August 2026 Essential Tax Summary

What Did I Miss?

Consultation on the proposed 30% minimum tax for trusts, further changes to the CGT and negative gearing rules, and a Federal Court decision on who should be assessed on management fees.

Treasury has released a consultation paper to seek feedback on key aspects of the proposed 30% minimum rate of tax on the income of discretionary trusts from 1 July 2028. While the consultation paper provides a clearer picture of how the Government intends for this measure to apply, many key details are still to be clarified.

Treasury has also released draft legislation on further changes to the CGT system and negative gearing, building on legislation that has already passed through Parliament. The new draft legislation seeks to address some technical and practical issues associated with the Budget measures.

In Larmar v Commissioner of Taxation [2026] FCA 826, the Federal Court held that management, success and brokerage fees from property syndicates were assessable to an individual rather than his related service trust. The Court found that the individual was personally responsible for generating the income, despite the administrative support provided by the service trust.

As change occurs, we’ll keep you posted through Fortis Accounting Partners’ social media accounts.

From the Government

Consultation on Discretionary Trusts Reform

Treasury has released its consultation paper on the implementation of the minimum 30% tax on discretionary trusts, which was announced in the 2026–27 Federal Budget.

The measure proposes to apply a 30% minimum tax on discretionary trusts from 1 July 2028. However, trusts that choose to restructure can access expanded rollover relief for three years from 1 July 2027.

Treasury has been seeking feedback on key aspects of the proposed changes, including:

• Expanded rollover relief to support restructuring from discretionary trusts;
• How excess franking credits should be treated; and
• The ways to collect the minimum tax.

A number of trust types, including testamentary trusts, fixed trusts, superannuation funds, charitable trusts, deceased estates and trusts earning primary production income, are proposed to be excluded from the measure. Some types of income, such as certain income relating to vulnerable minors, will also be excluded.

Treasury is also proposing three years of rollover relief for businesses and other taxpayers that choose to restructure out of discretionary trust arrangements, but it isn’t clear yet exactly how this rollover will apply.

The consultation paper also considers how the new rules should interact with unpaid trust distributions owed to corporate beneficiaries following the High Court’s decision in the Bendel case. The paper suggests that the Government is at least considering a change to the legislation in line with announcements made back in the 2018–19 Federal Budget.

Tranche 2 of CGT and Negative Gearing Legislation

Treasury has released draft legislation and explanatory materials for the second stage of the legislative amendments for the CGT and negative gearing reforms that were announced in the 2026–27 Federal Budget.

The draft materials address many of the gaps that were identified by practitioners following the release of the initial legislative package.

Key points to note from the draft legislation include:

• Individuals can potentially retain access to the existing negative gearing rules if they acquire an interest in a property from a spouse or former spouse due to death or relationship breakdown.
• Certain affordable and social housing, NDIS housing, public housing and build-to-rent developments will be exempt from the negative gearing changes.
• Existing negative gearing treatment can continue to apply when an existing main residence that was purchased before 12 May 2026 is first used to produce rental income after 12 May 2026.
• Certain testamentary trusts, deceased estates and special disability trusts will be excluded from the minimum 30% tax on capital gains.
• An apportionment method has been introduced so that taxpayers can determine the portion of a capital gain or loss that arose before and after 1 July 2027, rather than having to obtain a valuation at 1 July 2027.
• Specific rules will be introduced to clarify how the CGT changes apply to trusts, including attribution managed investment trusts.
• Specific rules will be introduced to ensure the changes apply correctly to people who are Australian residents for only part of the time they own the relevant asset.
• Certain CGT events will not trigger tax earlier than intended for deferred capital gains.

The changes also provide definitions to clarify the meaning of ‘new residential dwelling’ for the purposes of the negative gearing rules.

For example, where someone acquires a non-residential building and converts it into a residential dwelling, this is considered a ‘new residential dwelling’. Further, where a dwelling is acquired within 24 months of the occupancy certificate being issued, it can be a ‘new residential dwelling’ for the new owner.

It is important to remember that this is draft legislation and could change before relevant Bills are introduced into Parliament.

