call, email or message claiming to be from the ATO, contact us first. We can quickly check its validity through official channels.

Got questions or need help with the ATO app? Just reach out to us. We’re here to support you — securely, efficiently, and always in your best interests.

Superannuation contribution caps to increase from 1 July 2026

Following the recent release of the December 2025 quarter average weekly ordinary times earnings (AWOTE) the annual concessional contribution (CC) cap will increase from $30,000 to $32,500 from 1 July 2026. The annual non-concessional contribution (NCC) cap will also increase to $130,000. 

When considering contribution opportunities some individuals may have higher caps due to the carry forward CC rules or the NCC bring forward rules, while others with higher super balances may have a reduced or nil NCC cap. This will depend on your total superannuation balance (TSB) at the prior 30 June.

Concessional contributions

Concessional contributions are pre-tax contributions and can include compulsory superannuation guarantee (SG), voluntary salary sacrifice contributions and personal deductible contributions.

If your SG contributions are below your cap, you may be able to reduce your annual tax bill by making either salary sacrifice or personal deductible contributions. You may also have access to any unused concessional cap from the prior 5 years if your TSB was below $500,000 on the prior 30 June.

Non-concessional contributions

Non-concessional contributions are post-tax contributions. Although there typically isn’t an immediate tax saving on NCCs the superannuation accumulation (pre-retirement) tax rate of 15% is typically lower than many people’s marginal tax rate and the tax rate on superannuation earnings and drawdowns may be tax-free in retirement (subject to a pension transfer balance cap of $2,100,000 from 1 July 2026).

It can also be possible to bring forward 2 years of your NCC contribution cap and contribute 3 years at one time ($390,000 from 1 July 2026). However, the rules are complex and your TSB and any prior NCC contributions in the current and prior two financial years need to be considered.

There may be NCC opportunities this financial year if your TSB was below $2,000,000 on 30 June 2025.

If you would like to understand how superannuation contributions may reduce your current and future tax bill, please reach out to your tax or financial adviser.

Note: The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.

APRIL 2026 TAX ROUND UP

This month we step through the newly enacted Division 296 superannuation tax—what it means for those with large super balances, how it will operate in practice, and the planning opportunities now available.

We also bring a clear message for business owners and high-wealth individuals: long-standing assumptions are being tested, with the ATO and courts setting new benchmarks for compliance, valuation and planning.

We look at the SEPL decision and why it’s a timely warning for family businesses relying on informal arrangements that blur the line between ownership and employment. The Full Federal Court’s judgment in Kilgour offers fresh guidance on how the “market value” of assets is really determined in business sale transactions, with important implications for accessing the small business CGT concessions. We also unpack the ATO’s escalating focus on work-vehicle FBT issues, where misunderstood exemptions and poor record-keeping are driving significant audit activity.

What the New Div 296 Tax Means for Individuals with Large Super Balances

The Better Targeted Superannuation Concessions measure (known as the Division 296 tax) is now law and takes effect from 1 July 2026. For those with large super balances, it’s important to understand what the new tax does, why it’s been introduced, and the practical steps you and your financial adviser should consider.

The Purpose of the Tax

Division 296 is designed to make superannuation tax concessions fairer and more sustainable. Rather than changing the way super is taxed for everyone, the law targets a small group of people who hold large super balances, ensuring they pay more tax on the portion of investment earnings that relate to those large balances.

Who it Applies to — Thresholds and Rates

This new measure, starting 1 July 2026 (first year is 2026-27), applies to an individual with total superannuation balances (TSBs) in excess of the following thresholds:

•              Large balance threshold: $3.0 million 

•              Very large threshold: $10.0 million.

Both thresholds will be indexed in future years.

This will mean that the overall tax imposed on superannuation fund earnings will be as follows:

Division 296 TSB	Div 296 tax rate on earnings relating to this band	Total effective tax on those earnings
Up to $3,000,000	0%	15% (standard fund tax)
$3,000,001 to $10,000,000	15%	30% (15% + 15%)
Above $10,000,000	25%	40% (15% + 25%)

Certain people will be excluded from having this new tax levied upon them, notwithstanding that their TSB may exceed the threshold. Excluded persons include child recipients of death benefit pensions and individuals who have made structured settlement superannuation contributions for a personal injury compensation payment.

Further, where a person dies, they will no longer have a TSB. However, other than the first year of operation (ie, 2026-27), there can still be a Division 296 tax assessment in respect of the financial year in which they die, where they had a TSB of more than $3 million at the start of the year. Given superannuation is not an estate asset, this scenario should be considered as part of a review of an individual’s estate plan.

How the Tax Works

From an SMSF perspective, the fund will calculate its Division 296 earnings, which is based on its taxable income with adjustments for assessable contributions; net exempt income attributable to pensions; any non-arm’s length income (which is already taxed at 45%) and income relating to investments in a pooled superannuation trust. There may also be adjustments for any capital gains made from the disposal of fund assets, if the fund has made the relevant small-fund CGT election.

The calculated Division 296 superannuation earnings is then attributed to fund members using an attribution percentage calculated by an actuary. This information will be used by the ATO to assess the member’s Division 296 tax liability.

Division 296 tax is levied on the individual, not a superannuation fund. However, the tax can be paid either by the individual or they can elect for the amount to be deducted from their nominated superannuation interest.

Next Steps

If your total super balance is near—or already above—the thresholds, it is important that you contact your financial adviser to arrange tailored modelling and to discuss whether the small-fund CGT election is suitable. Early planning will help you manage cashflow, reporting and any actuarial requirements efficiently.

This will also be an opportunity to review the suitability and benefits of holding investment capital in a superannuation structure versus alternatives for amounts in excess of the large threshold.

A Wake-Up Call for Family Businesses on Fringe Benefits Tax

As Fringe Benefits Tax (FBT) lodgement season approaches, family businesses should carefully review the perks they provide to working directors and family members. A high-profile case involving luxury vehicles provided to three brothers who run a large business empire through a discretionary trust highlights the complexities — and potential risks — of informal arrangements. While the case initially appeared to expand FBT exposure, the latest decision handed down by the Full Federal Court offers reassurance that not all benefits provided to working owners will automatically trigger FBT.

What may seem like harmless “owner entitlements” or beneficiary perks can still attract scrutiny from the Australian Taxation Office (ATO). However, the courts have emphasised the importance of substance, documentation, and the capacity in which benefits are provided.

The Background

Three brothers operate a substantial business involving petrol stations, convenience stores, fast food, tobacco outlets, and gift shops. They serve as shareholders, directors, and key decision-makers (with powers as appointors under the trust deed), working long hours in executive-style roles without drawing formal cash salaries or wages. Profits and benefits flow through the family discretionary trust (SFT Trust), of which their corporate trustee (SEPL Pty Ltd) is the trustee. The brothers and family members are beneficiaries.

The business provided them with exclusive access to over 40 luxury and high-performance vehicles (including Bentleys and Ferraris) for both business and personal use. Costs associated with personal use were debited to the matriarch’s beneficiary account and later cleared by trust distributions — a mechanism consistent with beneficiary entitlements rather than employment remuneration.

The ATO assessed FBT on the private use component of these car benefits, arguing they were fringe benefits provided to the brothers as “employees” in respect of their employment.

What the Court Decided

The Administrative Appeals Tribunal (AAT) initially ruled in favour of the taxpayer (Re BQKD and Commissioner of Taxation [2024] AATA 1796). It found that the brothers were not “employees” for FBT purposes and that, even on a hypothetical basis, the vehicle benefits were not provided “in respect of” any employment. The benefits were instead linked to their capacities as beneficiaries, proprietors, and controlling family members.

