April 2025 Essential Tax Summary

Tax Insights & Updates: What You Need to Know This Month

The extension of the instant asset write-off threshold to $20,000 for small business for 2024-25 has finally passed Parliament.

The Bill also denies deductions for GIC and SIC amounts, and extends the ATO notification period for retaining refunds.

The ATO’s appeal to the High Court in the Bendel case and the release of their decision impact statement, also attracted headlines this month.

As we get closer to the election, we’ll continue to monitor promises that may impact our clients.

As change occurs, we’ll keep you posted through Fortis social media accounts’ on Twitter, Facebook, and LinkedIn.

From Government

Budget 2025 -26

You can read our full Budget 2025-26 summary here.

Payday Super details released

The Australian Government is planning significant changes to the way superannuation is paid — and it’s important for business owners across all industries to understand what’s coming.

The new “Payday Super” rules will require employers to pay super at the same time (or shortly after) they pay salaries and wages to employees. This is a major shift from the current system, where super payments are due quarterly, giving employers up to 28 days after the end of each quarter to make contributions.

When Will Payday Super Start?

The proposed start date is 1 July 2026, giving employers time to adjust — but it’s wise to start preparing early.

Key Changes Business Owners Should Know

Here’s a summary of what’s changing under the draft legislation:

Super Must Be Paid Within 7 Days of Each Payday

Employers will need to pay super within 7 calendar days of each employee’s payday. If this window is missed, employers could face a Super Guarantee Charge (SGC) unless specific exceptions apply (such as a two-week grace period for new employees).

New Definitions: “Qualifying Earnings”

Super contributions will be tied to what’s called “qualifying earnings” (QE) — based on ordinary time earnings. The “QE day” refers to the day employees are actually paid.

Interest & Admin Charges Changing

• The current 10% nominal interest rate will be replaced by the ATO’s General Interest Charge (GIC) rate, which may fluctuate.
• The existing $20 per employee per quarter admin fee will be replaced with a 60% uplift based on the shortfall and interest.

No More Mandatory SG Statements

Employers won’t be required to lodge SG statements unless they want to make a voluntary disclosure for potential reductions in penalties.

Tax Deductibility

• Super contributions (paid on time or late) and SGC payments will be tax-deductible.
• Penalties will remain non-deductible.

Stricter Penalties for Late Payments

• If the SGC remains unpaid after 28 days, the ATO must issue a notice to pay.
• A new penalty of 25% will apply automatically, increasing to 50% for repeat non-compliance within 24 months.
• Unlike the current system (where penalties can be remitted), these new penalties cannot be reduced by the Commissioner.

Easier Correction Process

If a payment is missed, any late contributions will be automatically applied to the earliest unpaid period, simplifying the correction process.

Clearing House to Be Retired

The Small Business Superannuation Clearing House will be phased out from 1 July 2026. Small businesses will need to make super payments directly to super funds going forward.

Tax Changes for Managed Investment Trusts (MITs): Key Updates for Investors

The Australian Government is updating tax laws to ensure legitimate investors can still access concessional withholding tax rates on distributions from Managed Investment Trusts (MITs), while preventing misuse.

Key Points:

• Foreign-based widely-held investors, like pension funds, can still benefit from concessional tax rates on eligible MIT distributions.
• MIT concessions will remain available for trusts ultimately owned by a single foreign investor, such as a foreign pension fund.
• The ATO’s Taxpayer Alert TA 2025/1 targets non-commercial restructures used to exploit MIT tax benefits.

Australia’s Approach to Developing an Innovative Digital Asset Industry

The Australian Government has outlined its approach to digital assets through a new statement, highlighting key reforms in the sector.

The primary elements to this approach to digital asset reforms are:

• Digital Asset Platforms (DAPs): A framework for platforms that hold digital assets like crypto for consumers.
• Payment Stablecoins: Treated as a type of Stored-Value Facility (SVF) under the Government’s Payments Licensing Reforms.
• Regulatory Sandbox Review: A review of Australia’s Enhanced Regulatory Sandbox for innovation.
• Digital Asset Initiatives: Investigating how digital asset technology can benefit financial markets and the broader economy.

