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Exposure draft legislation for the 30% minimum tax on trusts and other Budget reforms for innovation and investment.
This month, Treasury released exposure draft legislation for a range of measures announced as part of the 2026–27 Federal Budget.
This includes draft legislation outlining the proposed 30% minimum tax for discretionary trusts, which is intended to apply from 1 July 2028. The draft legislation includes roll-over relief for eligible clients restructuring out of a discretionary trust, available for three years from 1 July 2027.
The draft legislation also proposes allowing discretionary trusts to elect to nominate certain eligible beneficiaries to receive a fixed percentage of income and capital distributions each year, providing an alternative way to opt out of the minimum tax regime.
Treasury has also released exposure draft legislation covering proposed FBT changes for electric vehicles, changes to the research and development tax incentive, a new innovative business CGT concession, and amendments to the tax incentives for venture capital schemes.
As change occurs, we’ll keep you posted through Fortis Accounting Partners’ social media accounts.
From the Government
Draft Legislation For Minimum Tax on Discretionary Trusts
Treasury has released exposure draft legislation in connection with the proposed 30% minimum tax for discretionary trusts, which is intended to apply from 1 July 2028.
The draft legislation provides details on:
- How the minimum tax will work
- Excluded types of trusts and income
- A new definition of fixed trust
- How income tax-exempt entities will be treated
- Roll-over relief to help restructure out of a discretionary trust
- A new elective regime allowing trustees to nominate beneficiaries who will receive fixed percentages of income and capital distributions
- The treatment of excess franking credits
The exposure draft provides further details on a limited form of roll-over relief that would be available for three years from 1 July 2027. The relief can be used to transfer assets from a discretionary trust to a different structure that does not have any material discretionary elements.
The draft legislation also proposes an elective regime under which trustees of discretionary trusts in existence on 1 July 2028 will be able to make an ‘excluded election trust election’ (EET election) to distribute income and capital in fixed percentages to certain nominated beneficiaries.
If a valid EET election is made and distributions are made in accordance with that election, the 30% minimum tax will not apply to the trust. However, if the trustee departs from the election when making distributions, the EET election will be revoked. The trustee will then be subject to tax on the full net income of the trust at penalty rates for that year, and the 30% minimum tax will apply in subsequent years.
The draft legislation indicates that where a trust subject to the minimum tax has excess franking credits in a particular year, those credits will be refundable to the trustee.
It is important to remember that the legislation remains in draft form. Treasury has been seeking feedback from stakeholders as part of a consultation process, so further amendments may be made before the legislation is introduced to Parliament.
In addition, Treasury’s media release announced that the Government plans to legislate the 2018 Budget measure that brings existing unpaid present entitlements (UPEs) within the scope of Division 7A. This would effectively reverse the High Court’s decision in Bendel. However, this proposal is yet to be confirmed, and further details are awaited.
FBT Treatment of Electric Vehicles
Treasury has released exposure draft legislation proposing a transition from the existing full fringe benefits tax (FBT) exemption for certain electric vehicles (EVs) to a 25% FBT discount.
The proposed 25% FBT discount would apply to:
- Eligible EVs valued above $75,000 but not exceeding the fuel-efficient luxury car tax (LCT) threshold, from 1 April 2027.
- All eligible EVs valued up to the LCT threshold, from 1 April 2029.
Eligible EVs valued at $75,000 or less will continue to qualify for a 100% FBT exemption where the commitment to provide the vehicle is made before 1 April 2029.
While it appears reasonably clear that existing lease arrangements can continue to qualify for the more generous FBT treatment, it remains unclear how the proposed changes will apply where the employer owns the vehicle.
Research and Development Tax Incentive
Treasury has released exposure draft legislation relating to proposed reforms to the research and development tax incentive (R&DTI), which are intended to apply from 1 July 2028.
The proposed reforms include:
- Increasing offsets for eligible core R&D activities while removing eligibility for supporting R&D activities.
- Reducing the intensity threshold for the non-refundable offset to 1.5%.