The Commissioner appealed to a single judge of the Federal Court, who in June 2025 (Commissioner of Taxation v SEPL Pty Ltd as trustee of the SFT Trust [2025] FCA 581) allowed the appeal. Justice O’Sullivan held that the brothers were employees under the broad FBT definitions (including via the hypothetical deeming rule in s 137 of the Fringe Benefits Tax Assessment Act 1986 (Cth) — FBTAA) and that the benefits were provided in respect of their employment.

The taxpayer then appealed to the Full Federal Court. On 27 March 2026, in SEPL Pty Ltd as trustee of the SFT Trust v Commissioner of Taxation [2026] FCAFC 36 (Perry, O’Callaghan and Thawley JJ), the Full Court unanimously allowed the appeal. The Full Federal Court basically restored the AAT’s decision.

Key findings:

• Employee status: It was open to the AAT to conclude the brothers were not “employees” for FBT purposes. The definitions of “employee” and “salary or wages” ultimately draw on common law concepts of employment. The AAT properly considered factors such as the absence of employment contracts, no wages or leave entitlements, the presence of employed managers for operational roles, and the brothers’ control being referable to their proprietorial and governance roles rather than traditional employment.
• “In respect of” employment: Even assuming (hypothetically) that the brothers were employees, it was open to the AAT to find there was no sufficient material connection between the benefits and any employment relationship. Here, access to the vehicles was not a substitute for salary or wages. The AAT correctly weighed competing explanations and found the benefits arose primarily from family/trust relationships, not employment.

Why This Matters for Your Business

The case underscores the ATO’s ongoing focus on dual-capacity individuals (e.g., directors who are also beneficiaries and active workers in trust structures). However, the Full Court’s reasoning provides important boundaries:

• Informal perks for working family members in discretionary trusts are not automatically subject to FBT.
• Substance and documentation matter: How benefits are provided, funded, and recorded (e.g., via trust distributions vs. remuneration) can help in determining the outcome.
• Common law employment concepts remain relevant in interpreting FBT definitions.
• Blending roles does not inevitably trigger FBT if the dominant characterisation is beneficiary-based.

Family businesses should still exercise caution. The ATO may continue to scrutinise similar arrangements, particularly where benefits appear to represent a substitute for remuneration or lack clear documentation. Superannuation contributions or executive titles can sometimes support employee characterisation, though they were not decisive here.

Practical Steps to Protect Your Business

Don’t wait for an audit—review your arrangements now:

• Document clearly: If a benefit is a trust distribution to a beneficiary, record it via trustee resolutions. If it’s tied to work duties, treat it as a fringe benefit and calculate FBT accordingly. Or confirm why they fall outside the regime.
• Consider FBT properly: Apply statutory formulas or operating cost methods for cars. Employee contributions (e.g., reimbursing personal use) can reduce or eliminate liability.
• Consider exemptions/concessions: Minor benefits under $300, or salary packaging for EVs, might help.
• Audit overlaps: We also need to check for Division 7A loan issues or deemed dividends if benefits flow through private companies.
• Plan proactively: With ATO focus intensifying (as highlighted in recent compliance updates), model scenarios to minimise tax without losing commercial perks.

Remember that if the ATO discovers some unreported FBT liabilities then the business can also be exposed to penalties and interest.

The SEPL case ultimately favours the taxpayer and reinforces that FBT does not capture every benefit provided to working owners in family trust structures. However, every arrangement turns on its specific facts and evidence.

If your business provides vehicles, phones, travel, or other perks to family members actively involved in operations — especially without formal salaries — now is a good time to review. Our team can help analyse your structures, run FBT calculations or risk assessments, and implement practical fixes to protect profits while maintaining flexibility.

The law in this area is fact-sensitive and continues to evolve. Professional advice tailored to your circumstances is essential.

Key Lessons from the Kilgour Case: Smarter Valuations in Business Sale Transactions

When selling a business—or even a slice of one—how you value the assets involved can have a major impact on the tax bill. A recent Full Federal Court decision, Kilgour v Commissioner of Taxation [2025] FCAFC 183, offers timely guidance on how “market value” is really determined for capital gains tax (CGT) purposes.

When preparing for transactions, restructures or potential exit events, the case is a useful reminder: valuations must reflect real commercial conditions, not just theoretical models.

What Happened?

In 2016, three family trusts sold 100% of the shares in Punters Paradise Pty Ltd, an online wagering business, to News Corp for approximately $31 million. The ownership split was:

• Pettett Trust – 60%
• Kilgour Family Trust – 20%
• Reuhl Family Trust – 20%

The sale was negotiated at arm’s length, involved extensive due diligence, and included a working-capital adjustment after completion.

The minority beneficiaries (20% holders) sought to use the small business CGT concessions, which in this case required the seller’s net assets to be below $6 million. To fall below the threshold, they argued their 20% minority interests should be heavily discounted in value—because a small holding is usually worth less on a standalone basis.

The ATO disagreed, saying each 20% parcel formed part of a coordinated 100% sale and should simply be valued as 20% of the final $31 million deal price.

The Court agreed with the ATO.

How the Court Approached Market Value

The Court applied the long-standing “willing buyer/willing seller” principles from Spencer v Commonwealth—but with a modern, commercial twist. Two practical messages emerge:

1. Real-world expectations matter more than rigid valuation dates

Although the tax rules in this area require looking at value “just before” signing the sale contract, the Court said you cannot ignore things that were reasonably predictable at that point. Here, the sale was essentially locked in through negotiations, so the final agreed price was the best evidence of market value.

Practical takeaway: If a purchaser is clearly willing to pay a premium—for control, synergies, strategic value or expansion opportunities—those factors will likely shape the valuation for tax purposes.

2. Actual deal terms beat theoretical discounts

The taxpayers tried to argue for a typical “minority discount”. However, the Court said the real commercial context matters more:

• All shareholders intended to sell together.
• The buyer wanted all the shares, not bits and pieces.
• A coordinated, 100% sale typically lifts the value of each parcel.

Because of that, the hypothetical buyer would not insist on a discount. The minority interests effectively rode on the value of the full-stake sale.

Practical takeaway: When shareholders act collectively, the tax valuation of each interest can increase—sometimes significantly.

What This Means for Business Owners

• Don’t undervalue your stake – If the buyer is pursuing synergies or control, your interest might be worth more than a textbook minority valuation suggests. Make sure your advisers consider the wider commercial picture.
• Evidence is everything – Keep thorough records such as negotiations, emails, valuations, buyer motivations. These can be powerful in supporting your tax position and accessing concessions.
• Plan CGT concession eligibility early – If you’re relying on the small business concessions, test different deal scenarios before signing any contracts or other paperwork, including a heads of agreement. Sometimes restructuring ownership or staging a sale can make a material difference, but integrity and anti-avoidance rules in the tax system still need to be considered carefully.
• Align shareholder expectations – In family groups and private companies, minority owners often assume their shares will be valued as a standalone piece. Kilgour shows that courts will often look at the transaction as a whole—not each slice in isolation.

The Bottom Line

Kilgour reinforces that valuations for tax purposes work best when they reflect the real commercial world, not theoretical models. Before you sell, restructure or negotiate with a potential buyer, involve your accountant early. A well-supported valuation can mean the difference between accessing valuable CGT concessions—or missing out.

The ATO Targets FBT on Work Vehicles: Don’t Let Assumptions Cost You

The ATO is turning up the heat on employers who provide work vehicles for private use. Sophisticated data-matching means assumptions and shortcuts can quickly lead to audits, penalties, interest charges—and even reputational damage. You can see the latest ATO FBT audit warning here: Misreporting FBT on personal use of work vehicles | Australian Taxation Office

If you provide vehicles to your team, whether to support fieldwork, boost morale, or offer a valuable perk, now is the time to ensure your FBT reporting is watertight. Here’s what the ATO is focusing on—and how to protect your business.

