November 2025 Essential Tax Summary

This month we have seen some significant developments in connection with proposed changes to the superannuation system.

First, the Treasurer announced some key changes to the proposed Division 296 tax measure to deal with some of the more contentious features of this proposed new tax. The Government is planning to make a number of significant changes to the way this tax will apply, including:

• Moving from a total superannuation balance change methodology to a fund-level realised-earnings approach.
• Introducing a second threshold of $10 million, with CPI indexing applying to both thresholds.

The Government also announced that the start date for the new Division 296 tax will be deferred to 1 July 2026 to allow further consultation and implementation work.

The other key development is the introduction of legislation to Parliament on the Payday Super measure, which will represent a fundamental change to how and when super contributions are paid by employers for their employees. Rather than super contributions being due on a quarterly basis, the new system will require employers to make super contributions for employees as salary/wages are paid.

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

From the Government

Significant Changes to Division 296 tax

On 13 October 2025, the Federal Treasurer announced major changes to the proposed Division 296 tax. Here’s what you need to know:

• New Large Balance Threshold: A second superannuation balance threshold of $10 million will be introduced. Any earnings above this amount will attract an additional 25% tax.
• CPI Indexing: Both thresholds — $3 million and $10 million — will now be indexed to inflation.
• Realised Earnings Approach: The tax will now be based on realised earnings rather than unrealised gains. Instead of the ATO calculating earnings from balance movements, super funds (including SMSFs) will calculate the taxable earnings of members whose total super balance exceeds the lower threshold and report this to the ATO.

The ATO will still combine all super balances for each individual and issue any tax notices. This change shifts compliance responsibility from the ATO to super fund trustees.

How the Tax Works:

• For balances between $3 million and $10 million: an extra 15% tax applies to attributable earnings (on top of the standard 15% fund tax).
• For balances above $10 million: an extra 25% tax applies (on top of the 15% fund tax, bringing the total to 40%).
• Thresholds will be indexed: the $3 million threshold in $150,000 increments and the $10 million threshold in $500,000 increments.

Timing:

The first time an individual’s balance will be assessed under these rules is 30 June 2027, with the first tax notices expected in the 2027-28 financial year.

Payday Super Legislation Introduced

The Government has announced proposed changes to the Low-Income Superannuation Tax Offset (LISTO), effective from 1 July 2027:

• The maximum LISTO payment will increase by $310, rising to $810.
• The eligibility threshold will increase from $37,000 to $45,000.

Draft legislation is expected to be introduced in 2026 for consultation.

First Australia-Ukraine Tax Treaty

The Government has signed Australia’s first tax treaty with Ukraine on 17 October 2025. The agreement has not yet been made public.

From the Regulators

Dual Cab Utes and FBT

The ATO is focusing on the application of fringe benefits tax (FBT) to dual-cab utes, as it believes this is often misunderstood.

When employers provide dual-cab utes to employees, an FBT exemption may apply, but it is not automatic. Certain conditions must be met. The main factors that determine FBT liability include:

1. Determine if the dual-cab ute is classified as a “car”
   • A vehicle is considered a car if it is designed to carry a load of less than 1 tonne and fewer than 9 passengers.
2. If it is a car:
   • Check the car fringe benefit rules.
   • An exemption may apply only if the vehicle is not primarily designed to carry passengers and private use is restricted to:
     • Home-to-work travel
     • Work-related incidental travel
     • Minor, infrequent private use
3. If it isn’t a car:
   • Refer to the residual fringe benefit rules.
   • A full FBT exemption may be possible if private use is limited to:
     • Home-to-work travel
     • Incidental work-related travel
     • Minor, infrequent private use

Even if it appears that the exemption is available, employers must retain records to support this. Employers may also consider requiring employees to keep valid logbooks and odometer records in case the exemption is later questioned.

Australia Post to Discontinue SMSF Gateway Service

Australia Post will cease offering its SMSF Gateway Service to new subscribers, with the last day to purchase or renew a subscription being 29 November 2025. Existing subscribers can continue to use the service until their current subscription expires.

To comply with SuperStream data standards, SMSF users should:

• Arrange an alternative messaging service before their subscription ends.
• Obtain a new electronic service address (ESA) to share with the ATO and employers.