Additionally, the Board of Taxation’s Review on the Tax Treatment of Digital Assets concluded that Australia’s existing tax laws can accommodate crypto assets and transactions. Any uncertainties should be managed cooperatively between taxpayers and the ATO.

From Regulators

Reminder: Taxable Payments Annual Report (TPAR) Due by 28 August

The ATO is reminding businesses that pay contractors for services under the Taxable Payments Reporting System (TPRS) to lodge their TPAR by 28 August each year.

TPRS Services Include:

• Building and construction
• Courier and road freight
• Cleaning
• Information technology
• Security, investigation, or surveillance

If your client doesn’t need to lodge a TPAR or no longer pays contractors for TPRS services, they can submit a non-lodgment advice form.

Starting 22 March 2025, businesses that haven’t lodged their TPAR and have received three reminder letters will face penalties.

ATO Moving Non-Compliant Small Businesses to Monthly GST Reporting

From 1 April 2025, the ATO will move certain small business taxpayers with a history of non-compliance (e.g., late BAS lodgments, missed payments, or incorrect GST reporting) from quarterly to monthly GST reporting.

• Affected taxpayers will be notified in writing by the ATO.
• The change will remain in place for at least 12 months.

Small businesses can also voluntarily switch to monthly GST reporting, which can help with cash flow management and align better with the reconciliation process.

FBT Obligations for the 2025 Year: Key Deadlines and Changes

The ATO is reminding businesses about their Fringe Benefits Tax (FBT) obligations as the 2025 FBT year ends on 31 March 2025.

Key Actions for Clients:

• Determine FBT liability for fringe benefits provided to employees or associates between 1 April 2024 and 31 March 2025.
• If there’s an FBT liability, lodge the FBT return and pay by 21 May 2025.
• Report each employee’s reportable fringe benefits amount in their end-of-year payment information.

Important Updates for 2025:

• Clients can use existing records instead of travel diaries and declarations for certain fringe benefits, as long as the required information is provided at the time of lodging the return.
• The FBT exemption for plug-in hybrid electric vehicles ends on 31 March 2025. Employers can still apply the exemption if:
  • The vehicle was used before 1 April 2025 (and was exempt).
  • There is a financially binding commitment to continue providing private use of the vehicle after 1 April 2025.

ATO Focus Areas for Small Businesses: Key Concerns

The ATO is highlighting several key areas of concern for small businesses:

• Contractors omitting income: Ensuring contractors report all income.
• Quarterly to monthly BAS reporting: Moving to monthly GST reporting to improve business habits and cash flow management.
• Small business boost measures: Encouraging businesses to self-amend and correct errors or omissions in their tax reporting.

Additionally, the ATO will continue to focus on:

• Non-commercial business losses.
• Small business CGT concessions.
• Misreporting business income as personal income.
• GST registration and income for taxi, limousine, and ride-sourcing services.

Requesting Lodgment Deferrals: Key Considerations for Tax Practitioners

The ATO has provided guidance for tax practitioners on when to apply for lodgment deferrals. Before making a request, consider these three key questions:

1. Are the circumstances exceptional or unforeseen?
   • Deferrals may be granted if there are exceptional or unforeseen circumstances (e.g., serious illness, unexpected staff absences, or natural disasters).
   • Do not request a deferral if the delay is due to clients not providing necessary information in time.
   • Applications must include full details of the exceptional circumstances and why the request is submitted after the due date.
2. Does your client have a 15 May due date?
   • Some clients are eligible for the 5 June concession and don’t need to request a deferral for the 15 May due date.
   • The concession applies to individuals, partnerships, and trusts (if no tax is due or a refund is expected) and to companies and super funds under specific conditions.
3. Do you need tailored support?
   • If the issues affect your entire practice, the Supported Lodgment Program is available for practices needing extra time to lodge a large number of client returns.
   • It’s recommended to request the program as early as possible.

Online Services for Foreign Investors: Key Updates

The ATO has updated its guidance on online services for foreign investors, offering the following capabilities:

• Lodge residential property applications and pay associated fees.
• Monitor application status and view the history of applications since 1 January 2021.
• Manage foreign person details and asset registrations (residential and non-residential).
• Lodge vacancy fee returns and pay associated fees.
• Review vacancy fee return lodgments and payment history.
• Delegate authority to representatives to act on your behalf.