Don’t Assume Dual-Cab Utes Are Automatically Exempt

Dual-cab utes are popular in trades and construction, but despite popular opinion, they’re not automatically FBT-free.

Whether an FBT exemption applies can depend on the vehicle’s design and also how it is used across the FBT year.

Even if a ute is designed to carry a load of at least 1 tonne (ie, it is not classified as a car for FBT purposes) or it isn’t designed mainly to carry passengers (there is a specific formula used for this purpose) FBT could still be triggered if there is some private use of the ute.

The ATO has identified many cases where employers wrongly claimed full FBT exemptions, leading to back taxes plus interest.

The best way to handle ATO enquiries around the FBT exemption for commercial vehicles is to ensure that appropriate evidence is already in place to support the application of that exemption. While the FBT rules don’t specifically require formal logbooks when looking at this exemption, failing to keep records that are similar to a logbook can make it difficult to navigate ATO review or audit activities.

Accurately Apportion Private vs Business Use

If a full FBT exemption doesn’t apply then FBT is typically calculated on private use of work vehicles. You need to determine what portion of running costs—fuel, maintenance, depreciation—relates to personal trips. Ignoring this step can seem harmless but can quickly escalate during an audit.

Thorough record-keeping and proper apportioning can sometimes reduce your FBT liability even if the vehicle is used mainly for business purposes.

Remember that if a FBT liability is triggered it is the employer’s problem.

Lodging FBT Returns

Even if you think the FBT liability for the year might be small or immaterial, you might find that there is still an obligation to lodge an FBT return. The ATO’s analytics flag non-lodgers automatically. Penalties can reach up to 200% of the tax owed, plus interest.

Tip: Mark your calendar—FBT returns are due May 21 each year. Timely filing keeps your business compliant and avoids cash flow shocks.

Keep Reliable Logbooks and Records

A valid logbook tracks odometer readings, trip purposes, and business-use percentages over a 12-week period (renewable every five years). While not every scenario involving a motor vehicle specifically requires a valid logbook, failing to keep logbooks can sometimes lead to significant FBT liabilities that could otherwise have been avoided.

Efficiency tip: Digital logbook apps simplify tracking, save time, and reduce errors. Good records can also support deductions.

Why it Matters Commercially

Non-compliance isn’t just a numbers game. ATO audits divert time and energy from running your business, and ATO attention can affect your reputation with clients, partners, or lenders. Conversely, getting FBT right ensures you pay only what’s required, protects cash flow, and may even reveal tax efficiencies.

Next steps: Review your vehicle policies, update records, and ask us if you need help. We help businesses manage FBT with confidence—making compliance straightforward and stress-free.

Remember: assumptions can be costly, but a proactive approach protects your business, your people, and your peace of mind.

Note: The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.

MARCH 2026 TAX ROUND UP

This month we focus on key developments and practical guidance for business owners, property holders, and SMSF trustees navigating complex tax obligations. We begin with a deep dive into Director Penalty Notices (DPNs), highlighting the Tax Ombudsman’s review in response to a 136% surge in notices and the personal risks directors face if company taxes go unpaid. Next, we clarify the ATO’s updated position on capital gains tax for home-based businesses, emphasising when small business CGT concessions apply—and when they don’t. We also examine the ATO’s draft ruling on inherited homes, exploring how changes to main residence exemptions could affect family estates and estate planning strategies. Finally, we provide practical reminders for SMSF trustees on maintaining compliance, focusing on the sole purpose test and arm’s length requirements for related-party arrangement.

DPN Review: A Wake-Up Call for Business Owners on Personal Tax Risks

Running a successful business is hard work—and sometimes, despite best intentions, tax obligations slip. If the business is being operated through a company structure, then the ATO can potentially issue a Director Penalty Notice (DPN), holding company directors personally liable for unpaid taxes.

In 2024–25, DPNs skyrocketed by 136%, reaching over 84,000 notices, affecting directors of around 64,000 companies. The stakes are high, and now the Tax Ombudsman is reviewing how the ATO issues and manages these notices—a development all directors should take seriously.

So, what exactly is a DPN? Put simply, if your company fails to pay certain taxes—like PAYG withholding, GST, or Superannuation Guarantee Charge (SGC)—the ATO can target directors personally. There are two types:

• Non-lockdown DPNs: These apply if the company has lodged its activity statements or SGC statements but hasn’t made the relevant payments. In this case directors have 21 days to take appropriate action, such as arranging for payment of the debt, appointing an administrator, or entering liquidation. Acting promptly may allow the penalty to be remitted.
• Lockdown DPNs: These apply if reporting deadlines are missed as well. In this scenario directors can’t avoid personal liability by putting the company into administration or liquidation.

The intent is to protect government revenue and employee entitlements—but for directors, the impact can be severe.

Why the Ombudsman is Involved

The review, announced in December 2025 by Tax Ombudsman Ruth Owen, responds to a surge in complaints, with DPNs topping the list. It will examine:

• How effectively the ATO uses DPNs to recover debts ($54.2 billion in collectable amounts by mid-2025)
• The fairness of selecting cases for enforcement
• How directors are notified and communicated with
• Treatment of vulnerable directors, including those coerced into roles or facing financial abuse

The review also aligns with broader government initiatives, including support for gender-based violence survivors and more empathetic engagement with business owners. While timelines are flexible due to resources, the review is part of the 2025–26 work plan, alongside assessments of ATO services for agents, First Nations engagement, and interest charge remissions.

Commercial Takeaways for Directors

DPNs are more than a compliance issue—they’re a real commercial risk. Ignoring a notice can disrupt personal finances, damage credit ratings, and even trigger bankruptcy. At the same time, the Ombudsman review could improve transparency and fairness, giving directors a clearer understanding of options if financial stress arises.

Practical steps to protect yourself now

• Stay on top of obligations: make sure the company lodges returns and pays liabilities on time.
• Lodge statements even if payment isn’t possible: Failing to lodge activity statements just makes things worse.
• Consider using ATO payment plans if cash flow is tight but remember that this won’t necessarily enable directors to escape personal liability if a DPN has been issued already.
• Monitor company cash flow and tax health closely, especially during economic dips.
• Act fast if you receive a DPN: Consult immediately your accountant or lawyer to explore options because strict deadlines might apply.
• Consider director insurance or business structuring to limit personal exposure—but compliance always comes first.

The Ombudsman’s review is a timely reminder: tax is a key business risk, not just paperwork. Being informed, proactive, and prepared can protect both your business and your personal assets. If you’re concerned about DPN exposure, reach out for a tailored review—we can help you stay ahead of risk, so your business thrives rather than just survives.

Navigating CGT on Your Home: New ATO Clarity for Home-Based Businesses

Running a business from home—whether as a sole trader, freelancer, or small operator—has many perks. But when it comes to selling your home and potentially saving on tax, recent guidance from the ATO serves as a reality check.

The ATO has provided its views on how home-based businesses interact with the small business capital gains tax (CGT) concessions, providing a warning on how the ATO approaches a long-standing area of confusion.

See: Home-based business and CGT implications | Australian Taxation Office

The Key Issue: Active Asset Test

When an individual sells their main residence, they will often enjoy a full CGT exemption. However, if part of the home is used for business purposes, this can potentially impact on the scope of the exemption.

If a full exemption isn’t available under the main residence rules then we typically look to other CGT concessions, including the CGT discount for assets that have been held for more than 12 months or the small business CGT concessions.