As noted previously, the ATO Small Business Superannuation Clearing House (SBSCH) will also close on 1 July 2026, so it will not be a viable long-term alternative.

It is important that taxpayers using the SMSF Gateway Service download and back up any data before their subscription expires.

ATO Extends BAS Refund Notification Period

As of 1 July 2025, the ATO has extended the notification period for retaining BAS refunds for verification from 14 days to 30 days. This applies to BAS refunds flagged as high risk.

• If no notification is issued within 30 days, refunds will be released on day 31.
• Legitimate refunds remain unaffected, and interest will be paid for any amount held for more than 14 days.

Cybersecurity Awareness

The ATO is raising awareness of cyber threats targeting Australian businesses and emphasizing the importance of adopting a cyber-safe culture.

To help small businesses stay safe online, the ATO now offers free online cybersecurity courses.

To make cybersecurity a daily habit, the ATO recommends:

Businesses keep devices updated, use strong passphrases, and enable multi-factor authentication (MFA).

Employees set up a high-strength myGovID and use the ATO app for real-time account alerts.

ATO Rental Data Matching

The ATO is launching a rental data matching program to ensure taxpayers have correctly reported rental income.

• Affected clients will receive a letter if the data suggests they have overdue tax returns including rental income or have omitted rental income in lodged tax returns.

SMSF Compliance with Release Authorities

The ATO is reminding SMSF trustees to respond to release authorities within 10 business days by:

1. Releasing the requested amounts, and
2. Submitting a release authority statement back to the ATO.

Non-compliance can lead to significant penalties.

Tips for SMSF trustees to stay compliant:

• Regularly check the fund’s mail for release authorities.
• Use calendar tools or SMSF software to track deadlines.
• Keep the fund’s contact details and Electronic Service Address (ESA) updated with the ATO.

Transitional CBC Reporting Safe Harbour

The ATO has updated its website guidance on the transitional Country-by-Country (CBC) reporting safe harbour rules. The safe harbour is designed to provide relief to multinational enterprise (MNE) groups from undertaking detailed top-up tax calculations for a jurisdiction if they meet one of the three safe harbour tests:

1. De minimis test
2. Simplified effective tax rate (ETR) test
3. Routine profits test

The test must be satisfied using prescribed transitional CBC reporting safe harbour data. Broadly, the amounts must be sourced directly from qualified data, which includes:

• Qualified CBC reports
• Qualified financial statements

The data source depends on which test is applied.

• Annual election: An MNE group must make an annual election to apply the transitional CBC reporting safe harbour provisions.
• Transition period: The safe harbour only applies to fiscal years within the transition period — fiscal years beginning on or before 31 December 2026 and ending on or before 30 June 2028.

Rulings, Determinations & Guidance

Third Party Debt Test

The ATO has issued TR 2025/2, which outlines its view on the third-party debt test (TPDT), a component of the thin capitalisation rules, along with related compliance guidance in PCG 2025/2.

The thin capitalisation rules limit the amount of interest and other debt deductions that certain entities can claim. Key tests under these rules include:

1. Fixed Ratio Test (FRT)
   • Disallows debt deductions where net debt deductions exceed 30% of the entity’s tax EBITDA.
   • The FRT is the default test unless another test is elected or deemed to apply.
2. Group Ratio Test (GRT)
   • Limits net debt deductions using a ratio of net interest expense to EBITDA of the worldwide group (of which the entity is a member), based on the group’s audited financial statements.
3. Third-Party Debt Test (TPDT)
   • Limits an entity’s gross debt deductions to its third-party earnings limit.
   • The third-party earnings limit is the sum of debt deductions attributable to debt interests that meet the third-party debt conditions in the legislation. Debt deductions from other debt (e.g., related-party debt) do not count.

Conditions for TPDT Debt to Qualify
A debt is considered third-party debt if all the following are satisfied while on issue:

• The debt is not issued to an associate.
• The debt is not held by an associate at any time during the income year.
• The debt holder’s recourse for payment is restricted to Australian assets, ignoring minor or insignificant assets.
• The entity uses all or substantially all of the proceeds to fund its commercial activities in connection with Australia.
• The debt issuer is an Australian entity.

