October 2025 Essential Tax Summary

The ATO has announced its 2025–26 areas of focus for privately owned and wealthy groups. The ATO continues to focus on trusts and has raised a specific concern when it comes to applying the 45-day holding rule for franking credits in newly incorporated bucket companies.

An Administrative Review Tribunal decision also serves as a warning on the strict deadline that needs to be considered when it comes to claiming GST credits.

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

From the Government

Consultation on Regulations for the Critical Minerals Production Tax Incentive

The Treasury has released draft materials to help clarify how the Critical Minerals Production Tax Incentive (CMPTI) will work in practice.

The CMPTI, introduced under the Future Made in Australia (Production Tax Credits and Other Measures) Act 2025, is designed to support companies that process critical minerals in Australia. It offers a refundable tax offset for businesses carrying out eligible processing activities related to certain minerals.

While the law (Division 419 of the Income Tax Assessment Act 1997) provides a general definition of eligible activities, the Government can also make regulations to include additional processing activities.

The draft regulations propose extending eligibility to activities involving:

• High purity alumina
• Graphite
• Critical minerals containing precursor cathode-active material

The incentive will apply to eligible expenditure incurred between 1 July 2027 and 1 July 2040.

Public consultation on the draft regulations is open until 10 October 2025.

Supporting Alcohol Manufacturers

The Government has released draft laws to give more support to Australian alcohol producers, including brewers, distillers, and winemakers.

Under the proposed changes:

• The Wine Equalisation Tax (WET) rebate — which helps wine producers manage costs — would increase from $350,000 to $400,000 per year.
• The excise tax remission for eligible brewers and distillers would also rise from $350,000 to $400,000 each year.

These updates are designed to give local alcohol manufacturers a boost in financial relief, helping them reinvest and grow their businesses.

From the Regulators

2025-26 ATO Areas of Focus For Privately Owned and Wealthy Groups

The ATO has published guidance on its key focus areas for privately owned and wealthy groups for the 2025–26 financial year. Each year, the ATO provides a summary of topics it is closely monitoring. This information serves as a useful reminder for taxpayers to consider important issues when:

• Completing year-end compliance,
• Managing the tax treatment of one-off events, and
• Exploring potential tax planning opportunities.

While many items on the ATO’s list may be familiar, there are a few specific areas worth noting:

1. Family Trust Distribution Tax (FTDT)

The ATO continues to scrutinize potential FTDT issues. When a trust makes a family trust election, it gains access to various concessions. However, FTDT may apply if the trust distributes income outside the family group of the relevant individual.

• FTDT is 47% of the amount distributed, with interest charged on any unpaid amounts.
• Importantly, there is no time limit for the ATO to recover FTDT liabilities.

2. Restructures to Access Concessions

The ATO is concerned about restructures designed to access tax concessions that would otherwise not be available.

• This could include changes to a group’s structure to gain access to small business CGT concessions.
• In past cases, the ATO has applied the general anti-avoidance rules (Part IVA) to such restructures.

3. Franked Dividends and Newly Incorporated Corporate Beneficiaries

The ATO is also focusing on situations where a trust receives a franked dividend and distributes it to a corporate beneficiary that was incorporated after the dividend was paid.

• The ATO’s view is that the 45-day holding rule cannot be passed to a corporate beneficiary that did not exist when the dividend was originally paid, even if:
  • The trust held the shares for more than 45 days, and
  • A family trust election is in place.

Other Items of Interest

A summary of additional items listed by the ATO is available below. to ensure GST is being applied (or not applied) correctly.

Registration, lodgment and payment	The ATO expects all taxpayers, including privately owned and wealthy groups, to meet key tax obligations, including: • Registering for obligations, such as PAYG withholding and GST, where required • Choosing the correct accounting basis and reporting cycles • Lodging tax returns, activity statements, FBT returns, and Taxable Payments Annual Reports (TPAR) on time • Paying tax debts when due and engaging early with the ATO where more tailored support is needed
Reporting	• Incomplete reporting of tax returns, activity statements, and schedules • Omitted or underreported income, sales, or fringe benefits • Companies incorrectly claiming base rate entity status • Incorrect or overclaimed deductions, GST credits, fuel tax credits, and Research & Development (R&D) tax incentives where not entitled, for example: – Trusts overclaiming deductions to reduce net income – Businesses claiming ineligible R&D expenditure or activities
CGT	• Inappropriately applying the CGT discount • Claiming small business CGT concessions without meeting eligibility requirements • Misusing the small business restructure rollover • Restructuring to access concessions they would not otherwise be eligible for • Trusts inappropriately applying Division 855 of the ITAA 1997 to disregard capital gains for foreign beneficiaries. For example, some trusts have misapplied the CGT exemptions for foreign residents under sections 855-10 or 855-40 of the ITAA 1997 to avoid paying tax on capital gains
Trusts	• Higher-risk trust arrangements or distributions • Tax planning outside the ordinary course of genuine business or family dealings, including arrangements that reflect a misinterpretation or disregard of the law • Distributions to lower-taxed beneficiaries where the economic benefits flow elsewhere • Circular trust distributions where tax has not been paid on some or all of a distribution, to ensure compliance with trustee-beneficiary non-disclosure tax (TBNT) • Family trusts distributing outside the family group, triggering Family Trust Distribution Tax (FTDT) • Franked dividend distributions where beneficiaries claim the franking credit tax offset to reduce their tax liability without meeting the 45-day holding rule—in particular, newly incorporated corporate beneficiaries that may not meet the 45-day holding requirement