- Increasing the turnover threshold for the refundable offset to $50 million.
- Increasing the minimum expenditure threshold to $50,000.
- Increasing the maximum expenditure threshold to $200 million.
- Limiting refundability to firms up to 10 years old, with an extension to up to 15 years for eligible firms undertaking R&D activities related to therapeutic goods, such as biotechnology and medical technology.
Innovative Business CGT Concession
Treasury has released exposure draft legislation for the proposed innovative business CGT concession (IBCC), which would provide a 50% discount on capital gains from eligible early-stage investments in innovative start-ups.
The IBCC would apply to eligible shares issued by qualifying innovative businesses. The draft legislation proposes reducing the minimum holding period to three years and extending the eligibility period to 15 years for all qualifying businesses. It also removes the previously proposed lifetime cap.
Eligible individuals, partnerships and trusts would be able to choose between applying the 50% IBCC discount or using the cost-base indexation method, subject to the associated 30% minimum tax rules.
The proposed concession is intended to apply from 1 July 2027, alongside the broader changes to the capital gains tax (CGT) regime. Submissions on the exposure draft close on 28 September 2026.
Innovative Business CGT Concession
Treasury has released exposure draft legislation for the proposed innovative business CGT concession (IBCC), which would provide a 50% discount on capital gains from eligible early-stage investments in innovative start-ups.
The IBCC would apply to eligible shares issued by qualifying innovative businesses. The draft legislation proposes reducing the minimum holding period to three years and extending the eligibility period to 15 years for all qualifying businesses. It also removes the previously proposed lifetime cap.
Eligible individuals, partnerships and trusts would be able to choose between applying the 50% IBCC discount or using the cost-base indexation method, subject to the associated 30% minimum tax rules.
The proposed concession is intended to apply from 1 July 2027, alongside the broader changes to the capital gains tax (CGT) regime. Submissions on the exposure draft close on 28 September 2026.
Protecting Consumers: Superannuation and Self-Managed Super Funds (SMSFs)
The Government has announced a package of proposed reforms to strengthen consumer protections across the superannuation and financial systems. Several proposals relate specifically to self-managed super funds (SMSFs) and may be particularly relevant to clients considering establishing a new SMSF.
The proposed SMSF measures include:
- Preventing suspicious rollovers: Giving the ATO the ability to prevent rollovers into new SMSFs where there are concerns about fraud, financial abuse or other misconduct.
- Mandatory trustee education: Requiring trustees to complete education before establishing a new SMSF.
- Unique bank accounts: Requiring SMSFs to maintain a uniquely identifiable bank account. Most SMSFs should already meet this requirement.
- Improving investment strategies: Introducing measures to improve the quality of SMSF investment strategies, potentially including a requirement for a written investment strategy when establishing a new SMSF.
- Greater visibility of adviser fees: Giving the ATO additional visibility of financial adviser fees charged to new and existing SMSFs.
- Increasing the SMSF supervisory levy: Increasing the annual levy from $259 to $295.
Details on how these proposals would operate in practice remain limited. The Government has indicated that it will continue consulting with industry stakeholders before introducing legislation.
At this stage, no specific timeframes have been announced for consultation or implementation. SMSF trustees and those considering establishing a fund should monitor further developments as more details become available.
From the Regulators
Superannuation for Sportspeople, Performers, Filmmakers and Related Activities
The ATO has updated its website guidance on superannuation guarantee (SG) obligations for payments made to sportspeople, performers, filmmakers and individuals involved in related activities.
SG obligations can apply when someone is engaged as an employee under the ordinary meaning of the term. However, the SG rules also include an expanded definition of employee, which can cover individuals engaged wholly or principally for their labour, even if they are genuine independent contractors.
The rules can also apply to individuals who perform, present or participate in activities such as music, theatre, dance, entertainment, sport, displays and promotional events. They may also cover individuals who provide services in connection with these activities.