Supporting Guidance:

Restructures are rated from low to high risk, guiding the ATO’s allocation of compliance resources.

TR 2025/2 includes examples illustrating when a debt qualifies or fails the TPDT conditions.

PCG 2025/2 addresses the ATO’s compliance approach to restructures in response to the new thin capitalisation rules.

Provides a risk assessment framework for taxpayers to self-assess compliance risks under anti-avoidance provisions.

ATO’s Compliance Approach to Payday Super

The ATO has issued PCG 2025/D5, which outlines:

• When the ATO is likely to apply compliance resources in the first year of Payday Super (FY 2027).
• The risk framework that will be adopted for employers.

Employer Risk Zones:

1. Low Risk
   • Attempted on-time payments and corrected errors promptly.
   • Results in nil final shortfalls for the qualified earnings day.
2. Medium Risk
   • Nil final shortfalls by 28 days after the end of the quarter, but not fully Payday Super compliant.
3. High Risk
   • Persistent shortfalls beyond 28 days after the end of the quarter.

Key Points:

• The ATO will prioritise compliance resources on high-risk employers.
• Medium-risk cases may be investigated, but with lower priority.
• Employers can shift between risk zones during the year. Compliance reviews are applied only to medium or high-risk qualified earnings days.
• The draft document suggests the ATO may be lenient toward employers who make a genuine effort to comply with the new rules, at least until 30 June 2027.

Private-use Trading Stock Values

The ATO has issued TD 2025/7, which updates the estimated values of goods taken from trading stock for private use during the 2025–26 income year.

• The determination provides a schedule of acceptable amounts for specific industries.
• Taxpayers can rely on these values as fair and reasonable estimates without maintaining detailed records, provided they correctly apply the determination.

Key Points:

• The schedule specifies values excluding GST for:
  • Adults or children over 16 years old
  • Children aged 4 to 16 years old
• If the provided values do not reflect a taxpayer’s particular circumstances, they may choose a different value for goods taken from stock, provided they maintain suitable records to substantiate the value.

Cases

Shares Held by a Trust Retain Their Pre-CGT Status

The Administrative Review Tribunal (ART) has held that the sale of some subdivided residential lots occurred in the course of an enterprise and was therefore subject to GST.

Case Summary:

• The taxpayer and his late brother entered a commercial development agreement with a professional developer to subdivide a parcel of land into smaller lots.
• The developer bore all costs and risks for:
  • Rezoning and approvals
  • Constructing infrastructure (roads, utilities, stormwater, public spaces, childcare centre, sound barrier)
  • Marketing the lots
• The taxpayer:
  • Remained the registered proprietor of the land
  • Granted staged access to the developer
  • Signed necessary documents, including rezoning applications and over 700 sale contracts
  • Agreed not to encumber or sell the land inconsistently with the project
  • Was entitled to 25% of the sale proceeds per lot (later renegotiated to 20%)

Taxpayer’s Argument:

• Claimed their role was passive and administrative
• Did not provide funding or take on development risk
• Did not exercise business judgment beyond signing documents
• Contended that the sales were a realisation of an inherited capital asset, not part of a business or profit-making scheme

ART’s Decision:

• The ART affirmed the Commissioner’s decision, finding the taxpayer carried on an enterprise for GST purposes.
• Despite the developer’s dominant role, the taxpayer:
  • Entered a sophisticated commercial agreement
  • Facilitated rezoning and development over many years
  • Executed hundreds of contracts
  • Monitored sales via accountants
  • Renegotiated profit-sharing terms
• The activities demonstrated repetition, system, scale, and commercial character.
• The taxpayer effectively ventured their land into a large-scale, profit-oriented project, with ongoing obligations, and financial returns tied to market performance.

Outcome:

• The sale of the residential lots were taxable supplies and subject to GST.

Key Takeaway:

• The tax treatment of property transactions is highly fact-dependent.
• Taxpayers should approach similar situations with care, especially when large sums are involved.