Using business money for other purposes

Div 7A	• Inadequate record keeping • Unreported shareholder loans • Non-compliant loan agreements • Failing to make minimum yearly repayments, including not applying the correct benchmark interest rate • Arrangements where minimum yearly repayments are made either from another loan or a subsequent reborrowing from the same company • Arrangements to circumvent Division 7A through guaranteeing by private companies of third-party loans • Requests for the exercise of the Commissioner’s discretion under section 109RB to: – Disregard the operation of Division 7A, or – Allow a deemed dividend to be franked, particularly where the breach was not the result of an honest mistake or inadvertent omission
Lifestyle assets	• Lifestyle assets being used for private purposes, where a private pursuit or “hobby-like activity” is mischaracterized as a business activity • Accumulating or improving assets without sufficient income reported in tax returns to demonstrate the financial means to fund them • Purchasing assets for use through another business in the group or related entities, which can lead to: 1. Failing to recognise the application of Division 7A when assets have been provided to a shareholder or their associates 2. Claiming deductions or offsets the taxpayer may not be entitled to 3. Claiming GST credits on motor vehicles and other assets without correctly apportioning for private use 4. Failing to recognise fringe benefits provided to employees and their associates
Succession Planning	• Movement of assets around the group • Restructuring of family member interests • Accessing concessions, exemptions, and rollovers • Entities failing to review the pre-CGT status of assets • Settlement of loans to shareholders or associates (Division 7A loans) • Use of trusts to transfer wealth

Specific industries or activities in focus

Tax advisers and professional firms	• Professional firms that fail to lodge partnership returns or statements of distributions • Compliance with PCG 2021/4 regarding the allocation of professional firm profits • Intermediaries (including R&D and GST advisers) who either: – Promote tax avoidance or exploitation schemes, or – Encourage clients to take high-risk tax positions contrary to ATO guidance, including R&D, GST, or fuel tax credit refund arrangements, particularly where adviser fees are charged on a contingency basis
Property and construction	• Disposals of property, particularly in relation to property renovation (“flipping”), residential suburban block development, and large-scale subdivision • Non-arm’s length dealings between entities within the same private group to reduce taxable income, or incorrect reporting of real property sales or omitted income within the group. Private groups may be considered higher risk where they have ongoing real property sales and sustained losses or minimal taxable income • Failure to lodge or report sales or income, as identified by the Taxable Payments Reporting System (TPRS), particularly where taxpayers have received income as subcontractors and are required to meet their reporting and compliance obligations to the ATO
Private Equity	• Tax risks associated with transactions and activities of Australian-based private equity firms and their associated private equity participants • All stages of the private equity investment lifecycle: pre-acquisition, acquisition, holding, pre-exit, and exit
Retail	• Transactions between entities within the same private group • Omission of income from sales • Misclassification of voucher sales and warranty payments • Claiming input tax credits for non-creditable acquisitions
Cross-border Transactions	• Intangible migration arrangements • Incorrect self-assessment of Significant Global Entity (SGE) status • Arrangements involving false or exaggerated invoicing, mismatched accounting methods, or the appearance of high-value transactions where no genuine economic activity has occurred

October Quarterly TBAR Lodgments for SMSFs

The ATO is reminding taxpayers that all self-managed super funds (SMSFs) must report transfer balance account (TBA) events that affect members quarterly by lodging a Transfer Balance Account Report (TBAR).

• TBARs for the October quarter are due by 28 October 2025
• TBA events must be reported quarterly, regardless of the member’s total superannuation balance
• If no TBA event occurs during the quarter, no lodgment is required

Personal Trips by Employees and FBT

The ATO is focusing on the application of Fringe Benefits Tax (FBT) to the personal or private use of work vehicles, an area it notes is frequently overlooked.