The small business CGT concessions can potentially reduce or eliminate a capital gain made on sale of a property, but only if certain conditions are passed. One of the key conditions is that the property must pass an active asset test.

In very broad terms, to pass the active asset test you need to show that the property has been actively used in a business activity for at least 7.5 years across the ownership period or for at least half of the ownership period.

The ATO is clear: the active asset test applies to the entire property, not just the business portion. When you are applying the active asset test, an asset either passes this test or fails it. It is not really possible for an asset to partially pass the active asset test. The entire property is either an active asset or it is not.

Simply having a home office, workshop, or even being able to claim home occupancy expenses as a deduction does not necessarily make your home an active asset. Where business use is incidental to the home’s primary residential purpose, the ATO’s view is that the small business CGT concessions generally do not apply.

Rus v FCT

The view that the entire property must qualify as an active asset—and that incidental or minor business use (such as a home office or storage in a largely residential setting) is insufficient—draws support from case law, particularly the Administrative Appeals Tribunal (AAT) decision in Rus and Commissioner of Taxation [2018] AATA 1854 (Rus v FCT).

In that case, a taxpayer sought access to the small business CGT concessions on the sale of a 16-hectare largely vacant rural property, where only a small portion (less than 10% by area) was used for business purposes: a home office, shed for storing tools/equipment/vehicles, and related supplies tied to a plastering and construction business operated through a controlled company. The balance of the land remained vacant or used residentially.

The AAT upheld the ATO’s ruling that the property as a whole did not satisfy the active asset test, reasoning that the business activities were not sufficiently integral to the asset overall.

Minor or incidental use did not make the entire property an active asset, especially where the business was primarily conducted off-site. This precedent reinforces the ATO’s strict approach in home-based business scenarios: the property is assessed holistically. This means that limited business use typically fails to tip the scales toward qualifying for the concessions.

Practical Examples

Let’s take a look at how the ATO approaches some common scenarios.

Minor home-based business: Harriet runs a hairdressing salon in a spare room, using 7% of the total floor space of the property and seeing clients eight hours a week. She claims deductions for occupancy expenses and gets a 93% main residence exemption. However, because her business use is minor, she cannot access small business CGT concessions. The 50% CGT discount can still apply.

Significant business use: Sue and Rob own a two-storey building, with the ground floor operating as a takeaway store (50% of the total floor area of the property) and the top floor as their private residence. The business has been running for decades with employees. Here, the property qualifies as an active asset, potentially giving them access to the small business CGT concessions for the portion of the capital gain that isn’t covered by the main residence exemption.

What This Means for You

• A partial main residence exemption doesn’t necessarily mean you have access to the small business CGT concessions. Many homeowners mistakenly assume that business deductions or a home office automatically open the door. The ATO clearly doesn’t share this view.
• Seek advice before changing the way your home will be used. Starting to operate a business from home can impact on deductions, CGT calculations and access to CGT concessions. We are here to help you make fully informed decisions.
• Keep thorough records. Floor plans, hours of business use, and detailed deductions can help strengthen your position and may help in any future planning or audits.
• Consult your accountant. If selling your home is on the horizon, professional advice is critical to assess any potential CGT exposure and explore concessions that might be available.

The Bottom Line

The ATO’s updated guidance suggests that many home-based business owners won’t have access to the small business CGT concessions on sale of their home, but this always depends on the facts. Business owners need to plan proactively, rather than assume that tax relief will be available.

By understanding how your home’s business use is treated, you can make smarter decisions. For example, will the profits generated from a small business operated at home end up being wiped out by a higher CGT liability on sale of the property down the track?

After all, when it comes to CGT, every dollar you keep counts toward your next venture or your retirement nest egg.

ATO Update on Inherited Homes: What it Means for Your Family’s Wealth

The ATO has issued a Draft Taxation Determination TD 2026/D1 which looks at how inherited family homes are treated for CGT purposes. Some industry commentators have dubbed it a “death tax by stealth”, but it is a bit more complex than this. The draft guidance focuses on a specific aspect of the rules around applying the main residence exemption to inherited properties, potentially exposing deceased estates and beneficiaries to significant tax if not planned correctly.

Here’s what you need to know in practical terms.

Why TD 2026/D1 Matters

Under current law, deceased estates or beneficiaries can potentially sell a deceased individual’s former family home without paying CGT if certain conditions can be met. This exemption is particularly valuable for properties owned long-term, where unrealised gains could be substantial.

In order to access a full exemption you normally need to ensure that the property is sold within 2 years of the date of death (but the ATO can potentially extend this deadline) or that the property has been the main residence of certain qualifying individuals from the date of death until the property is sold.

These qualifying individuals can include the surviving spouse of the deceased individual, the beneficiary selling an interest in the property or someone who has a right to occupy the dwelling under the deceased’s will.

The draft ATO guidance focuses on this last point. That is, what does it mean for someone to have “a right to occupy the dwelling under the deceased’s will.” In summary, the ATO’s view is that:

• The right to live in the home must be explicitly granted in the will to a named individual.
• Broad discretionary powers given to trustees, separate agreements, or even testamentary trusts (TTs) are not sufficient in the ATO’s view.

For example:

• A will giving an executor discretion to allow a family member to occupy the home does not meet this requirement.
• A trustee of a TT who allows a beneficiary to live in the house is seen as separate from the will and may trigger CGT on sale.

Some legal and real estate experts warn this could force families to sell homes within two years of death to avoid CGT, especially in high-value areas.

Consider this: inheriting a $2 million home with a capital gain of $1.5 million could expose the beneficiaries to $300,000–$600,000 in tax, depending on discounts and tax brackets.

However, it is important to remember that there are still other ways for the sale of the property to qualify for a full exemption.  

Practical Steps to Protect Your Estate

While we are waiting for the ATO to finalise its guidance in this area, there are steps you can take to protect your family’s assets:

• Review and update your will, especially if you are planning to provide certain individuals with the right to occupy a property. Does the will currently provide this right to specifically named beneficiaries?
• Plan the timing of sales – The two-year exemption window remains, but if you inherit a property and intend to hold it longer than this, weigh any potential CGT exposure against future rental income or family needs. Partial CGT exemptions might still apply, but the rules and calculations can be complex.
• Seek professional advice, especially if your estate plan uses TTs. You will normally need to work closely with tax and legal advisors to structure the plan appropriately.
• Be market aware – Estate planning can intersect with market timing. Quick sales may preserve CGT exemptions, but this needs to be weighed up against non-tax factors.

The key takeaway is clear: estate planning is a complex area and needs to be navigated carefully to preserve family wealth and avoid unintended tax implications.

Keeping Your Self-Managed Super Fund Compliant

Self managed superannuation funds (SMSFs) can offer significant flexibility, allowing the members to make investments and enter arrangements that may not be available through retail or industry superannuation funds. However, being an SMSF trustee does come with important responsibilities to ensure that all dealings comply with superannuation law.

Two critical areas to keep front of mind are:

• The sole purpose test, and
• The arm’s length requirements in both superannuation and taxation law.

The Sole Purpose Test 

The sole purpose test requires that superannuation funds should be managed for the sole purpose of providing retirement benefits to fund members. While some SMSFs may have dealings with or/investments in related entities, these are subject to strict limits and when arrangements are entered into it is important that first and foremost SMSF trustees are considering the retirement benefits of the fund members rather than the needs of any external parties.

The example below illustrates how SMSF trustees should apply the sole purpose test when looking at making a related party investment.

Example: Investing in a Related Business?

Sachin and Deepthi have an SMSF which has a total balance of $1.2m. Their son Hardik commenced a business 3 years ago using a company structure. Hardik has approached his parents to invest $50,000 into his company via their SMSF.