These services help streamline the management of property and tax obligations for foreign investors.

Small Business Benchmarks for 100 Industries

The ATO has updated its financial benchmarks to help small business owners compare their performance against industry averages. The benchmarks cover over 2 million small businesses across 100 industries.

Industries Included:

• Accommodation and food
• Building and construction
• Education, training, and recreation
• Health care and personal services
• Manufacturing
• Other services
• Professional, scientific, and technical services
• Retail trade
• Transport, postal, and warehousing

While the ATO doesn’t rely solely on these benchmarks, businesses outside the norms are more likely to face closer scrutiny from the ATO.

Reminder: SMSF Quarterly TBAR Reporting Due 28 April 2025

The ATO is reminding self-managed super funds (SMSFs) of their reporting obligations for Transfer Balance Account Reporting (TBAR).

• TBARs for the March quarter are due by 28 April 2025, even if the member’s total super balance is under $1 million.
• Failure to meet reporting obligations may result in compliance action and penalties, and can negatively impact members’ transfer balance accounts.
• Members may need to commute amounts over their cap and pay excess transfer balance tax.

System Updates in ATO Online Services: March 2025 Changes

The ATO has announced updates to its Online Services system for tax agents in March 2025:

• The Card payment menu is now view-only. Agents will no longer be able to make credit/debit card payments on behalf of clients.
• The ‘Make payments’ permission in Access Manager has been removed for tax and BAS agents to align with the change.
• The 2025 FBT return is now available for lodgment.

Lawyers in the Spotlight: ATO Focus on Compliance

The ATO is focusing its compliance activities on the legal profession, with concerns about non-lodged returns, errors, and late payments.

Key concerns include:

• Lawyers incorrectly reporting distributions from partnerships and service trusts.
• Redirecting legal firm income to associated entities or engaging in inappropriate income alienation.

Such activities are considered high-risk by the ATO. Non-compliance could lead to a finding that the lawyer is not fit to practice, potentially resulting in being struck off the roll.

Avoiding Common CGT Errors: Key Tips for the Next 5,000

The ATO is advising privately owned and wealthy groups of common Capital Gains Tax (CGT) mistakes to avoid:

Common CGT Errors:

• Reporting transactions in the wrong year.
• Incorrectly characterizing ordinary income as capital income.
• Beneficiaries failing to gross up their share of discounted capital gains from trusts.
• Unsubstantiated carried forward capital losses.
• Inability to substantiate assets sold to related parties.

Consequences of Errors:

• Incorrect CGT reporting can lead to audits and amendments, which can be time-consuming and costly.

How to Ensure Compliance:

• Understand the nature of the transaction and asset.
• Keep detailed records relevant to calculating capital gains or losses.
• Obtain independent professional valuations for assets sold between related parties.

Rulings, Determinations & Guidance

Interim Decision Impact Statement – Bendel

On 18 March 2025, the ATO applied to the High Court for special leave to appeal the Full Federal Court’s decision.

The ATO has also issued an interim decision impact statement in response to the Full Federal Court decision in the Bendel case (Commissioner of Taxation v Bendel [2025] FCAFC 15), which concerns whether a private company’s failure to call for payment of entitlements to income of an associated trust was the provision of ‘financial accommodation’ and, therefore, a loan for the purposes of section 109D of the Income Tax Assessment Act 1936.

Since late 2009, the ATO has taken the controversial view that unpaid present entitlements (UPEs) owed by a trust to a company can be treated as if they were loans for Division 7A purposes (see DI 2022/11 for the ATO’s latest guidance in this area). This can lead to a deemed unfranked dividend being triggered for tax purposes if appropriate action isn’t taken to prevent this, even if no funds are provided by the trust to shareholders of the company or their associates.

However, the AAT and Full Federal Court have held that this view is incorrect and that a UPE balance should not be treated as a loan for the purpose of Division 7A.