When employers provide work vehicles to employees, it’s important to check how the vehicles are being used and whether any FBT exemptions apply.

Key Points About FBT and Work Vehicles:

• FBT generally arises when a work vehicle is made available for private use, even if it is not actually used for private purposes.
• Private use includes any travel not directly related to the employee’s job, for example:
  • Taking the vehicle on beach or camping trips
  • School drop-offs and pick-ups, even if on the way to or from work
  • Running personal errands (e.g., grocery shopping)
  • Transporting friends or family for non-work purposes
  • Parking the vehicle at the employee’s home, even if only for security reasons
• Exemptions may apply depending on the type of vehicle and the nature of private use (e.g., some dual-cab utes are exempt if private use is limited).

Common Issues Identified by the ATO:

• Treating private use as business use
• Misapplying exemptions (e.g., dual-cab utes only exempt for limited private use)
• Incorrectly classifying vehicles
• Poor record keeping that doesn’t support claims or FBT calculations
• Late reporting or payment of FBT

The ATO Encourages Employers to:

1. Check for exemptions – some vehicles may be exempt from FBT if private use is limited.
2. Keep accurate records – depending on your calculation method, this may include logbooks and odometer readings. Even if the benefit is exempt, records are needed to support the claim.
3. Work out the taxable value and calculate FBT liability – the ATO FBT car calculator can assist.
4. Lodge the FBT return and pay on time.
5. Report the reportable fringe benefits amount on each employee’s income statement or payment summary.

Reporting Account Balances and Other Annual Amounts

The ATO is reminding superannuation funds to report the 30 June 2025 account balances and other annual amounts by 31 October 2025 using the Member Account Transaction Service (MATS).

This reporting includes:

• Superannuation accumulation account balances
• Notional taxed contributions
• Defined benefit contributions

Key Points Before Lodging:

• Ensure each active member’s account has been reported through the Member Account Attribute Service
• Verify that each member’s identity details are correct
• For defined benefit members who close their account before 30 June 2025 due to a successor fund transfer:
  • The transferring fund must report pro-rata notional taxed contributions and defined benefit contributions
  • The fund must report a zero account balance at 30 June 2025

Correcting Errors:

• Superannuation funds must correct any errors or omissions within 30 days of becoming aware of them
• Corrections can be made by:
  1. Cancelling the original transaction and submitting a new MATS form with the correct information, or
  2. Overwriting the reported amounts and lodging a MATS form with the corrected figures using the same balance date

Important: When making amendments, accumulation account balances, notional taxed contributions, and defined benefit contributions default to zero. To avoid adverse impacts on member calculations, funds must re-enter the amounts originally reported along with the corrected balance.

GST and Voucher Sales

The ATO has updated its guidance on applying GST to vouchers, distinguishing between face value vouchers and non-face value vouchers.

Face Value Vouchers

• A face value voucher can be redeemed for a reasonable choice of goods and services.
• GST is accounted for when the voucher is redeemed, not when it is sold, because the sale of a face value voucher at or below its face value is not a taxable supply.
• If the voucher expires or is not fully redeemed, an increasing adjustment is generally required for 1/11th of the unredeemed balance.
• When you buy a face value voucher for business purposes, you claim GST credits when the voucher is redeemed, not when purchased.

Non-Face Value Vouchers

• A non-face value voucher can only be redeemed for specific goods or services.
• GST applies at the time the voucher is sold, but only if it is redeemable for taxable supplies.
• When purchasing a non-face value voucher, you claim GST credits in your BAS for the reporting period when the voucher is bought.

Rulings, Determinations & Guidance

Effective Life of Depreciating Assets

The ATO has finalised the Income Tax Assessment (Effective Life of Depreciating Assets) Determination 2025, which sets out the effective life of various depreciating assets under Division 40 of the ITAA 1997.

This new determination replaces the 2015 instrument but retains the same substantive effect.

Simplified Accounting Methods for Supermarkets and Convenience Stores

The ATO has issued Legislative Instrument LI 2025/16, A New Tax System (Goods and Services Tax) (Simplified Accounting Methods – Supermarket and Convenience Stores) Determination 2025, which provides simplified accounting methods (SAM) for GST purposes.

Key points:

• The new instrument has the same substantive effect as the previous determination and commenced on 9 September 2025.
• The instrument allows eligible food retailers, such as smaller supermarkets and convenience stores, to adopt SAM when calculating their GST net amount.
• SAMs reduce compliance costs for small enterprises by removing the need to separately identify and record the GST component of each individual purchase when determining GST credits.
• LI 2025/16 repeals and replaces the previous 2015 determination, which was due to sunset on 1 October 2025.