Although Hardik is passionate about the business it has not grown as he would like, and Sachin and Deepthi are aware that the business has had cashflow issues and profits are not at a point where the business is growing or generating a profit.

Although the proposed investment amount is within the 5% in-house asset limit would Sachin and Deepthi invest member funds in an unrelated business knowing the business was in this same situation? That is, would they be placing their son’s interests ahead of the interests of the fund members?

Based on Sachin and Deepthi’s knowledge of the business, if the SMSF was to go ahead and make this investment they as trustees may have contravened the sole purpose test.

Arm’s Length Requirements

In addition to the sole purpose test there are superannuation and taxation law requirements that SMSF trustees always deal on arm’s length commercial terms. This is again particularly important when arrangements are with fund members and/or related parties.

Where arrangements are not at arm’s length, SMSF trustees can be liable for superannuation law penalties and in some cases fund income may be taxed at a higher rate.

Some common examples and key issues are discussed below.

Example: An SMSF Owns a Commercial Property Which is Leased to a Related Party Business

The rent should be on commercial terms and this needs to be evidenced by a rental appraisal from a professional such as a real estate agent when a lease is entered into.

The lease agreement should:

• Be in writing;
• Clearly cover who is responsible for particular outgoings and maintenance; and
• Be prepared by a legal professional.

Example: A Member of the SMSF or a Related Party Completes Work on an SMSF Property

SMSF trustees should seek professional advice before commencing any work on SMSF properties where the work may be performed by a member or a related party.

All arrangements with related entities should be commercial, including:

• If a related building company is used, the SMSF must pay market rates (same as the general public) and this should be supported by documentation to satisfy the fund auditor.
• If members (who are also trustees) perform work personally, strict rules apply to whether they can be paid for their services.
• All materials should be purchased directly by the SMSF, not by individual members.

Please contact us to discuss these rules further if you are considering entering into any transactions or projects involving SMSF-owned property and related parties.

Note: The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.

FEBRUARY 2026 TAX ROUND UP

This month we look at the ATO’s sharpened compliance focus across property, business incentives and emerging technologies. New draft guidance on holiday homes signals a much tougher approach to deductions for short-term rentals, particularly where lifestyle use blurs with genuine income-earning intent. The Federal Government’s review of the Electric Car Discount also places current EV tax benefits under the spotlight, prompting businesses and employees to revisit timing and eligibility. We then turn to the rise of AI-generated tax “advice” — and the costly traps emerging as the ATO cracks down on misinformation. Finally, we unpack the nuances of downsizer contributions and the main residence exemption, highlighting key conditions and misconceptions that frequently trip up retirees.

Holiday Homes Under the Microscope: What the ATO’s New Guidance Means for You  1

Electric Car Discounts Under Review: What It Means for Your Business (and What You Should Do Now) 3

AI Tax Tips: Helpful Shortcut or Costly Trap?. 4

Downsizer contributions and the main residence exemption  6

Holiday Homes Under the Microscope: What the ATO’s New Guidance Means for You

For many Australians, a holiday home does double duty. It’s a place to escape with family and friends, and during the rest of the year it’s listed on Airbnb or Stayz to help cover the costs.

Until recently, many owners assumed they could claim most of the usual deductions for the property without much trouble, as long as appropriate apportionments were made. However, that position is now under more scrutiny than ever following the release of some new draft guidance documents by the Australian Taxation Office (ATO) – TR 2025/D1, PCG 2025/D6 and PCG 2025/D7.

The ATO is looking to significantly tighten the rules around holiday homes that are used to derive some rental income. While the documents are still in draft form, they clearly signal the ATO’s compliance focus going forward.

What is the ATO Concerned About?

In simple terms, the ATO wants to distinguish between properties that are genuinely held to maximise rental income and those that are primarily lifestyle assets with some incidental rental use.

The ATO confirms that all rental income must be declared, even if it is occasional or earned through informal arrangements. However, if the property is really a holiday home and isn’t used mainly to produce rental income during the year then the owner can’t claim any deductions for expenses such as interest, rates, land tax, repairs and maintenance.

That is, the ATO might not allow any of these expenses to be claimed as a deduction, even if the property is used to generate taxable rental income for some of the year at market rates. If the property is classified as a holiday home by the ATO then owners can only claim deductions for limited direct expenses such as cleaning or advertising.

The ATO is particularly focused on properties that:

• Are blocked out for private use during peak periods (for example, school holidays or ski season),
• Are advertised inconsistently or at above-market rates,
• Generate ongoing tax losses year after year.

How Expenses Must be Claimed

Even if the property isn’t classified as a holiday home, it will often still be necessary to apportion expenses if the property is only used partly for income producing purposes. PCG 2025/D6 outlines how expenses should be apportioned. The key principle is that claims must be “fair and reasonable”. Common methods include:

• Time-based apportionment (for example, based on days rented or genuinely available for rent), and
• Area-based apportionment (where only part of a property is rented).

Getting this wrong, or failing to keep evidence, increases audit risk. The ATO has access to booking platform data and can easily compare listings, calendars and reported income.

The Financial Impact can be Significant

Consider a holiday unit that earns $30,000 a year in off-peak rent but is kept for private use during peak holiday periods. Under the new approach, the ATO may conclude the property is really a holiday home and could reduce deductible expenses from tens of thousands of dollars to only a small fraction, resulting in a materially higher tax bill.

Co-ownership also needs care. Income and deductions are generally split according to ownership interests, regardless of who uses the property more. Renting to relatives at discounted rates can further limit deductions.

Practical Steps you Should Take Now

Although the guidance is proposed to apply from 1 July 2026 (with transitional relief for arrangements in place before 12 November 2025), now is the time to review your position:

• Are you holding and using the property to genuinely maximise rental income? Is the property advertised broadly and consistently, including during peak periods?
• Use market pricing: Set rent in line with comparable properties in the same area.
• Keep strong records: Retain booking calendars, advertisements, enquiries, and a diary showing private versus rental use.
• Review ownership and strategy: In some cases, changing how a property is operated can improve its commercial profile and tax outcome, but beware of CGT liabilities, duty and legal fees.
• Document existing arrangements: If you may qualify for transitional relief, evidence is critical.

The Bottom Line

The ATO is not banning deductions for holiday homes, but it is drawing a firmer line between genuine investment properties and lifestyle assets. With the right structure, pricing and record-keeping, many owners can still claim appropriate deductions and improve cash flow.

If you own a holiday property, a proactive review could save you from an unpleasant surprise later. Please contact us if you would like us to assess your current arrangements and help you plan ahead.

Electric Car Discounts Under Review: What It Means for Your Business (and What You Should Do Now)

Electric vehicles (EVs) are no longer a niche choice. By late 2025, they account for more than 8% of new car sales in Australia, driven in no small part by generous tax incentives. One of the most significant is the Federal Government’s Electric Car Discount, introduced in mid-2022. For many businesses and employees, it has materially reduced the cost of owning or leasing an EV.

That said, the rules are now under review. While no immediate changes are proposed, this is an important moment to understand the benefits, assess whether they suit your circumstances, and consider timing.

How the Electric Car Discount Works (in Plain English)

The discount is not a cash rebate. Instead, it operates through tax concessions that can significantly reduce the real cost of an EV:

1. Fringe Benefits Tax (FBT) exemption

Where an eligible EV is provided to an employee as a fringe benefit, private use is exempt from FBT. This is often the biggest saving. Without the exemption, FBT is effectively charged at up to 47%. For many employees, the exemption can reduce the annual after-tax cost of a vehicle by thousands of dollars.

Important points:

• The exemption applies to battery electric vehicles and hydrogen fuel cell vehicles.
• Plug-in hybrid vehicles lost eligibility for new arrangements from 1 April 2025.
• The car must be first held and used after 1 July 2022 and be below the luxury car tax threshold at first purchase.