The ATO confirms that payments to social media influencers, guest speakers at events and livestreamers are generally covered. Payments to fitness, Pilates and yoga instructors may also trigger SG obligations when they physically demonstrate the relevant movements.
These obligations can apply regardless of whether the individual is a genuine independent contractor, holds an Australian business number (ABN), participates as a hobby or is engaged on a one-off basis. The main exception is where the performance is of a private or domestic nature.
The ATO’s updated guidance also confirms that the payer generally does not need to meet SG obligations when payments are made to a partnership, trust or company.
The guide further explains how SG obligations apply when payments are made to groups of performers engaged as individuals, how to determine the portion of a payment subject to SG, and how to manage arrangements involving intermediaries.
Permanent $20,000 Instant Asset Write-Off
From 1 July 2026, the $20,000 instant asset write-off (IAWO) threshold has been made permanent.
Businesses with an aggregated annual turnover of less than $10 million may be able to claim an immediate deduction for the business-use portion of eligible depreciating assets costing less than $20,000, provided the asset is first used or installed ready for use in the relevant income year. The $20,000 threshold applies per asset, meaning multiple eligible assets may qualify for an immediate deduction.
The IAWO may also apply to eligible improvements or upgrades to existing assets where the cost is less than $20,000 and the original asset qualified for the IAWO. In most cases, both new and second-hand assets may qualify, although exclusions and limitations apply.
Assets costing $20,000 or more that cannot be immediately deducted can generally continue to be added to the small business pool and depreciated at 15% in the first year and 30% in subsequent years.
From 1 July 2026, the low-value pool threshold has also increased from $1,000 to $20,000. This is relevant when determining whether the remaining balance of the pool can be written off.
Businesses that previously opted out of the simplified depreciation rules can also re-enter the regime until 30 June 2027 without being subject to the usual five-year lock-out period.
To claim the IAWO, the deduction should be included in the tax return for the income year in which the asset is first used or installed ready for use.
PAYG Withholding for Non-Residents
The ATO has updated its guidance on PAYG withholding annual reports, including the annual report required for interest, dividend and royalty payments made to non-residents.
This report is required when an entity makes payments of interest, unfranked dividends or royalties to foreign residents and tax is withheld from those payments. Interest and unfranked dividends do not need to be included if they are reported through an Annual Investment Income Report (AIIR).
The PAYG Withholding from Interest, Dividend and Royalty Payments Paid to Non-Residents – Annual Report (NAT 7187) is generally due by 31 October each year. It informs the ATO of the amounts paid and withheld and helps identify the foreign recipients of these payments.
The ATO has also clarified that separate annual reporting requirements apply to certain other payments made to foreign residents. These include payments relating to entertainment and sports activities, construction and related activities, and the arrangement of casino gaming junket activities. These payments are reported using NAT 12413.
Information Technology Services TPAR
The ATO has updated its guidance on Taxable Payments Annual Report (TPAR) obligations for businesses that provide information technology (IT) services.
Businesses in the IT industry may need to lodge a TPAR if they make payments to contractors for IT services and those payments are received in the course of carrying on a business.
The ATO considers a broad range of activities to be IT services, including the design, development, implementation, maintenance and support of computer systems and software. Businesses should consider the nature of the services actually provided when determining whether payments fall within the TPAR reporting requirements.
Not all payments to contractors need to be reported. For example, payments may be excluded where the contractor provides services that are not IT services or where another specified exclusion applies. Where a contract includes both IT and non-IT services, practitioners should consider whether the IT component is sufficiently connected to the services covered by the TPAR rules.
Tax practitioners should review contractor arrangements for clients operating in the IT sector to determine whether they have a TPAR obligation and ensure reportable contractor payments are appropriately identified and reported to the ATO.
There is also no reporting exemption for contractors located outside Australia.
FBT Changes to Salary-Sacrificed Work-Related Benefits
From 1 April 2027, changes will apply to the fringe benefits tax (FBT) treatment of certain salary-sacrificed work-related expenses.