GST Intermediary Arrangements for the Multimedia Industry

The ATO has issued Legislative Instrument LI 2025/17, A New Tax System (Goods and Services Tax) (Application of Intermediary Arrangements to the Multimedia Industry) Determination 2025.

Key points:

• The instrument provides that supplies and acquisitions of multimedia products are treated as falling within the arrangements in section 153-50 of the GST Act.
• This means that intermediaries and principals involved in such transactions are considered to have agreed to adopt these arrangements.
• LI 2025/17 repeals and replaces the previous 2015 determination, which was due to sunset on 1 October 2025.
• The new instrument has the same substantive effect as the previous determination and commenced on 10 September 2025.

Valuation Methods for ESS Start-Up Concession

The ATO has finalised Legislative Instrument LI 2025/19, which sets out the valuation methods for companies offering Employee Share Scheme (ESS) interests under the start-up concession in section 83A-33 of the ITAA 1997.

Key Points:

• The instrument provides two approved valuation methods:
  1. Method One – Available to all eligible companies. Requires a valuation by a CFO or qualified person, endorsed by directors, taking into account tangible and intangible assets, comparables, premiums, discounts, and cash flow forecasts.
  2. Method Two – A simplified approach available to smaller companies meeting certain criteria, such as:
     • Less than $10 million capital raised in the past 12 months
     • Small business entity or incorporated for less than 7 years
     • Preparing statutory financial reports
• Use of these methods is optional. Companies may apply alternative valuation approaches, but only valuations at least equal to those under the approved methods will receive Commissioner approval.
• The instrument repeals and replaces the Income Tax Assessment (Methods for Valuing Unlisted Shares) Approval 2015, which was due to sunset on 1 October 2025.

Exempt Income of International Organisations and Connected Persons

The ATO has finalised Ruling TR 2025/1, which explains the income tax exemptions that may apply to certain international organisations and persons connected with them.

Key Points:

• Certain income of international organisations and connected persons is exempt under section 6-20 of the ITAA 1997 due to the International Organisations (Privileges and Immunities) Act 1963 (IOPI Act).
• The IOPI Act provides exemptions for:
  • Taxation of the organisation, its income, property, assets, and transactions
  • Liability to collect taxes
  • Taxation of obligations and securities issued or guaranteed by the organisation, including interest and dividends

Who is Considered “Connected”?

A person may be connected to an international organisation in several ways, including:

• High office holders or other office holders
• Attendees at international conferences
• Committee members
• Participants in the work of the organisation
• Persons performing missions on behalf of the organisation
• Others as specified in the regulations

Conditions for Income Exemption

Income from an international organisation is exempt from income tax only if all three conditions are met:

1. The organisation is covered by the IOPI Act
2. The person is currently connected to the organisation in a prescribed way (see Table 1 in the ruling)
3. The regulations provide an exemption for that category of person, and any specified conditions are satisfied

Additional Details in the Ruling

• Expanded criteria for determining office holders in an international organisation, including positive and negative factors
• Three detailed examples showing when income is exempt, assessable, or partially exempt, including for services rendered outside Australia
• Guidance on acceptable documentary evidence to demonstrate a person’s connection to the organisation

Background

This ruling updates the ATO’s previous views expressed in TR 92/14 and TD 92/153, which were withdrawn from 27 March 2019.

Superannuation Contributions

The ATO has issued an Addendum to Ruling TR 2010/1, which outlines the Commissioner’s views on the ordinary meaning of the word “contribution” in relation to:

• Superannuation funds
• Approved deposit funds
• Retirement savings accounts

This applies under the ITAA 1997, the Superannuation Industry (Supervision) Act 1993 (SISA), and the Superannuation Industry (Supervision) Regulations 1994 (SISR).

Key Updates in the Addendum:

• Clarifies the interaction between non-arm’s length income provisions and the rules governing superannuation contributions
• Reflects the removal of the maximum earnings test for the purpose of deducting personal contributions, effective from 1 July 2017

Capital Raised for the Purpose of Funding Franked Distributions

The ATO has issued a Practical Compliance Guideline (PCG) outlining when it is likely to apply compliance resources under section 207-159 of the ITAA 1997, and the framework used to assess the risk that this provision may deny franking credits attached to a distribution.