2. Higher luxury car tax (LCT) threshold

Fuel-efficient vehicles, including EVs, benefit from a higher LCT threshold ($91,387 for 2025–26, compared to $76,950 for other cars). This can prevent the 33% luxury car tax applying to part of the purchase price.

3. Reduced import costs

Certain EVs are also exempt from the 5% customs duty, reducing upfront acquisition costs.

Commercially, these settings have made EVs very competitive. Lower running costs (electricity versus fuel, fewer servicing requirements) and solid resale values have strengthened the business case, particularly for salary packaging and small fleets.

Why the Government Is Reviewing the Rules

A statutory review of the Electric Car Discount has now commenced. The key reason is cost. Uptake has exceeded expectations, and the projected cost to the budget has increased significantly over the forward estimates.

The review will examine:

• Whether the concession is still required to encourage EV adoption.
• Whether eligibility settings should be tightened (for example, limiting benefits to certain vehicle types or price points).
• How the discount interacts with other policies, such as the National Vehicle Emissions Standard commencing in 2025.

Public consultation is underway, with a final report not due until mid-2027. Importantly, there is no suggestion of immediate changes, and any reforms are more likely to be prospective.

Practical Takeaways for Business Owners and Employees

While uncertainty always creates hesitation, the current rules are clear and legislated. From a practical perspective:

• Now is a good time to review fleet or salary packaging arrangements, particularly if you are considering replacing a vehicle in the next 12–24 months.
• Existing arrangements are expected to be grandfathered, reducing the risk of retrospective changes (although we can’t guarantee this).
• Ensure vehicles are clearly under the LCT threshold at first purchase and meet all eligibility criteria if you want to access the FBT exemption.
• Check the tax treatment of charging infrastructure provided in connection with an eligible EV, this won’t necessarily qualify for an FBT exemption.

Final Thought

The Electric Car Discount remains one of the most valuable concessions available for employee vehicles. While a review introduces longer-term uncertainty, the commercial reality today is that EVs can deliver genuine tax and cash-flow savings when structured correctly.

If you are considering an EV—either personally or through your business—now is the right time to run the numbers. Please contact our team if you would like tailored advice on whether an electric vehicle strategy makes sense for you under the current rules.

AI Tax Tips: Helpful Shortcut or Costly Trap?

As a business owner or investor, time is always tight. So it’s no surprise many people now turn to AI tools like ChatGPT for quick answers on tax deductions, super contributions or structuring ideas. The responses sound confident, arrive instantly and cost nothing. What could go wrong?

Plenty.

The Australian tax and super system is complex, highly fact-specific and constantly changing. While AI can be a useful starting point, relying on it for decisions can expose you to audits, penalties and poor financial outcomes. We’re increasingly seeing the clean-up work when AI advice goes wrong.

Where AI Can Help (and Where it Can’t)

AI is quite good at explaining basic concepts in plain English. It can help you understand what “negative gearing” means, outline the difference between concessional and non-concessional super contributions, or prompt you to think about record-keeping. Used this way, it can save time and help you ask better questions.

The problem starts when AI moves from explaining concepts to giving “advice”.

Tax and super outcomes depend on your specific facts: your income levels, business structure, age, residency status, assets, timing and future plans. AI does not know these details unless you provide them—and you generally shouldn’t. Even then, it cannot exercise judgement or balance competing risks the way an experienced adviser can.

The Accuracy Risk: Confident, but Wrong

AI tools are known to “hallucinate” – that is, provide answers that sound authoritative but are incorrect or incomplete. In practice, this can mean:

• Claiming deductions that don’t apply to your circumstances
• Miscalculating capital gains tax or ignoring integrity rules
• Suggesting super strategies that breach contribution caps or eligibility rules
• Quoting legislation, cases and rulings or concessions that don’t exist or are out of date.

These errors are rarely obvious to a non-expert, but they are normally obvious to the ATO, courts and experienced advisers.

A recent decision handed down by the Administrative Review Tribunal highlights some of the key problems. In Smith and Commissioner of Taxation [2026] ARTA 25 the taxpayer appeared to rely on AI tools to identify cases which supported their argument, but this approach was shot down by the Tribunal. Some of the cases didn’t exist and others were simply not relevant to the matter being considered.

If the person using the AI tool doesn’t verify the existence of the cases provided by the tool and read them to ensure their relevance then “the Tribunal’s resources are being wasted, as the Tribunal must look for cases that don’t exist and read cases that have no relevance at all”.

ATO Scrutiny is Increasing, not Decreasing

The ATO isn’t anti-AI—they use it internally for fraud detection and analytics. But for you? The ATO’s misinformation guide makes it clear that AI tools can provide false, inaccurate, incomplete or outdated information. The ATO’s message is to verify everything, or face the music. Surveys reveal 64% of businesses seek AI accounting help first, only for pros to unscramble the mess—wasting time and money.

ATO AI transparency statement | Australian Taxation Office

Protect yourself from misinformation and disinformation | Australian Taxation Office

When something is wrong, the ATO will generally amend the return, charge interest and may apply penalties—even if the mistake came from AI advice rather than intent.

We are seeing this play out most clearly with work-from-home claims, property deductions and SMSF compliance.

Superannuation: High Stakes, Little Margin for Error

Super is an area where AI advice can be particularly dangerous. Self-managed super funds, in particular, operate under strict rules. AI often overlooks key issues such as eligibility, timing, purpose tests and investment restrictions. The result can be non-compliance, forced unwinding of transactions and penalties that run into thousands of dollars.

Super mistakes can also permanently damage your retirement savings.

Data Security and Privacy

There is also a practical risk many people overlook: entering personal or financial information into AI platforms. Once data is entered, you lose control over how it is stored or used. This creates privacy and fraud risks that are simply not worth taking.

A Smarter Approach: AI Plus Professional Advice

AI is best used as a support tool, not a decision-maker. It can help you understand the landscape, but important tax and super decisions should always be reviewed in light of your full circumstances.

At our firm, we encourage clients to bring questions early, test ideas and have conversations before acting. That approach almost always costs less than fixing problems after the fact.

The bottom line: AI can be a helpful assistant, but it is not your accountant. When it comes to protecting your wealth and staying compliant, tailored professional advice remains essential.

Downsizer Contributions and the Main Residence Exemption

When clients sell a long-held family home, they may be able to channel part of the proceeds into superannuation by using the downsizer contribution rules.

Basic Eligibility Conditions

To qualify, the seller must meet a number of conditions:

• They must have reached the eligible age of 55 years (at the time of making the contribution).
• The eligible dwelling must be located in Australia and have been owned for at least 10 years.
• The disposal of the dwelling must be exempt from CGT under the main residence exemption to some extent (full exemption not required).
• The contribution must be made within 90 days of settlement, and an election form must be lodged with the fund no later than when the contribution is received.

The downsizer contribution can only be used once per individual and is limited to the lesser of the gross sale proceeds or $300,000 per person.

Does the Sale Need to be Fully CGT-exempt?

A common question is whether the sale must be fully exempt as the main residence.

Importantly, a full exemption is not required.

Even if only part of the capital gain is exempt under main residence rules, the property may still qualify — provided all other conditions are met.

Is the Property Required to be the Main Residence at Sale?

Equally important: the property does not need to be the seller’s principal residence at the time of sale.

Living in the property for some years and renting it out later does not disqualify it, as long as the ownership and residence history supports at least a partial main residence exemption. 

Special Rules for Pre-CGT Properties

Where a property was acquired before CGT began, the rules look at whether part of the gain would have been disregarded had CGT applied.