In particular, the ‘otherwise deductible’ rule will no longer be available to reduce FBT on salary-sacrificed expense payment fringe benefits for work-related expenses covered by the standard deduction for work-related expenses, regardless of the amount involved.
This will affect arrangements involving expenses such as home office expenses, home phone and internet expenses, and self-education expenses.
The otherwise deductible rule will continue to apply to expense payment fringe benefits that are not covered by the standard deduction. It will also continue to apply to expenses covered by the standard deduction where the benefit is not provided through a salary sacrifice arrangement.
Changes will also be made to the work-related items FBT exemption. From 1 April 2027, certain items will no longer qualify for the exemption when provided through a salary sacrifice arrangement. These include:
- Portable electronic devices
- Computer software
- Protective clothing
- Briefcases
- Tools of trade
These items may continue to qualify for the exemption when provided outside a salary sacrifice arrangement, provided the relevant requirements are met.
At the same time, the exemption for work-related items will be expanded to allow employers to provide employees with multiple items that have the same or substantially identical functions within an FBT year. The items must be used mainly for work purposes and must not be provided through a salary sacrifice arrangement.
This removes the current limit of one exempt item per employee per FBT year and extends the exemption to all employers, rather than only small businesses.
Tax practitioners should review clients’ salary sacrifice arrangements and work-related benefits ahead of 1 April 2027, particularly where arrangements involve expenses covered by the standard deduction or work-related items that may no longer qualify for an FBT exemption.
New Foreign Resident CGT Measures from 1 October 2026
Changes to the foreign resident capital gains tax (CGT) regime have received Royal Assent and will apply from 1 October 2026.
The changes cover disposals of Australian real property and interests in real property, including interests held through shares, trust units and other membership interests.
Tax practitioners should consider whether foreign resident clients may be affected, particularly in relation to water entitlements, investments potentially affected by state or territory severance provisions, and investments in Australian companies and other entities.
The key changes from 1 October 2026 include:
- Notification requirements for large disposals: Foreign vendors providing a non-indirect Australian real property interest (non-IARPI) declaration to a purchaser for an asset disposal, including related transactions, valued at $50 million or more must notify the ATO using a prescribed form.
- Purchaser obligations: Purchasers must consider whether they reasonably believe a vendor’s declaration is false at any time between receiving the declaration and settlement.
- New Commonwealth definition of real property: A new definition will apply, covering:
- Land
- Rights and interests relating to land
- Assets fixed to land
- Leases or licences over those assets
The new definition of real property will not apply retrospectively to disposals that have already settled.
Other changes include:
- Principal asset test: The test will change from a point-in-time assessment to a 365-day testing period.
- Renewable energy assets: A temporary 50% CGT discount will apply to eligible non-individual foreign residents disposing of certain renewable energy assets.
The ATO is developing a new notification form for disposals of interests valued at $50 million or more. The form will be available for download and submitted to the ATO by email. Tax practitioners will be able to submit it on behalf of their clients.
Before 1 October 2026, the ATO intends to publish further guidance on changes affecting direct and indirect investments in Australian real property. This will include clarification on when clients must notify the ATO about disposals of shares and other membership interests exceeding $50 million.
Payments from Superannuation
The ATO has updated its website guidance on several superannuation tax rates and thresholds that apply from 1 July 2026.
The low rate cap amount has increased to $260,000 from 1 July 2026. The low rate cap limits the amount of the taxable component of a superannuation lump sum that can receive a lower or nil tax rate. It applies to individuals who have reached preservation age but are under 60.
The cap is a lifetime limit, reduced by amounts previously counted towards it. Following changes to the family law framework, the low rate cap no longer applies to family law arrangements from December 2024.
The untaxed plan cap amount continues to limit the concessional tax treatment of superannuation benefits containing an untaxed element. The cap applies separately to each superannuation plan from which a member receives lump sum benefits and is relevant when determining whether an excess untaxed roll-over amount arises. The amount is indexed in $5,000 increments based on average weekly ordinary time earnings (AWOTE), with the new indexed amount generally applying each February.