Summary of ATO’s Decision Impact Statement:

• The ATO will continue to administer the tax rules in accordance with TD 2022/11 until the outcome of the High Court appeal process is known. That is, the ATO will still treat UPEs as loans for Division 7A purposes.
• The ATO will hold off processing amendments, private rulings, and objections relating to this issue until the appeal process is finalised. However, if the ATO is forced to make a decision during this period, it will apply the approach in TD 2022/11.
• The ATO reiterates that regardless of the Division 7A position, the reimbursement agreement rules in section 100A also need to be considered. If UPEs aren’t on terms that are at least as commercial as a Division 7A loan agreement, the arrangement would fall outside the green zone in PCG 2022/2.

Margin Scheme Applies Separately for Each Freehold Interest

The ATO has updated its guidance on the Margin Scheme through an addendum to GSTR 2006/6. This update clarifies how the phrase “improvements on the land” is interpreted within the context of GST law.

The key change is that the Margin Scheme will now apply separately to each freehold interest in land. This means that even if multiple freehold interests are sold together as a single parcel, the GST rules under the Margin Scheme will be applied to each freehold interest individually.

This change follows a Full Federal Court decision in the case of Commissioner of Taxation v Landcom [2022], which confirmed this interpretation of the GST Act.

Division 7A and Section 109R: ATO’s Draft Guidance

The ATO has issued a draft Taxation Determination outlining the Commissioner’s views on sections 109R and 109T of Division 7A of the Income Tax Assessment Act 1936 (ITAA 1936).

Key Points:

• Section 109R aims to prevent shareholders (and their associates) from circumventing Division 7A by repaying a loan with another loan from the same company. This section disregards repayments where a reasonable person would conclude that the entity intended to borrow, or borrowed, a similar or larger amount from the same private company.
• Section 109T extends Division 7A to loans (and payments) made indirectly through interposed entities, ensuring that transactions involving third-party entities still comply with the rules.

ATO’s Views:

1. Section 109R can apply to disregard repayments made to a private company where the repayment is considered part of a larger loan arrangement involving interposed entities.
2. In cases where a notional loan is created under sections 109T and 109W, section 109R can apply to disregard repayments when calculating the loan balance.

Example:

• 30 March 2023: Banana Co lends $200,000 to Apple Trust (Loan A).
• 10 May 2024: Banana Co lends $205,000 to Orange Co (Loan B).
• 1 May 2024: Orange Co lends $205,000 to Apple Trust (Loan C).
• 14 May 2024: Apple Trust repays Loan A in full.

In this example, the ATO considers that Banana Co made Loan B as part of an arrangement that involved Loan C to Apple Trust. Section 109T applies, and under section 109W, a notional loan from Banana Co to Apple Trust is created. Section 109R will disregard the repayment of Loan A, and section 109D will deem a $200,000 dividend to Apple Trust by 30 June 2023 (subject to distributable surplus).

Restructures and Managed Investment Trust (MIT) Withholding Regime: ATO Alert

The ATO has issued Tax Alert TA 2025/1 to inform taxpayers that it is currently reviewing arrangements that may be improperly exploiting the MIT withholding regime through restructuring of inward investment structures.

The ATO’s focus is on arrangements where an existing trust or investment structure is restructured to gain inappropriate access to the MIT withholding regime, which includes deemed Capital Gains Tax (CGT) treatment. This is particularly concerning when the restructure is linked to the disposal of trust property or assets held by entities controlled by the trust.

Taxpayers involved in such arrangements should be cautious, as the ATO is closely monitoring these activities for compliance.

Life and Remainder Interests: Exceptions for Granny Flat Arrangements

The ATO has issued an Addendum to TR 2006/14 regarding the CGT consequences of creating life and remaining interests in property. This addendum introduces exceptions for granny flat arrangements, qualifying them for concessional CGT treatment.

Under the new guidelines, the creation, variation, or termination of an eligible granny flat arrangement will not trigger CGT events under Division 137 of the ITAA 1997.The changes apply from 12 March 2025.

PAYG Withholding Rate for External Administrators or Trustees of Bankrupt Estates

A draft legislative instrument has been released, proposing changes to the PAYG withholding rate for external administrators or trustees managing bankrupt estates. The new instrument, titled Taxation Administration (Withholding Variation for Certain Payments Made by External Administrators and Trustees of Bankrupts’ Estates) Legislative Instrument 2025, is set to replace the 2015 version.