A key requirement is that there is a dwelling that qualifies as the main residence. Disposal of vacant land will generally not satisfy the test and therefore will not meet downsizer requirements. 

Eligibility of a Non-Owning Spouse

It is common for only one spouse to be listed on the property title.

A non-owning spouse may still qualify for a downsizer contribution if all other requirements are met, apart from ownership.

However, a spouse who never lived in the property and could not reasonably have treated it as their main residence is unlikely to be eligible.

Preservation and Access to Funds

A downsizer contribution is subject to the standard preservation rules. Once contributed, the amount cannot be accessed until:

• You reach preservation age (60) and retire, or
• You reach age 65, regardless of retirement status.

Consider future cash-flow needs before making the contribution.

Before you Contribute

Although seemingly straightforward, downsizer contributions involve several nuances. Please contact us if you have any questions.

Related links:

• Downsizer super contributions
• Downsizer contributions and capital gains tax

Note: The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.

DECEMBER 2025 TAX ROUND UP

From payroll reform to professional development, this issue explores several important topics for businesses and investors. We unpack the new Payday Super laws that will soon change how employers handle super contributions and clarify when further study — like an MBA — can genuinely pay off at tax time. We also look at the Federal Government’s proposed “cash acceptance” rules that could see some retailers required to accept notes and coins again, and what that means for everyday operations. Finally, for SMSF trustees, new draft guidance from the ATO highlights why education is more than just good practice — it’s essential to avoid compliance risks and penalties. It’s a practical, forward-looking edition designed to help you stay compliant, confident, and ready for the changes ahead.

INSIDE

Super on Payday: Fundamental Changes for Employers  1

Unlocking Tax Savings: Can Your MBA (or Other Studies) Pay Off at Tax Time?  3

Know the Rules Before You Break Them: Why SMSF Education Matters More Than Ever 4

Cash is Making a Comeback – Is Your Business Ready to Take It?  6

Super on Payday: Fundamental Changes for Employers

If you run a business, you already know the juggling act that comes with managing the payroll process — paying staff on time, managing cash flow, and staying compliant. From 1 July 2026, there’s a major change coming that will reshape how you handle superannuation contributions for staff.

It’s called Payday Super, and it became law on 4 November 2025. The new rules are designed to close Australia’s $6.25 billion unpaid super gap and make sure employees — especially casual and part-time workers — get their retirement savings when they get paid.

What’s Changing?

From 1 July 2026, you’ll need to pay superannuation guarantee (SG) contributions at the same time as wages, rather than weeks or months later. Employers will have seven business days from payday to ensure contributions hit employees’ super funds.

If payments are late, the Superannuation Guarantee Charge (SGC) will apply — that means paying the missed super plus an interest and administration penalty. Once SGC has been assessed, additional interest and penalties may apply if the SGC liability isn’t paid in full.

Unlike the existing system, SGC amounts will normally be deductible to employers, although penalties for late payment of SGC won’t be deductible.

On top of this, the ATO will retire the Small Business Superannuation Clearing House (SBSCH) platform from 1 July 2026 for all users and alternative options should be sought.

The change isn’t just about compliance — it’s about impact. The Government estimates the earlier payments could boost an average worker’s retirement balance by around $7,700.

Why It’s Good for Business

This reform might sound like extra admin, and it might take a bit of getting used to, but it can actually simplify your payroll process and strengthen your reputation as an employer.

• Less admin – Paying super when you run payroll means no more quarterly payment crunches.
• Fewer compliance risks – ATO data-matching will pick up issues faster, helping you avoid penalties before they snowball.
• Stronger employee trust – Staff can see their super growing in real time, which might help with engagement and retention.
• Smoother cash flow management – Paying smaller, regular amounts of super is often easier to manage than large quarterly sums.

The ATO will take a “risk-based” approach for the first year, focusing on education and helping businesses transition smoothly. If you pay on time, you’ll likely be flagged as low risk, meaning fewer compliance checks.

How to Get Ready — Practical Steps to Take Now

You’ve got time before the rules kick in, but the smart move is to prepare early. Here’s how:

1. Check your payroll software.
Most modern systems (like Xero, MYOB, or QuickBooks) already support payday-aligned super. Confirm your setup and check if any updates or integrations are needed.

2. Map your pay cycles.
Note how often you pay staff (weekly, fortnightly, monthly) and calculate the seven-day payment window for each.

3. Brief your team.
Make sure whoever manages payroll understands the changes. The ATO has free online resources and webinars to help.

4. Plan your cash flow.
Consider shifting from quarterly to more regular payments now to get used to the timing. Smaller, frequent super payments can reduce cash flow shocks.

5. Monitor and review.
Set up a monthly check to ensure super contributions have cleared correctly. Keep an eye on ATO updates as final guidance is released.

If you outsource payroll, contact your provider soon — many are already updating systems for Payday Super and can help you make a seamless switch.

The Bottom Line

Payday Super isn’t just a compliance change — it’s an opportunity to make your payroll more efficient, your staff happier, and your business more compliant with less effort. With the laws now passed and just over 6 months to prepare, it’s time to get ahead of the curve.

If you’d like help reviewing your payroll setup or planning the transition, get in touch with our team — we can help you make sure your business is ready to go when Payday Super commences.

Unlocking Tax Savings: Can Your MBA (or Other Studies) Pay Off at Tax Time?

If you’ve invested in further study — an MBA, a leadership course, or a postgraduate qualification — you might be wondering: can this help at tax time?

For many professionals, the answer is yes — but only if the right boxes are ticked. The ATO’s rules on self-education expenses are strict, and the line between “deductible” and “non-deductible” can be thin. Getting it right could mean thousands back in your pocket; getting it wrong could mean an ATO adjustment, plus interest and penalties.

Let’s unpack how it works with a real-world example and some practical takeaways.

The Scenario: Sarah’s MBA

Sarah works in the Department of Defence and recently completed an MBA through a private provider. Her employer supported her studies with a $40,000 study allowance, and the course fees totalled $18,000. She deferred payment using the FEE-HELP loan system and declared the allowance as taxable income in her return.

Now she’s asking:

Can I claim a deduction for my MBA fees?

Does it matter that I used FEE-HELP?

Does the employer allowance change things?

The Type of Loan Matters

First, not all funding for education courses is treated equally.

HECS-HELP – no deduction:
If your course is a Commonwealth supported place (most undergraduate and some postgraduate university programs), you can’t claim a deduction. There is specific legislation in the tax system which denies deductions for fees covered by HECS-HELP — even if you pay them upfront and even if the course is closely related to your work.

FEE-HELP – potential deduction:
If you’re in a full-fee course, your tuition fees might be deductible if the study directly relates to your current employment or business activities. The ATO doesn’t allow a deduction for loan repayments later on — just the course fees themselves.

Practical tip:
Check your course statement or loan confirmation to see if you’re under HECS-HELP or FEE-HELP. Only FEE-HELP (or private payment) gives you potential deductibility.

The “Nexus” Test — Linking Study to Your Current Work

Even if the funding passes the first test, the purpose of the study is key. The ATO will only allow deductions if the course maintains or improves the skills you already use in your job, or is likely to increase your income in that same role.

It won’t apply if you’re studying to move into a new field or start a different career.

The ATO issued a detailed ruling on this topic in 2024 which provides some clear examples:

Allowed: A store manager doing an MBA to strengthen leadership and business operations skills.

Denied: A sales rep doing an MBA to change careers into consulting — the link to the current role was too weak.

For Sarah, the deduction depends on whether her MBA subjects (like strategy, policy or management) build directly on her current Defence role. The fact that her employer funded the course helps demonstrate relevance, but it’s not proof on its own.