Beneficiary TFN Reporting for Closely Held Trusts

From 1 July 2026, trustees of closely held trusts are no longer required to lodge quarterly TFN reports for reporting periods after 30 June 2026. Instead, beneficiary TFN information will be reported through the trust tax return.

For TFN withholding purposes, a closely held trust is a resident trust that is:

• a discretionary trust; or
• a trust that satisfies the 20/75 test, where 20 or fewer individuals (including certain related parties and nominees) directly or indirectly hold fixed entitlements to at least 75% of the trust’s income or capital.

However, a trust is not a closely held trust if it is an excluded trust. Excluded trusts include complying superannuation funds, eligible deceased estates, certain fixed and listed unit trusts, discretionary mutual funds, employee share trusts and law practice trusts.

From the 2027 tax return, trustees must report beneficiary TFNs in the statement of distribution when completing the trust tax return.

The TFN withholding rules apply to most beneficiaries of closely held trusts, regardless of whether they are an individual, company, partnership, trust or superannuation fund.

The TFN withholding rules do not apply to beneficiaries that are:

• non-residents for tax purposes;
• exempt entities as defined in the tax laws, such as tax concession charities, deductible gift recipients and other entities that self-assess their status as income tax exempt; or
• under a legal disability (e.g. minors).

There is no change to the existing TFN withholding and reporting obligations of trustees where a beneficiary has not quoted their TFN before receiving a payment from the trust or becoming entitled to trust income.

Occupancy Expenses While Working from Home

The ATO has reminded practitioners that it is closely scrutinising work-from-home expense claims, particularly where taxpayers incorrectly claim occupancy expenses such as rent or mortgage interest.

The ATO notes that employees are generally not entitled to claim occupancy expenses where they choose to work from home, even if they live a considerable distance from their employer’s workplace.

To claim occupancy expenses, a taxpayer must be able to demonstrate that they incurred the expenses and that:

• the area of the home used for work is a genuine place of business;
• it was necessary to work from home because the employer did not provide an alternative place of business; and
• the nature of the taxpayer’s income-earning activities requires them to maintain a place of business.

When determining whether part of a home constitutes a place of business, the ATO considers whether the area:

• is clearly identifiable as a place of business;
• is not readily capable of private or domestic use;
• is used exclusively or almost exclusively for business purposes; and
• is regularly used for client or customer visits.

Where a taxpayer satisfies these requirements, deductible occupancy expenses, such as rent or mortgage interest, should be apportioned based on:

• the floor area used as a place of business;
• the period the area was used for work purposes; and
• the taxpayer’s ownership or rental interest in the property where it is jointly owned or leased.

The ATO has also published a Decision Impact Statement on the Hall decision, providing further guidance on the Commissioner’s view of occupancy expense claims.

Rental Property Schedules

The ATO is focusing on rental property deductions and reminding practitioners that property manager reports should be treated as a starting point only when preparing rental property schedules. This is because the expense classifications used for property management purposes may not reflect the correct tax treatment.

The ATO has identified a number of common issues, including:

• capital expenditure (including initial repairs) being incorrectly claimed as an immediate deduction;
• expenses being grouped too broadly to determine the appropriate tax treatment;
• inconsistencies between expenses recorded when incurred and when they are paid; and
• private expenses, such as costs relating to an owner’s personal use of the property, being incorrectly claimed as rental deductions.

To reduce the risk of incorrect claims, the ATO recommends that practitioners:

• obtain invoices or work descriptions where the nature of an expense is unclear;
• seek additional evidence, including photographs, where invoice descriptions do not adequately reflect the work undertaken;
• verify that invoices and supporting documentation relate to the relevant rental property rather than the client’s private residence or another property;
• ensure repairs, capital works and depreciating assets are correctly identified and treated for tax purposes; and
• explain to clients why the tax treatment of expenses may differ from the classifications shown in property manager reports.

The ATO notes that this review process is particularly important where a rental property has recently been acquired or significant expenditure has been incurred.