The ATO has also reiterated the rules for minimum annual payments from superannuation income streams. Minimum payment requirements for account-based pensions, allocated pensions and annuities, and market-linked pensions and annuities returned to normal from the 2013–14 income year following temporary reductions in earlier years. A further 50% reduction applied from the 2019–20 to the 2022–23 financial years, but this reduction has not been extended beyond 2022–23.
Superannuation and annuity providers calculate the required minimum annual payment as at 1 July each year, based on the member’s account balance. For pensions commencing part-way through a financial year, the minimum payment is calculated proportionally based on the account balance at commencement.
Practitioners should also consider the updated superannuation lump sum tax rates and Departing Australia superannuation payment (DASP) tax rates when advising clients on superannuation withdrawals and rollovers.
In limited circumstances, a DASP held as unclaimed superannuation money may be rolled over where a former temporary resident has subsequently returned to Australia as a permanent resident. However, the amount remains classified as a DASP and is taxed at the applicable DASP rates.
Myths About the Cents per Kilometre Method
The ATO has highlighted five common misconceptions relating to claims using the cents per kilometre method.
Myth 1: You can claim travel between home and work.
Home-to-work travel is generally not deductible, regardless of whether the cents per kilometre or logbook method is used. Limited exceptions may apply, such as where a taxpayer is required to transport bulky tools or equipment that are essential to their work and there is no secure storage available at the workplace.
Myth 2: You can claim 5,000 kilometres without keeping records.
A claim for 5,000 kilometres still requires supporting records. Taxpayers cannot automatically claim the maximum 5,000 kilometres without evidence. Records should support vehicle ownership, a personal lease or a private arrangement allowing the use of someone else’s car, as well as the work-related trips undertaken and how the kilometres were calculated.
Myth 3: The type of lease does not matter when claiming car expenses.
The type of lease is important. Car expenses may be claimed where the taxpayer has a personal lease. However, a taxpayer generally cannot claim car expenses for a vehicle provided under a novated lease through a salary sacrifice arrangement because they do not own the vehicle. The ATO receives data on novated leases as part of its data-matching activities.
Work-related parking and tolls may still be deductible where these costs are not reimbursed by the employer.
Myth 4: You can claim the car’s decline in value under both the cents per kilometre and logbook methods.
Depreciation cannot be claimed separately under the cents per kilometre method. The cents per kilometre rate incorporates depreciation and other vehicle costs, including registration, insurance, fuel, maintenance and repairs. Depreciation can instead be claimed separately where the logbook method is used.
Myth 5: You can use the cents per kilometre and logbook methods for different periods during the income year to maximise deductions.
Taxpayers cannot switch between the cents per kilometre and logbook methods during the income year to maximise their deduction. The same method must be used for the full income year.
Where a client is unsure which method to use, practitioners should recommend keeping comprehensive records throughout the year so that the most appropriate method can be considered.
Rulings, Determinations & Guidance
Software Royalties
The ATO has finalised its ruling TR 2026/2, which sets out the Commissioner’s views on when payments under software intermediation arrangements are considered a ‘royalty’ as defined in section 6(1) of the ITAA 1936 and are therefore subject to withholding tax.
The ruling focuses on cross-border payments for:
- The use of, or right to use, copyright or other similar property or rights.
- Payments that may otherwise fall within another element of the definition of a ‘royalty’.
Broadly, a payment is a royalty if it is consideration for:
- The grant of a right to use intellectual property (IP), regardless of whether the right is exercised.
- The use of any IP right.
- The supply of know-how.
- The supply of assistance as a means of enabling the application or enjoyment of anything listed above.
- The right to use, or use of, any IP right in software embedded in tangible goods.
- Total or partial forbearance in respect of the use or supply of any property or right covered by these categories.
The ruling also confirms that a payment is not a royalty if it is:
- Consideration solely for the grant of a right to distribute copies of a computer program made by the copyright holder, where the payment is not for the use of, or right to use, any IP rights.
- Consideration solely for the assignment of all rights relating to the copyright in software.