In some cases you might find that specific subjects or modules are sufficiently linked with current income earning activities, while other subjects are too general in nature for the fees to be deductible.

Employer Allowances and HELP Repayments

The $40,000 allowance Sarah received is assessable income — it’s taxed just like salary. But that doesn’t stop her from claiming eligible self-education deductions for the course fees.

HELP loan repayments later on are not deductible — they’re simply a repayment of debt. The timing of the deduction is based on when the course expense was incurred (not when the loan is repaid).

Making It Practical

If you’re planning further study or reviewing a recent course, here’s how to make sure you get it right:

Check your loan type – FEE-HELP or private fees can be deductible; HECS-HELP cannot.

Gather evidence – Keep course outlines, job descriptions, and any correspondence showing the study supports your current work.

Claim what’s relevant – You can only claim expenses directly connected to your current job (fees, books, and possibly travel).

Be ready for review – Large claims often attract ATO attention. A private ruling can provide peace of mind if the amount is significant.

Key Takeaways

For many professionals, postgraduate studies like an MBA can deliver both career and tax benefits — but only if they relate directly to your current role.

Handled correctly, self-education deductions can return thousands in tax savings. For Sarah, that could mean a refund of over $5,000 on an $18,000 course.

If you’re considering further study, talk to us before you enrol or claim. A quick chat could ensure your next qualification delivers the best return — professionally and financially.

Know the Rules Before You Break Them: Why SMSF Education Matters More Than Ever

Running, or deciding to set up a self-managed super fund (SMSF) gives you control, but it also brings legal responsibilities. The Superannuation Industry (Supervision) Act 1993 (SISA) contains detailed rules on trustee duties, investments, borrowing, payments and recordkeeping. Simply put, you cannot identify or avoid breaches you don’t know exist. For trustees, this should mean education is not optional but rather, is essential for risk management. 

Why understanding SISA matters 

• You can’t comply with what you don’t know: Many common breaches arise from misunderstanding basic SISA duties (for example, sole purpose, arm’s length dealings, or in-house asset limits). Awareness of the rules is the first step to spotting a problem early. 
• Early identification reduces harm: Knowing what to look for, incorrect benefit payments, related party transactions that aren’t on commercial terms, or records that are incomplete, lets you seek advice before small errors become reportable contraventions. 
• Education protects members: The consequences of a breach can include loss of tax concessions, penalties and remediation costs that reduce retirement savings for members. 

The ATO’s Focus on Education — What Trustees Need to Know 

The ATO has recently published a draft Practice Statement (PS LA 2025/D2) explaining when it might issue an education direction under section 160 of SISA. These directions give the ATO power to require trustees (or directors of corporate trustees) to complete specified education, where trustees’ knowledge or behaviour poses a risk to compliance. The draft statement sets out the ATO’s approach and the kinds of circumstances that may lead to an education direction. 

However, trustees should not wait for an ATO directive before getting educated – such a directive means the trustees have already breached the rules. The draft Practice Statement is intended to support compliance and public confidence, but it is not a substitute for proactive trustee learning. Acting early and voluntarily is both safer for trustees and viewed more favourably by regulators. 

Practical Steps Trustees Can Consider 

Use ATO’s official SMSF guidance

Start with the ATO’s SMSF courses on the lifecycle of an SMSF, setting up, running and winding up. These courses are written for trustees and prospective trustees:  

• Setting up an SMSF: https://smallbusiness.taxsuperandyou.gov.au/setting-up-a-self-managed-super-fund-smsf 
• Running an SMSF: https://smallbusiness.taxsuperandyou.gov.au/running-a-self-managed-super-fund-smsf 
• Winding up an SMSF: https://smallbusiness.taxsuperandyou.gov.au/winding-self-managed-super-fund-smsf 

Complete the ATO’s ‘knowledge check’

The ATO provides an online “knowledge check” for each course designed to test trustee understanding. It’s a useful starting point, but note a pass mark of 50% should not be taken as a guarantee of safety. Trustees should consider whether aiming for a much higher standard, even 100% comprehension of core duties, is a more appropriate target to reduce risk. 

Seek timely professional advice

If a knowledge check or your reading flags uncertainty, contact us early to discuss your concerns. Timely, qualified advice often transforms a potential contravention into a routine fix and may mitigate potential penalties or ATO enforcement action. 

Document your learning and decisions

Keep records of training completed, who provided advice, and why investment or payment decisions were made. Good records are persuasive evidence of a trustee’s intent to comply. 

Final Word 

SMSF trustees hold both opportunity and responsibility. Learning the SISA rules and the ATO’s expectations is the most practical way to prevent costly mistakes. The ATO’s draft Practice Statement shows the regulator is prepared to use education directions where trustees’ knowledge gaps pose risks, but you shouldn’t wait to be told. Build your knowledge, use the ATO’s resources, complete the knowledge check, document what you learn, and seek professional help confidently and early. That approach better protects your fund and retirement outcomes. 

Cash is Making a Comeback – Is Your Business Ready to Take It?

For years, businesses have been moving away from cash – and for good reason. Digital payments are quick, traceable, and cut down on the risk of theft or counting errors. But that tap-and-go world might soon have to make room again for notes and coins.

The Government has released draft regulations that would require certain retailers to accept cash payments, ensuring Australians can still buy essential goods like groceries and fuel – even when technology fails. The change aims to stop people from being excluded when power, internet, or card systems go down, or when they simply prefer to pay in cash.

Who Will Need to Accept Cash – and Who Won’t

The new rules are targeted and, importantly, practical. They’ll apply to fuel stations and grocery retailers, including both major supermarket chains and independent operators, but only for in-person transactions under $500. That means you won’t have to accept someone paying for a $700 tyre replacement or bulk farm supplies in cash – it’s about the everyday essentials.

If your business (or franchise group) has an annual turnover of less than $10 million, you’ll be exempt. That’s good news for most small businesses such as family-run grocers, local cafés, and corner stores already managing tight margins and staffing challenges.

The regulations are expected to take effect from 1 January 2026, with a review after three years to see how the system is working in practice.

Why It’s Happening

The move comes as part of a broader push to maintain access and fairness in Australia’s payment system. The Government and industry groups have recognised that while most Australians are happy to tap their card or phone, around 10–15% still prefer to use cash – particularly older Australians and those in regional or remote areas.

There’s also a resilience angle: during bushfires, floods, or power outages, card networks can go offline. In those moments, cash becomes essential.

What This Means for Your Business

For larger retailers, this change will mean dusting off cash-handling policies and reintroducing processes that many have phased out. That may include:

• Re-establishing cash floats and tills
• Staff training to handle and verify cash
• More frequent bank deposits and reconciliation procedures

For small businesses that fall under the $10 million exemption, the key step will be to document your turnover clearly so you can demonstrate that the exemption applies. We can help ensure your records and structures support that.

There may also be commercial upside. Accepting cash could attract a segment of customers who’ve drifted away as stores went digital – especially in regional areas where cash use remains strong. A small business that promotes “cash welcome” could even gain new loyal customers who value convenience and personal service.

Preparing for the Change

With final regulations expected soon, it’s worth starting to plan now. Review your payment policies, assess whether you’re likely to be caught by the new rules, and budget for any setup or compliance costs.

If you’re exempt, ensure your records are watertight. If not, look for ways to streamline cash handling – for example, by using digital cash counters or smart safes to reduce errors and time spent on reconciliations.

Looking Ahead

Cash isn’t going away just yet. This reform is about maintaining choice, resilience, and fairness in how Australians pay – and ensuring businesses are ready when customers want to use it.

If you’d like help assessing how these rules could affect your operations or what the exemption means for your business, get in touch with our team.

Note: The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.