Taking these additional steps can improve the accuracy of rental property schedules, help clients understand the correct tax treatment of expenses, and reduce the risk of ATO review or audit arising from incorrect or overstated deductions.

Payday Super

The ATO is reminding employers that Payday Super has now commenced. Employers will need to pay super for each payday, which will depend on how often they pay their employees (e.g. weekly, fortnightly or monthly).

Super payments must reach super funds within seven business days after payday to be considered on time.

If any payments are rejected by the fund, employers should review the error, correct the details and resubmit the payment.

The Small Business Super Clearing House (SBSCH) closed permanently on 1 July 2026. Any payments to the SBSCH received on or after 1 July 2026 will be returned within seven business days.

Division 296 Changes for SMSFs

From 1 July 2026, Division 296 imposes an additional 15% tax on the proportion of earnings attributable to the part of an individual’s total super balance (TSB) that exceeds the large super balance threshold (LSBT), which is $3 million for the 2026–27 income year.

The ATO has highlighted several key points for SMSF trustees and practitioners:

• SMSF annual reporting: From the 2026–27 income year, SMSFs will need to report each affected member’s relevant super earnings in the SMSF Annual Return. A member may be impacted where the value of their interest in the fund exceeds the LSBT.
• CGT adjustment election: SMSFs can elect to apply the Division 296 CGT adjustment to all CGT assets held by the fund on 30 June 2026. This election applies fund-wide, cannot be revoked once made, and is available even if no member exceeds the LSBT at that date. The election must be made by the due date for lodging the 2026–27 SMSF Annual Return.
• Assessments and payment: The ATO expects to issue Division 296 assessments for the 2026–27 income year during the second half of the 2027–28 financial year. Individuals may choose to release money from their super fund to meet their Division 296 tax liability.

The ATO is also developing Law Companion Rulings to provide further guidance on calculating the relevant super earnings of members who fall within the scope of Division 296.

Claiming FRCGW Credits

The ATO has updated its website guidance on how to claim foreign resident capital gains withholding (FRCGW) credits for clients.

Before lodging a client’s tax return, practitioners should obtain a copy of the FRCGW payment confirmation from the purchaser as evidence of the amount withheld. If the client does not have a copy, they should request the purchaser’s payment confirmation notice.

When preparing the client’s income tax return, practitioners should:

• declare all assessable income, including any capital gain or capital loss arising from the sale or disposal of the property, where applicable; and
• claim the FRCGW credit at the relevant withholding credit label. Unlike some other withholding credits, FRCGW amounts are not pre-filled in the tax return.

The ATO notes that the FRCGW amount will be refunded in full where:

• the client has no outstanding tax debts; and
• no CGT is payable on the property disposal.

The FRCGW credit applies in the income year in which the sale contract is signed. Where the contract is signed in one income year, but the purchaser remits the withholding amount to the ATO in the following income year, both the capital gain or loss and the FRCGW credit must be reported in the income year in which the contract was executed.

Where a tax return has been lodged without correctly claiming the FRCGW credit, practitioners may need to lodge an amendment or objection to have the credit applied.

Over-Claiming Expenses and GST Credits

The ATO is focusing on businesses that are deliberately over-claiming expenses and GST credits, such as those that:

• over-claim deductions or GST credits;
• claim private expenses as business costs;
• make incorrect claims in BAS or tax returns, including claiming GST credits where GST is not included in the price; and
• fail to keep records or have missing records.

Where expenses are partly private, only the business portion can be claimed.

New TPAR Pre-Fill for 2026

The ATO has announced that Taxable Payments Annual Report (TPAR) amounts will now pre-fill in tax returns for tax time 2026.

Most TPAR data will be available after 28 August each year, once payers have lodged their reports. The ATO recommends lodging tax returns after 28 August 2026 to avoid missing data.

As always, pre-fill information should be checked and updated where required.

Rulings, Determinations & Guidance

Transfer Balance Cap

The ATO has issued an addendum to LCR 2016/9 to:

• further explain the proportional indexation of the transfer balance cap and superannuation income streams subject to a commutation authority;
• clarify how the general principles apply in the context of successor fund transfers; and
• reflect the increase in the maximum allowable number of members made under the Treasury Laws Amendment (Self-Managed Superannuation Funds) Act 2021.