Key Points:

• Section 207-159 is designed to discourage arrangements where capital is raised to fund franked distributions in a way that does not significantly change the financial position of the entity.
• The PCG identifies key factors used to determine the risk level of such arrangements, including:
  • Whether the arrangement is consistent with established practice
  • Whether the arrangement involves the issue of equity interests
• The ATO provides examples of arrangements classified into risk zones:
  • Green zone – low-risk arrangements
  • Red zone – high-risk arrangements

Division 7A and Arrangements Involving Guarantees

The ATO has finalised TD 2025/6, which addresses a specific issue under section 109U of the ITAA 1936.

Key Points:

• Under section 109U, a private company may be treated as making a payment to a shareholder or their associate (the target entity) for Division 7A purposes if all the following conditions are met:
  1. The private company guarantees a loan made by another entity (the first interposed entity)
  2. A reasonable person would conclude the guarantee was provided solely or mainly as part of an arrangement involving a payment or loan to the target entity
  3. Another private company (which may be the first interposed entity or a different interposed entity) makes a loan or payment to the target entity
  4. The amount loaned or paid by the other private company exceeds its distributable surplus
• The TD confirms that these rules can be triggered even if the first interposed entity is not a private company.
  • For example, the rules could apply if a private company guarantees a loan made by a public company bank.
• Important: The entity making the ultimate payment or loan to the target entity must be a private company for these rules to apply.

Rulings, Determinations & Guidance

Four-Year Time Limit for Claiming GST Credits

The Administrative Review Tribunal (ART) has confirmed that taxpayers cannot claim GST credits in GST returns lodged more than four years after their due date.

Key Points:

• Under section 93-5 of the GST Act, a taxpayer loses entitlement to a GST credit if it is not claimed within four years of the original lodgment due date.
• In this case, a swimming pool construction business fell behind on its BAS lodgments for 2012 and 2013 and did not lodge the returns until 2018. The Commissioner disallowed the GST credit claims following an audit.

Taxpayer Arguments:

• The taxpayer argued that the four-year limit did not apply to objections or reviews, relying on comments in Coles Supermarkets v FCT.
• The taxpayer also claimed the ATO had effectively granted an extension through correspondence.

ART Findings:

• The ART rejected these arguments, affirming the Commissioner’s decision.
• Accepting the taxpayer’s position would allow GST credit claims many years or even decades later, contrary to the clear language of section 93-5.
• The ART found no evidence that the Commissioner had extended the lodgment time; correspondence only recorded agreed lodgment dates.
• Once the four-year period expires, a taxpayer’s entitlement to the GST credit is extinguished.

This decision reflects the ATO’s view in MT 2024/1 that the four-year time limit must be applied strictly.

Medical Expenses Not Deductible

The Administrative Review Tribunal (ART) has upheld a private ruling that medical expenses connected with a taxpayer’s total and permanent disability (TPD) are not deductible.

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

A Bill has been introduced to Parliament proposing several tax and regulatory changes.

Key Measures:

1. Instant Asset Write-Off Extension (Schedule 7)
   • The $20,000 instant asset write-off for small businesses (annual turnover under $10 million) will be extended by 12 months to 30 June 2026.
   • Eligible assets must be first used or installed ready for use by that date.
2. Enhanced Beneficial Ownership Disclosure (Schedule 1)
   • Amendments to the Corporations Act 2001 will strengthen substantial holding and tracing notice regimes for listed entities.
   • Key changes include:
     • Disclosure of equity derivative interests (including deemed economic interests and short positions)
     • Expanded ASIC powers
     • Coverage of foreign listed entities
     • Increased penalties
3. ACNC Secrecy Provisions (Schedule 2)
   • The ACNC Commissioner will be able to publicly disclose protected information relating to new and ongoing investigations, subject to a public harm test.
4. Financial Regulator Assessment Authority Reviews (Schedule 3)
   • The frequency of reviews of ASIC and APRA will be reduced from every 2 years to every 5 years, as announced in the 2023–24 Federal Budget.

Proposed Amendments to the ART Act

A Bill has been introduced to Parliament proposing amendments to the Administrative Review Tribunal Act 2024 (ART Act).

The Administrative Review Tribunal and Other Legislation Amendment Bill 2025 aims to expand the circumstances in which the ART may make a decision without holding a hearing.

• The Bill has been referred to the Senate Legal and Constitutional Affairs Legislation Committee for inquiry, with a report due by 24 November 2025.

Key Proposed Change:

• Amendment to Section 106 of the ART Act: The Tribunal may make a decision without holding a hearing if all of the following are satisfied:
  1. It appears that the issues for determination can be adequately decided in the absence of the parties.
  2. It appears reasonable in the circumstances to make a decision without holding the hearing.
  3. The Tribunal has given all parties (except non-participating parties) a reasonable opportunity to make submissions regarding the Tribunal making its decision without a hearing, and has considered any submissions received.

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