The key change is a reduction in the withholding rate from 34.5% to 32% for certain payments made to employees of bankrupt estates.This new rate is proposed to take effect from 1 July 2025.

FBT Rates for Private Use of Vehicles (Other than Cars)

The ATO has issued TD 2025/1, which outlines the rates for calculating the private use of motor vehicles (other than cars) using the cents per kilometre method for the FBT year starting 1 April 2025.

Engine Capacity	Rate per km
0-2500 cc	69c
Over 2500 cc	80c
Motorcycles	20c

Reasonable Food and Drink Expenses for LAFHA

The ATO has issued TD 2025/2, which outlines the reasonable food and drink expenses for employees receiving a Living-Away-from-Home Allowance (LAFHA) for the FBT year starting 1 April 2025.

This includes rates for employees both within Australia and outside Australia (with a list of countries). If the total food and drink expenses for an employee (including eligible family members) do not exceed the reasonable amount set by the Commissioner, those expenses do not need to be substantiated under Section 31G of the FBT Act.

Cases

Residency and Domicile Test: Case Summary

In a recent case before the Administrative Review Tribunal (ART), the taxpayer, Mr. Quy, contested an ATO decision, which deemed him a resident of Australia for tax purposes based on the domicile test under Section 6(1) of the ITAA 1936.

Mr. Quy had moved to Australia in 1978, becoming an Australian citizen, and lived there until moving to Dubai in 1998. He returned to Australia in 2009 but moved back to Dubai in 2015 for work. During the relevant years (2016-2020), Mr. Quy spent varying amounts of time in Australia—ranging from 29 to 119 days annually—and maintained a home in Perth, along with two rental properties in Sydney. He also kept his Australian bank accounts, health insurance, and vehicle registrations.

The ATO assessed him as an Australian resident for tax purposes, believing that his continued connections to Australia indicated he was domiciled there. Mr. Quy disagreed, arguing that his domicile was in Dubai due to his work arrangements and residence there.

Initially, the Administrative Appeals Tribunal (AAT) ruled in favor of the ATO, concluding that despite his presence in Dubai, Mr. Quy was a resident under the ordinary concepts test. The tribunal noted his wife’s residence in Australia, their family home in Perth, and his frequent returns to Australia.

However, the Federal Court allowed Mr. Quy’s appeal, remitting the case to the ART, stating that the AAT had applied the wrong test by considering whether Mr. Quy intended to remain in Australia permanently. Instead, the correct test was whether he intended to treat Australia as his home for the time being.

Upon remittal, the ART upheld the ATO’s decision based on the domicile test, even though Mr. Quy was not a resident under the ordinary concepts test. The ART concluded that Mr. Quy’s enduring connections to Australia, including his family home and investments, indicated that he had not abandoned his residence in Australia or established a permanent home in Dubai. This was in contrast to another case (Harding v Commissioner of Taxation), where the taxpayer had clearly demonstrated a long-term commitment to living abroad.

The case highlights the importance of domicile and ordinary concepts in determining tax residency, particularly for individuals with connections to multiple countries.

FBT and Commercial Parking Stations: Recent Court Decision and ATO Response

In a recent case, the Federal Court ruled in favor of the taxpayer, determining that a Toowoomba shopping centre car park was not a “commercial parking station” for the purposes of Fringe Benefits Tax (FBT). This decision has implications for businesses with car parks, especially in determining whether they fall under FBT regulations.

Under Section 39A of the FBT Act, a “commercial parking station” is defined as a permanent car parking facility where parking spaces are made available to the public for all-day parking in exchange for a fee. However, the law excludes parking facilities located on public streets or roads where users pay via meters or vouchers.

The Court’s reasoning focused on the nature of the car park. In this case, parking at the shopping centre was free for up to three hours, with modest fees applied after that period. The Court concluded that the car park was not operated primarily for commercial profit, but rather to complement the shopping centre’s operations. Therefore, it was not considered a “commercial parking station” under FBT rules.

Despite this ruling, the ATO has appealed the decision to the Full Federal Court. In the meantime, on 28 March 2025, the ATO issued an Interim Decision Impact Statement, maintaining its stance as outlined in TR 2021/2. According to the ATO, a car park that has a primary purpose other than all-day parking, and which uses fee structures to discourage all-day parking (such as penalty rates), can still qualify as a “commercial parking station” for FBT purposes.