GST Recipient Created Tax Invoices

The ATO has issued a new draft GST ruling, GSTR 2026/D2, which sets out the ATO’s updated views on when a recipient created tax invoice (RCTI) can be issued. The draft ruling replaces GSTR 2000/10.

The GST legislation gives the Commissioner the power to determine situations where the recipient of a taxable supply can issue the tax invoice, rather than the supplier.

There were previously 51 separate legislative instruments issued by the Commissioner in connection with RCTIs, but most of these were replaced by an updated instrument issued in 2023. The new draft ruling reflects this updated position.

The draft ruling looks at key issues associated with RCTIs, including:

• the requirement that the recipient determines the value of the supply, which is often relevant in determining whether an RCTI can be issued;
• the requirements for a written agreement that must be satisfied for an RCTI to be a valid tax invoice; and
• how RCTIs operate where a recipient acts through an agent.

Cases

Fee Income Assessed Directly to the Individual and Not Related Entity

Whether certain fee income should be taxed in the hands of the key individual involved in the work or their related entity was considered by the Federal Court in Larmar v Commissioner of Taxation [2025] FCA 226.

By way of background, an accountant practising in his own name separately established and managed 12 highly successful property syndicates over the course of 30 years. While the accountant retained at least some ownership in many of the property syndicates, they also had unrelated investors.

It was clear that the accountant himself was heavily involved in a way that was critical to the success of the property syndicates. He located properties, made strategic decisions, procured investors and oversaw the property projects.

However, the accountant also had a service trust that employed a number of individuals. Not only did these individuals perform work for his accounting practice, but they also undertook tasks for the property syndicates, including assisting with banking, invoicing and the preparation of financial statements.

The core of the dispute related to management, success and brokerage fees charged to the property syndicates.

Although some of these fees were disclosed in the tax return of the accountant’s service trust and ultimately its beneficiaries, the ATO issued amended assessments to the individual in or around 2017.

The ATO took the position that fees of approximately $29.8 million generated between the 2005 and 2014 income years should instead be assessed directly to the individual accountant as his ordinary income.

This was the first matter considered by the Federal Court and ultimately concluded in the Commissioner’s favour.

Even though there were some agreements with a few of the syndicates indicating that the service trust was the manager of the relevant syndicate, the judge concluded that all the fees were ordinary income of the individual accountant. This conclusion was reached largely having regard to the following:

• The individual accountant was personally instrumental to the management and creation of the property syndicates and made all strategic decisions associated with the property syndicates.
• The fees were billed in the name of his accounting firm as a sole trader and paid to its bank account, rather than being billed and paid to the service trust.
• The personal guarantees provided by the accountant in connection with the property syndicates included some disclosures indicating that the fees were his income.
• The size of some of the fees was determined by the accountant, with no breakdown of any fees attributable to the tasks performed by employees of the service trust.

Had the income been assessable in the hands of the service trust, the Federal Court also alternatively considered that the fee income was personal services income of the individual due to his instrumental involvement in the property syndicates.

The Federal Court also concluded that each of the personal services income tests would have been failed. This essentially meant that the income would have been automatically attributed and assessed in the hands of the individual accountant under the personal services income rules.

Finally, the Federal Court did not seek to disturb the Commissioner’s finding that there was evasion. This meant that the normal amendment periods did not apply and permitted the Commissioner to issue amended assessments in or around 2017, which targeted income going as far back as the 2005 income year.

It is not uncommon to deal with situations where one key individual is critical to a business. This Federal Court case reminds practitioners to consider the supporting evidence and documentation around which entity should be disclosing the income.

There are often other rules that need to be considered in situations like this. If the income is personal services income, the rules are quite restrictive around ensuring the profit is not retained by the trading entity or distributed to other related parties that did not perform the relevant work, irrespective of whether the personal services income tests are passed.