YouTuber Denied GST credits

The Administrative Review Tribunal (ART) has denied a YouTuber’s claim for GST credits, highlighting the importance of maintaining clear, reliable, and corroborative evidence linking expenses to a business enterprise. This case underscores the scrutiny around digital, home-based content creation businesses.

Case Summary:

• The taxpayer was a registered sole trader running a YouTube video production business with three monetised channels.
• All scripting, editing, and voice-over work was performed by overseas contractors.
• The taxpayer claimed GST credits on various purchases, including:
  • Office furniture and appliances (TV, couch, fridge)
  • Construction of a granny flat on his parents’ property intended as a permanent office
  • A 2022 Ford Ranger (planned as a prop for a fourth 4WD channel)
  • Fuel, insurance, and tools for a BMW F30 used for business travel

ATO’s Position:

• The ATO disallowed nearly all GST credits, concluding that most acquisitions were not made for a creditable purpose, with some being private or domestic.

ART Decision:

• The ART agreed with the ATO, ruling that the taxpayer failed to prove the assessments were excessive.
• Key evidential weaknesses included:
  • Inconsistent timelines, e.g., office use of the granny flat versus construction dates
  • Lack of corroborating documents (sketches, emails, or third-party confirmation)
  • Unreliable witness recall
  • Contradictions between logbooks, insurance policies, and claimed business purposes

Key Takeaway:

• Mere receipts are not enough to prove a creditable purpose.
• Taxpayers must demonstrate that acquisitions were made in carrying on the enterprise to claim GST credits.
  

Legislation

Payday Super reforms

Case Details:

• The taxpayer retired due to TPD caused by emotional and financial abuse and received a TPD pension as their only income.
• The ATO ruled that the expenses were not deductible, and the ART upheld this decision.
• They sought a ruling on whether approximately $98,000 in medical expenses were deductible, arguing they were incurred to maintain eligibility for the TPD pension.

ART Findings:

• The expenses were not deductible under section 8-1(1)(a) of the ITAA 1997 because they were not productive of assessable income.
• They also fell within the exclusion in section 8-1(2)(b) as the expenses were essentially private in nature.
• This confirms that medical expenses, even if related to circumstances affecting income, are not deductible when they are personal in character and lack a sufficient connection to deriving assessable income.

Legislation

Proposed Extension of Instant Asset Write-Off and Other Tax Measures

The Government is progressing with the introduction of a Payday Super system. The following bills have been introduced into Parliament:

1. Superannuation Guarantee Charge Amendment Bill 2025
   • Imposes the SG charge on SG shortfalls for a qualifying earnings day (QE day) rather than for a quarter.
2. Treasury Laws Amendment (Payday Superannuation) Bill 2025
   • Contains new provisions for the calculation and administration of SG shortfalls and the SG charge.

These amendments aim to incentivise employers to make superannuation contributions at the same time employees are paid their qualifying earnings (e.g., salary or wages).

Key Points of the New Framework:

• Employer Liability:
  • An employer is liable for the superannuation guarantee charge (SGC) unless contributions are received by the employee’s fund within 7 business days of payment of qualifying earnings.
• Qualifying Earnings (QE):
  • Includes ordinary time earnings, salary sacrifice super contributions, and other amounts currently included in an employee’s salary or wages for SG purposes.

Components of the Updated SGC:

• Individual Final SG Shortfall: Contributions that remain unpaid when the SGC is assessed. Late contributions paid before assessment reduce the shortfall.
• Notional Earnings: An interest component to compensate employees for lost super fund earnings when contributions are late.
• Administrative Uplift: Additional charge reflecting enforcement costs and encouraging voluntary disclosure.
• Choice Loading: Applies if an employer does not comply with choice of fund rules.

Additional Charges:

• General Interest Charge (GIC): Accrues on the entire SGC amount, not just the shortfall.
• Late Payment Penalty:
  • If SGC remains unpaid 28 days after assessment, the ATO issues a notice to pay.
  • Failure to pay within a further 28 days results in a late payment penalty.

Tax Treatment:

• SGC amounts are deductible.
• Penalties for late SGC are not deductible.

Reporting Requirements:

• Employers must report QE amounts and superannuation liability for each employee via Single Touch Payroll (STP).

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