- A payment from a distributor that is consideration solely for acquiring a tangible good with embedded software, provided the distributor does not use, and is not granted the right to use, any IP right in the embedded software.
- A payment from a distributor that is consideration solely for acquiring physical media on which software is stored, provided the distributor does not use, and is not granted the right to use, any IP right in the software.
Where an amount is consideration for several things together, the amount may need to be apportioned to reflect the extent to which it constitutes a royalty.
The ATO has also issued draft PCG 2026/D4, which outlines the Commissioner’s compliance approach to identifying whether any part of a cross-border payment made to a non-resident is a royalty and subject to withholding tax.
The PCG sets out colour-coded risk zones—white, green, yellow, amber and red—and describes the features of arrangements that fall within each zone.
PAYG Withholding Variation for Foreign Resident Capital Gains Withholding Payments
The ATO has issued the Taxation Administration (PAYG Withholding Variation for Foreign Resident Capital Gains Withholding Payments) Legislative Instrument 2026 to consolidate five existing class variation legislative instruments relating to the foreign resident capital gains withholding (FRCGW) regime into a single instrument, effective from 17 September 2026.
The existing instruments have been repealed and replaced. Except for the variation relating to acquisitions from income tax-exempt entities, the new instrument has the same effect as the instruments it replaces.
Cases
CTP Insurance Receipts Assessable as Compensation for Lost Earnings
In Sebastian and Commissioner of Taxation [2026] ARTA 1981, the Tribunal considered whether insurance payments received under a compulsory third-party (CTP) insurance policy were intended to replace lost earnings and were therefore assessable on revenue account. This was contrasted with compensation for the loss of income-earning capacity, which would be capital in nature.
Mr Sebastian suffered injuries in a car accident on 1 March 2024 that left him unable to return to work. As a result, he received insurance payments totalling $29,870 from QBE under his CTP insurance policy in the following income year. Some amounts were also withheld for PAYG withholding.
Although he initially included the compensation payments as assessable income in his tax return, he subsequently lodged an objection arguing that the payments were capital in nature. The ATO disallowed the objection.
The Tribunal applied the well-established principle that a compensation payment generally assumes the character of what it replaces. Citing the Full Federal Court decision in Federal Commissioner of Taxation v Slaven [1984] FCA 17, the Tribunal also considered that the terms of the relevant statute or insurance policy are key to determining what the taxpayer is being compensated for.
The central issue was whether Mr Sebastian was being compensated for lost earnings, which would have the character of ordinary income, or for lost earning capacity, which would be capital in nature.
The difficulty for Mr Sebastian was that the payments were governed by the Motor Accident Injuries Act 2017 (NSW), under which payments made during the first 78 weeks after an accident are calculated by reference to pre-accident weekly earnings. As all payments to Mr Sebastian were made during the first 52 weeks after the accident, the Tribunal concluded that they compensated him for lost earnings and were assessable on revenue account.
Mr Sebastian also relied on materials from the State Insurance Regulatory Agency and a letter from the insurer to support his position. However, the Tribunal noted that neither constituted legal authority and that, in any case, they did not support his argument. He relied on statements in the materials concerning payments made after the first 78 weeks, which were not relevant to his insurance receipts.
Practitioners commonly encounter situations involving compensation payments where the tax implications depend on what the payments are intended to replace. While correspondence between the parties is often a useful starting point, this Tribunal decision is a reminder to also consider whether the compensation is paid under an insurance policy or statute. If so, it is particularly important to examine how the policy or statute describes and calculates the payment.
Intermingling of Group Funds Treated as Division 7A Loans
In Traynor and Commissioner of Taxation [2026] ARTA 2024, the Tribunal considered whether the transfer and intermingling of funds within a private group, primarily to assist with cash flow and minimise interest expenses, gave rise to Division 7A issues.
Mr Traynor was the director, shareholder and beneficiary of a group of entities, comprising Complete Fire Doors Australia Pty Ltd (CFDA Pty Ltd) as the main trading entity, as well as KTM Property Trust and Songain Property Trust.