On the other hand, if the income is not personal services income but income from a business structure, the rules are generally more flexible. However, the ATO has issued some guidance in PS LA 2022/4 targeting professional firms, which still sets out some expectations around the level of profit that should be assessed in the hands of the individual principal practitioner.

Directors’ Personally Liable for Superannuation Guarantee Paid Late

The Federal Court in Ostwald v Commissioner of Taxation [2026] FCA 868 considered whether the directors were personally liable for director penalties in relation to the superannuation guarantee charge payable by the company.

Of note is the fact that the company did make payments for the relevant superannuation guarantee. However, the payments were made late in respect of the quarters ended 30 September 2016, 31 December 2016 and 31 March 2017.

In fact, the payment for the quarter ended 30 September 2016 was made on the actual due date of 28 October 2016, but unfortunately, the payment was only received by the superannuation fund three days later.

Having not lodged a superannuation guarantee statement, the Commissioner issued a default assessment for superannuation guarantee charge to the company and subsequently also issued director penalty notices in respect of the above-mentioned three quarters.

The directors sought to argue that they were not liable for director penalties under section 269-35(2) of Schedule 1 to the Taxation Administration Act 1953 on the basis that they had taken all ‘reasonable steps’ to ensure the company complied with its obligations, being its obligation to pay the superannuation guarantee charge.

First, the Federal Court did not consider this defence to be available to the directors. This was essentially because such a defence could only be available where there is a recovery of the penalty.

Alternatively, the Federal Court concluded that the directors could not satisfy the ‘reasonable steps’ defence. The challenge was that the steps taken by the directors did not appear to be directed at the superannuation guarantee charge liability specifically:

• The engagement of consultants to assist with refinancing and restructuring appeared to be directed at assisting the continued operation of the group.
• The additional financing obtained was directed at ensuring wages and superannuation guarantee could be paid, rather than the superannuation guarantee charge.
• The proceeds from the sale of assets were used to assist with the general running of the business.

It was also made clear that the fact that the company ultimately paid its superannuation guarantee liability, albeit late, was not considered relevant.

This case highlights that the rules in this area can be harsh and reinforces the importance of seeking advice from a legal adviser or insolvency specialist in situations where there is a risk of a client being exposed to director penalties.

There may be potential options available to assist in minimising personal exposure, depending on the circumstances. These options can often depend on certain actions being taken within the required timeframe.

Legislation

Treasury Laws Amendment (Strengthening Accountability for Tax Adviser Misconduct and Other Measures) Bill 2026

On 2 July 2026, the Government introduced the Treasury Laws Amendment (Strengthening Accountability for Tax Adviser Misconduct and Other Measures) Bill 2026.

Schedule 1 to the Bill amends the Tax Agent Services Act 2009 to include new and expanded regulatory penalty powers for the TPB. The powers are aimed at improving protections for taxpayers against tax agent misconduct, including poor and unlawful tax advice, and maintaining community confidence in the integrity of the tax system.

The reforms will implement a stronger penalties framework aimed at penalising and deterring inappropriate conduct by both registered tax practitioners and unregistered preparers.

Schedule 2 to the Bill amends Division 855 of the Income Tax Assessment Act 1997, Schedule 1 to the Taxation Administration Act 1953 and the Income Tax Assessment Act 1936 to strengthen the foreign resident CGT regime.

Schedule 3 to the Bill amends the income tax law to provide a transitional 50% CGT discount for certain foreign investors disposing of Australian renewable energy assets. The CGT discount applies to CGT events happening from commencement to 30 June 2030.

Schedule 6 to the Bill amends the Income Tax Assessment Act 1997 to list three new deductible gift recipients, extend the listing of two deductible gift recipients and update the name of one listing.

Schedule 8 to the Bill inserts new subsections into sections 18-15, 18-20 and 18-25 in Schedule 1 to the Taxation Administration Act 1953 to entitle taxpayers to claim a tax credit for amounts withheld under Subdivision 14-D in the same assessment for the income year in which the underlying transaction is recognised for income tax purposes, where the withholding has been paid to the Commissioner.

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