This case highlights the complexities of FBT as it applies to commercial parking stations and the differing interpretations between taxpayers and the ATO. Until the appeal process is finalized, businesses with parking facilities should continue to follow the ATO’s current guidance on the matter.

Full Federal Court Decision on Division 615 Rollover

The Full Federal Court has dismissed an appeal by Ausnet, upholding the original decision that the requirements of Division 615 of the Income Tax Assessment Act 1997 (ITAA 1997) were met during their group restructure. This case involved a Division 615 rollover, which is used for tax purposes to facilitate the reorganisation of corporate structures without triggering capital gains tax (CGT).

Background

In 2015, Ausnet received a class ruling confirming that a Division 615 rollover applied to their group restructure. This restructure involved introducing a new holding company within their stapled group. However, Ausnet later argued that the rollover requirements were not met, particularly because the cost base of the underlying assets of the joining entities was not uplifted when they joined a tax consolidated group.

Court’s Ruling

The initial decision from the Federal Court was in favor of the ATO, affirming that the restructure was a legitimate reorganisation under Division 615 and did not require the interposed company to be a “shelf company.” Ausnet then appealed the decision to the Full Federal Court.

The Full Federal Court dismissed the appeal, with key points from the judgment including:

• Division 615 is not limited to interposed companies that are “shelf companies.”
• The ratio requirement in Section 615-20(2) refers only to the shares issued under the scheme, not all shares held in the company.
• The involvement of multiple entities did not prevent the restructure from qualifying as a reorganisation under Division 615.

Conclusion

The Full Federal Court’s ruling confirms that the Division 615 rollover provisions can apply to a wider range of restructures, including those involving multiple entities. This decision strengthens the framework for corporate reorganisations under the Australian tax law, offering greater clarity on the application of the rollover provisions in Division 615.

Legislation

Treasury Laws Amendment (More Cost of Living Relief) Bill 2025

The Treasury Laws Amendment (More Cost of Living Relief) Bill 2025 has been introduced and passed by both Houses of Parliament. The Bill covers individual income tax cuts and changes to Medicare levy thresholds, which were announced in the 2025-26 Federal Budget on 25 March 2025. The Bill is now awaiting Royal Assent.

Key Changes in the Bill:

1. Personal Income Tax Cuts:
   • Schedule 1 of the Bill reduces the personal income tax rate of 16% (applicable to the income bracket of $18,201 to $45,000) to 15% for the 2026-27 income year.
   • For the 2027-28 income year and beyond, the rate will further decrease to 14%.
2. Medicare Levy Threshold Increases:
   • Schedule 2 of the Bill proposes an increase in certain Medicare levy thresholds. This includes thresholds for:
     • Low-income individuals and families.
     • Individuals and families eligible for the Senior Australian and Pensioner Tax Offset (SAPTO).
     • Surcharge low-income thresholds.
   • These thresholds will be adjusted in line with the Consumer Price Index (CPI), with the changes applying retroactively from the 2024-25 income year.

This Bill is aimed at easing the financial burden on individuals and families, especially those on lower incomes.

Treasury Laws Amendment (Tax Incentives and Integrity) Bill 2025

The Treasury Laws Amendment (Tax Incentives and Integrity) Bill 2025, which includes a number of tax-related amendments, has now passed both Houses of Parliament and awaits Royal Assent.

Broadly, the Bill includes amendments for:

1. Tightening the definition of a fuel-efficient vehicle for Luxury Car Tax purposes under the A New Tax System (Luxury Car Tax) Act 1999.
2. Denying deductions for General Company Income (GCI) and Special Company Income (SCI) amounts.
3. Extending the ATO’s notification period for retaining refunds.
4. Extending the $20,000 instant asset write-off for small business entities until 30 June 2025.

Although the increased threshold for the instant asset write-off to $20,000 has been passed for the income year ending 30 June 2025, there was no mention of any further extension of this threshold beyond 30 June 2025 in the 2025-26 Federal Budget. If there are no further amendments, the instant asset write-off threshold will return to $1,000 after 30 June 2025.

If you have any questions regarding the above information, please do not hesitate to contact our office to speak to one of our team.