The issue first came to light through CFDA Pty Ltd’s financial statements, which recorded a number of loans made by the private company to Mr Traynor and both KTM and Songain Property Trust across the 2016 to 2020 income years. This led to an ATO audit, with the ATO taking the position that the loans should be treated as deemed unfranked dividends because they had not been repaid or placed under complying loan agreements by the required deadline.
Mr Traynor sought to explain the amounts, but one of the challenges was that his explanation changed throughout the dispute. Initially, it was argued that the funds represented intercompany loans that fell outside the scope of Division 7A. Later, it was submitted that the amounts represented transfers to and from eleven loan facilities used by the entities to manage cash flow and minimise interest expenses. It was also argued that CFDA Pty Ltd operated some form of clearing account.
There were also evidentiary issues. While bank statements showed funds being received from CFDA Pty Ltd and then transferred out again, there was no explanation of the purpose of the transfers, the identity of the account holders or the recipients. The bank statements also indicated that at least some of the funds had been used to pay Mr Traynor’s personal expenses.
The Tribunal therefore agreed with the ATO, concluding on balance that the amounts were loans assessable as deemed unfranked dividends under Division 7A to Mr Traynor and both KTM and Songain Property Trust. In reaching this conclusion, the Tribunal was further persuaded by the following factors:
- CFDA Pty Ltd’s financial statements provided prima facie evidence that the amounts were loans to the various borrowers. The Tribunal particularly noted that no attempts had been made to amend those financial statements.
- The funds had been intermingled, creating inherent difficulties in tracing and demonstrating what had occurred without sufficient records or forensic accounting.
The Tribunal also declined to exercise its discretion under section 109RB to disregard a deemed dividend or allow it to be franked. It considered that there had been no honest mistake or inadvertent omission in this instance, but rather an absence of proper records where funds had been intermingled. The Tribunal also found no basis to reduce the 25% shortfall penalties imposed for a lack of reasonable care.
Many private groups operate through a common facility or transfer funds between entities as needed. While there may be genuine commercial reasons for these arrangements, it is important not to overlook Division 7A where a company is part of the structure. In such cases, appropriate records are essential to demonstrate what has occurred.
Furthermore, where a private company’s financial statements disclose related-party loans owed by a shareholder or an associate, this decision is a timely reminder that such loans may be scrutinised during an ATO review for potential Division 7A issues.
Legislation
Treasury Laws Amendment (Strengthening Accountability for Tax Adviser Misconduct and Other Measures) Act 2026
The Treasury Laws Amendment (Strengthening Accountability for Tax Adviser Misconduct and Other Measures) Act 2026 received Royal Assent on 15 September 2026 and is now law. The Act introduces stronger regulatory measures for tax practitioners, changes to the foreign resident CGT and withholding rules, and several other tax and charitable giving measures.
Schedule 1 strengthens the Tax Practitioners Board’s regulatory and enforcement powers. The changes include increased civil penalties, infringement notices and enforceable undertakings, as well as new criminal offences for certain unregistered practitioners who provide or advertise tax agent or BAS services.
Schedule 2 strengthens and clarifies the foreign resident CGT regime by broadening the scope of taxable Australian real property, modifying the principal asset test to apply over a 365-day period, and introducing notification requirements for certain high-value transactions involving foreign residents.
Schedule 3 provides a transitional 50% CGT discount for eligible foreign residents disposing of certain Australian renewable energy assets until 30 June 2040.
Schedule 6 adds three new entities to the list of specifically deductible gift recipients (DGRs), extends the listing period for two existing DGRs, and updates the name of one listed entity.
Schedule 7 renames Public Ancillary Funds and Private Ancillary Funds as Public Giving Funds and Private Giving Funds, respectively.
Schedule 8 allows taxpayers to claim a credit for amounts withheld under the foreign resident CGT withholding regime in the same income year that the underlying transaction is recognised for tax purposes, provided the withheld amount 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.
